Friday, May 24

US awards chip supplier $162 million to support critical industries

The Biden administration on Thursday announced plans to provide $162 million in federal grants to Microchip Technology, an Arizona-based semiconductor company that supplies the automotive, defense and other industries.

The deal is the second award announced under a new program intended to ensure that American companies that rely on semiconductors have a stable supply. Last month, the Biden administration announced a $35 million grant for BAE Systems, a defense contractor.

The investment will allow Microchip to increase its production of semiconductors used in automobiles, airplanes, appliances, medical devices and military products. The administration said it expects the award will create more than 700 construction and manufacturing jobs.

“Today’s announcement with Microchip is a significant step in our efforts to strengthen the supply chain for legacy semiconductors found in everything from automobiles to washing machines to missiles,” Commerce Secretary Gina M said in a statement. Raymond.

Microchip plans to use $90 million to modernize and expand a facility in Colorado Springs and $72 million to expand a facility in Gresham, Oregon. The administration said the financing would help Microchip triple its production at the two sites and decrease the company’s reliance on foreign facilities to help make its products.

The company’s chips aren’t cutting-edge but are key components of nearly every military and space program. Microchip is a major supplier of semiconductors to the defense industrial base and a designated trusted foundry for the military sector. It also plays a crucial role in industries important to the national economy, U.S. officials said.

This role has become more evident during the pandemic, when the global chip shortage has put the spotlight on domestic suppliers like Microchip. With foreign chip factories shuttered to help contain the virus, automakers and other businesses have scrambled to secure supplies. As a result, demand for Microchip products has increased.

Such shortfalls also helped motivate lawmakers to put together a funding bill aimed at supporting American manufacturing and reducing reliance on foreign chips. The CHIPS and Science Act of 2022 gave the Commerce Department $53 billion to invest in the semiconductor industry, including $39 billion for federal grants to encourage chip companies to set up facilities in the United States.

The Commerce Department is expected to begin announcing larger awards in the coming months for major chip manufacturing plants owned by companies such as Intel and Taiwan Semiconductor Manufacturing Company, known as TSMC.

Microchip had previously announced plans to increase its capacity in both Oregon and Colorado, but the government funding would be used to expand those improvements and bring more manufacturing back to the United States, officials said. According to its filings, Microchip relies on outside facilities to make a significant portion of its products – about 63% of its net sales in 2023 – a relatively common practice in the industry.

While attention has focused on ensuring U.S. facilities can produce some of the world’s most advanced chips, concerns are growing about Chinese investments in less advanced semiconductors, also known as legacy chips, which help power cars, computers, missiles and dishwasher.

U.S. officials question whether such investments could increase U.S. dependence on China or allow Chinese companies to undermine competitors. The Commerce Department said it plans to launch a survey this month to identify how U.S. companies are obtaining their legacy chips and reducing security risks related to China.

The deal announced Thursday is a preliminary, non-binding agreement. The Department of Commerce will conduct due diligence on the project before reaching final award terms.

The department said it has received more than 570 expressions of interest and more than 170 pre-applications, full applications and concept plans from companies and organizations interested in the funding.

Don Clark contributed reporting from San Francisco.