On Thursday, the U.S. Commerce Department said it plans to award Microchip Technology MCHP.O $162 million in government grants to step up U.S. production of semiconductors and microcontroller units (MCUs) key to the consumer and defense industries. The funds will allow Microchip to triple Production of mature-node semiconductor chips and microcontroller units at two U.S. factories, officials said. These components are vital to cars, washing machines, cell phones, internet routers, airplanes, and the defense-industrial base. Commerce Secretary Gina Raimondo said the grant “is a meaningful step forward in our efforts to strengthen the supply chain for legacy semiconductors that are present in everything we do.”
The funding is part of a $50 billion plan dubbed Chips for America that Congress approved in August 2022 to subsidize chip production and counter growing dependence on foreign manufacturers such as China. The first allocation of grants, $35 million for a BAE Systems plant in New Hampshire to boost the Production of chips used in military aircraft, including fighter jets, was announced in December.
Commerce has yet to release a complete list of companies seeking grants. However, the grants will be distributed over time and tied to a company meeting agreed-upon benchmarks. The goal is to avoid a repeat of the coronavirus chip shortages that curbed U.S. car production and pushed up prices in the middle of President Joe Biden’s term, as well as to reduce risks to national security from reliance on Chinese-made chips.
The Commerce Department has emphasized the importance of advanced chips that power smartphones, computers, and missiles and the need to keep U.S. plants in a position to produce them. But the $162 million planned for Microchip, divided between $90 million for expanding a fabrication unit in Colorado and $72 million to expand Production in Oregon, highlights the need to also invest in less advanced chips known as “legacy” chips to offset security risks tied to foreign manufacturing.
In a sign of the growing scrutiny of China’s role in the global economy, senior administration officials said on Wednesday that they would soon begin surveying U.S. companies about where they get their legacy chips to cut reliance on overseas Production. Senior administration adviser Jake Sullivan said it was unrealistic to categorize chips as either “advanced” or “less advanced,” as both were essential to the economy and national security.
The Commerce Department will review the applications of more than 570 firms before deciding who should receive grants, and officials said it could make about a dozen awards this year. The money will be paid out as the companies hit benchmarks, a performance-based contracting process that will save taxpayer dollars by cutting the price of the grants.