US gives chip supplier US$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.

This agreement is the second award announced under a new program aimed at helping ensure that American companies that depend on semiconductors have stable supplies. Last month, the Biden administration announced a $35 million grant to BAE Systems, a defense contractor.

This investment will enable Microchip to increase its production of semiconductors used in automobiles, aircraft, appliances, medical devices, and military products. The administration said it expects the award to create more than 700 job opportunities in the construction and manufacturing sectors.

“Today’s announcement regarding Microchip is a meaningful step in our efforts to strengthen the supply chain for legacy semiconductors found in everything from cars to washing machines to rockets,” Commerce Secretary Gina M. Raimondo said in a statement.

Microchip plans to use $90 million to modernize and expand a facility in Colorado Springs and $72 million to expand a facility in Gresham, Ore. Management said the financing will help Microchip triple its production at the two sites and reduce the company's reliance on foreign facilities. To help make their products.

The company's chips are not cutting-edge but are essential components of almost every military and space program. Microchip is one of the largest semiconductor suppliers to the defense industrial base and part of the Military Trusted Foundry Program. It also plays a critical role in industries important to the national economy, US 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. As foreign chip factories closed to help contain the virus, automakers and other companies scrambled to secure supplies. As a result, demand for Microchip's products has increased.

The shortage also helped spur lawmakers to prepare 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 U.S. facilities.

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

Microchip previously announced plans to increase capacity in both Oregon and Colorado, but government funding will be used to expand those boosts and bring more production back to the United States, officials said. According to its filings, Microchip relies on outside facilities to manufacture a large percentage of its products — roughly 63% of its net sales in 2023 — a relatively common practice in the industry.

While attention has focused on ensuring US facilities can manufacture some of the world's most advanced chips, there are growing concerns about Chinese investments in less advanced semiconductors, also known as legacy chips, which help power cars, computers, rockets and dishwashers.

US officials question whether such investments could increase US dependence on China or allow Chinese companies to undercut competitors. Ministry of Commerce He said It plans to begin a survey this month to determine how U.S. companies obtain their older chips and reduce security risks associated with China.

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

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

Don Clark He contributed reporting from San Francisco.