The Biden administration on Thursday announced plans to award $162 million in federal grants to Microchip Technology, an Arizona-based semiconductor company that supplies the automotive, defense and other industries.
The contract is the second award announced under a new program to help ensure U.S. companies that rely on semiconductors have a stable supply. Last month, the Biden administration announced a $35 million grant to BAE Systems, a defense contractor.
The investment will help Microchip increase production of semiconductors used in cars, aircraft, appliances, medical devices and military products. Management said it expects the award to create more than 700 jobs in construction and manufacturing.
“Today's announcement with Microchip is a meaningful step in our efforts to improve the supply chain for legacy semiconductors in everything from cars to washing machines to missiles,” said 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 funding will help Microchip triple its production at two sites and reduce the company's reliance on overseas facilities. Help develop its products.
The company's chips aren't cutting-edge, but are key components of nearly every military and space program. Microchip is one of the largest suppliers of semiconductors to the defense industrial base and is part of the military's Trusted Foundry program. US officials said it plays an important role in industries vital to the national economy.
That role became more apparent during pandemics, when global chip shortages put the spotlight on domestic suppliers like Microchip. As overseas chip factories shuttered to help contain the virus, automakers and other companies scrambled to secure supplies. As a result, the demand for microchip products increased.
Those deficits helped motivate lawmakers to put together a funding bill to boost U.S. manufacturing and reduce reliance on foreign chips. The Chips and Science Act of 2022 provided $53 billion to the business sector to invest in the semiconductor industry, including $39 billion in federal grants to encourage chip companies to set up U.S. facilities.
The industry is expected to begin announcing major awards in the coming months for key chip fabrication facilities owned by companies such as Intel and Taiwan Semiconductor Manufacturing Company, known as TSMC.
Microchip previously announced plans to increase its capacity in both Oregon and Colorado, but government funding will be used to expand those improvements and bring more manufacturing back to the United States, officials said. According to its filings, Microchip relies on external facilities to make a significant proportion of its products — about 63 percent of its net sales in 2023 — a relatively common practice in the industry.
While the focus is on ensuring that US facilities can produce some of the world's most advanced chips, there are growing concerns about Chinese investments in less advanced semiconductors, also known as legacy chips that power cars, computers, missiles and dishwashers.
U.S. officials question whether such investments will increase U.S. confidence in China or allow Chinese companies to undercut rivals. Department of Commerce has told It plans to launch a survey this month to look into how US companies source their legacy chips and reduce security risks linked to China.
The deal announced Thursday is a nonbinding preliminary agreement. The commercial department 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, full applications and concept projects from companies and organizations interested in funding.
Don Clarke Contributed reporting from San Francisco.
