US Grants $162 Million to Chip Supplier to Boost Output, Create Jobs

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The second batch of CHIPS and Science Act funding for US semiconductor production.

The U.S. Department of Commerce announced $162 million in federal subsidies as part of a preliminary agreement with an Arizona-based computer chip maker to bolster the domestic supply of semiconductors and create new jobs.

Government grants will allow Microchip Technology to expand the production of microcontroller units and semiconductors vital to the aerospace, automobile, defense, and industrial industries.

About $90 million of CHIPS and Science Act funding will be used to improve a Microchip plant in Colorado Springs, Colorado. Another $72 million from the landmark legislation will be allocated to expand the company’s factory in Gresham, Oregon. These projects will close to triple the firm’s semiconductor output and reduce America’s dependence on foreign sources, said Secretary of Commerce Gina Raimondo.

“One of the objectives of the CHIPS and Science Act is to address the semiconductor supply-chain shortages we saw during the pandemic that put our national security at risk and led to furloughed auto workers and higher prices for consumers,“ Ms. Raimondo said in a statement. ”Today’s announcement with Microchip is a meaningful step in our efforts to bolster the supply chain for legacy semiconductors that are in everything from cars, to washing machines, to missiles,” said Secretary Raimondo.

Microchip CEO Ganesh Moorthy called the U.S. funding “a direct investment to strengthen our national and economic security.”

The manufacturing investment could prevent future price spikes and supply disruptions for various consumer products comparable to what was witnessed during the coronavirus pandemic, noted Lael Brainard, director of the White House National Economic Council.

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Administration officials estimate that the deal, which is the second in a nearly $53 billion “Chips for America” initiative, will create more than 700 direct construction and manufacturing jobs.

The federal government award has not been finalized yet.

More to Come

White House officials have repeatedly emphasized the importance of the CHIPS and Science Act because of how ubiquitous microchips are in many products, such as home appliances and smartphones. President Joe Biden has regularly stated that the United States produced just 10 percent of the world’s computer chips, meaning the largest economy depends on foreign semiconductor supply chains.

In December, the administration unveiled $35 million in federal subsidies for BAE Systems and its defense projects to “modernize an aging facility to quadruple its production capacity for chips that are essential to our national security.”

“Over the coming year, the Department of Commerce will award billions more to make more semiconductors in America, invest in research and development capabilities to keep America at the forefront of new technologies, strengthen our national security, and create good-paying jobs,” President Biden said in a statement last month.

Speaking to reporters last month, Ms. Raimondo said that she expects to approve dozens of semiconductor chip funding awards over the next year.

“Next year, we’ll get into some of the bigger ones with leading-edge fabs,” Ms. Raimondo told reporters. “A year from now, I think we will have made 10 or 12 similar announcements, some of them multibillion-dollar announcements.”

The Trouble with China

Late last month, the Commerce Department confirmed that it will launch a survey of the domestic semiconductor supply chain and national defense industrial industries. The purpose is to learn how U.S. firms are sourcing current-generation and legacy chips. Results from the study will allow officials to boost America’s supply chain and address national security concerns originating from Chinese-sourced chips.

Commerce Secretary Gina Raimondo testifies during the Senate Commerce, Science, and Transportation hearing to examine CHIPS and science implementation and oversight, on Capitol Hill in Washington, on Oct. 4, 2023. (Saul Loeb/AFP via Getty Images)
Commerce Secretary Gina Raimondo testifies during the Senate Commerce, Science, and Transportation hearing to examine CHIPS and science implementation and oversight, on Capitol Hill in Washington, on Oct. 4, 2023. (Saul Loeb/AFP via Getty Images)

Ms. Raimondo explained in the survey’s announcement that Beijing has made efforts to increase businesses’ legacy chip production “and make it harder for U.S. companies to compete.”

“To get ahead of these concerns, the Department of Commerce is taking proactive measures to assess the U.S. semiconductor supply chain by collecting data from U.S. companies on the sourcing of their legacy chips,” she added. “Government alone cannot create and sustain a robust supply chain—we need industry at the table. This survey will empower the department with the data we need to inform our next steps in building strong, diverse, and resilient semiconductor supply chains.”

In 2022, China boasted at least $150 billion in chip subsidies. This past fall, the Chinese government enhanced its tax credit for semiconductor research and development investments by 20 percent.

China’s semiconductor industry was hit with tougher U.S. tech sanctions, restricting access to advanced chip-producing tools and artificial intelligence processors. But White House officials found reports of a significant chip breakthrough by a Chinese company “incredibly disturbing.”

In October, Chinese multinational tech juggernaut Huawei Technologies revealed a 7-nanometer semiconductor breakthrough that experts contend defied U.S. sanctions. This chip was produced by China’s Semiconductor Manufacturing International Corp. (SMIC), a company added to a U.S. trade restriction list called the Entity List in 2020.

At an Oct. 4 Senate Commerce Committee hearing, Ms. Raimondo requested more resources to address these developments.

“We need different tools. We need additional resources around enforcement,” the secretary said. “We’re tough as we need to be, but we need more resources.”

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