Massive Investment in New U.S. Chip Plants Kicks Off with Billion of Dollars Infusion
In the first large-scale grant to revitalize domestic chip production, the United States government is awarding GlobalFoundries $1.5 billion to construct and expand facilities in Vermont and New York.
Soon, projects in Arizona, Texas, New York, and Ohio will receive funding from the Commerce Department, marking the beginning of a string of such infusions. Micron Technology, Intel, Taiwan Semiconductor Manufacturing, and Samsung Electronics have all applied to the government to help pay for a share of the billions of dollars needed to construct state-of-the-art manufacturing facilities.
The announcement of Monday’s award to GlobalFoundries is subject to a round of due diligence prior to the final agreement being signed. Once the projects meet certain development and production milestones, the funds will be distributed in stages.
U.S. car and aerospace industries, which depend on foreign-sourced chips, would benefit from increased supply chain stability thanks to home manufacture, according to Vice President Kamala Harris.
The $53 billion Chips Act is built around the grants, which have been negotiated for months. Following the United States’ chip manufacturing share dropping from 37% in 1990 to about 12% in 2020, the Biden administration and a bipartisan group of senators introduced the 2022 act, which proposed increased investments in chip research and production.
The initiative is timed to coincide with the increasing sense of urgency felt by governments, manufacturers, and chip users around the globe to support the chip-making sector. Like oil, chips are increasingly considered a vital resource with consequences for national security.
Thousands of industrious Americans were shut down, laid off, or put on furlough at automotive manufacturing plants around the nation due to a shortage of chips that occurred during the epidemic, according to Commerce Secretary Gina Raimondo, who spoke on a call with reporters. We will make sure this doesn’t happen again with today’s news.
The United States has taken measures to reduce China’s sway in the semiconductor industry by enforcing stronger export restrictions and by increasing local chipmaking. It has isolated China from cutting-edge semiconductors utilized in AI computing due to concerns about their potential application in cyber-espionage and military activities.
In his re-election campaign, President Biden has emphasized the Chips Act, which has been a landmark program for the Biden administration. Not everyone in the business world is happy about how long it has taken the Biden administration to establish the agency in charge of the grant program and begin handing out large rewards. The number of businesses seeking funding exceeds 170.
The launch coincides with the chip industry’s efforts to bounce back from a protracted slump. Despite an uptick in sales in the second half of 2023, global chip sales declined 8.2% to $526.8 billion in 2023.
Intel and TSMC, two of the largest chip manufacturers, have both delayed the start of factory construction from their original schedules. But the chip manufacturers have stated that they will see their initiatives through to completion.
According to the Commerce Department, GlobalFoundries will be able to build a new chip facility and expand its current facilities in Malta, N.Y., a town located around 30 miles north of Albany, with the help of the $1.5 billion award. Last year, GlobalFoundries, a leading producer of automotive semiconductors, inked a long-term supply deal with GM.
The company’s manufacturing capacity in increased York will be tripled over the next decade thanks to the increased investment, according to the Commerce Department.
An additional facility in Burlington, Vermont, will undergo renovations to enable the mass production of gallium-nitride chips, which are essential in electric vehicles and telecommunications.
The United States is providing the business with $1.6 billion in loans on top of the grant money. Government grants and loans would fund a percentage of the overall investment of approximately $12.5 billion in the projects.
There will likely be an increase of 1,500 manufacturing jobs and 9,000 construction jobs as a result of these developments. Additionally, GlobalFoundries has committed to continuing its $1,000 yearly child care subsidy for construction workers and to supporting workforce-development programs.
Two prior awards had been made by the office under the Commerce Department that is responsible for funding before Monday’s award. In December, BAE Systems was awarded the first, which was valued at $35 million. Microchip Technology was the recipient of the second, which was valued $162 million and took place in January.
According to Raimondo, “many more” announcements are on the way in the next few months.
Before President Biden delivers his State of the Union speech on March, chip sector executives have expressed their expectation that significant prizes will be announced.
