June 12, 2024

The U.S. Commerce Department has announced plans to provide $162 million in government grants to semiconductor manufacturer Microchip Technology. The subsidies aim to expand Microchip’s American output of critical legacy chips used across consumer and defense products.

Funding Triples Legacy Chip Capacity  

The federal funds will allow Microchip to triple its U.S. production capacity for mature-node semiconductors and microcontroller units relied upon by autos, home appliances, cell phones, and more. 

Specifically, Microchip will receive $90 million to expand its fabrication facility in Colorado and another $72 million to enlarge its similar manufacturing site in Oregon. 

Boosting domestic legacy chip fabrication helps reduce dependency on foreign suppliers like China. The Microchip subsidy marks the second disbursement under the “Chips for America” program passed by Congress last August.

The $52.7 billion initiative equips American semiconductor firms to restore more manufacturing, which is currently dominated by Asian producers.

Officials stated supporting legacy chip output domestically curbs risks of supply shortages and price hikes stemming from overseas reliance. The durable components are essential across U.S. industries from consumer to aerospace.

December saw the first “Chips for America” grant of $35 million towards BAE Systems’ production of semiconductor products for fighter jet systems. 

Alongside the Microchip announcement, the subsidies underscore government efforts to ensure national security capabilities remain insulated from foreign chip dependencies.

Company to Invest Further in U.S. Production

Microchip’s CEO, Ganesh Moorthy, hailed the incoming grant as strengthening economic and national security interests. Earlier this year, Microchip had already pledged to invest $800 million in its Oregon fabrication facilities.

The new federal subsidies will now enable tripling capacity at that site.

The Commerce Department also recently said it plans to survey U.S. firms on procurement of Chinese-made legacy chips. The study aims to identify risks and reduce reliance on Chinese semiconductors in critical domestic supply chains.

As U.S.-China technology tensions mount, federal incentives to restore semiconductor manufacturing are expected to ramp up drastically. The Microchip Award represents an early down payment towards reclaiming domestic production across the vital chip industry.

Lael Brainard, White House National Economic Council director, highlights the broader impact of the award on national and economic security. 

The funds are expected to reduce dependence on global supply chains, which led to disruptions, price spikes, and extended wait times for various products during the pandemic. 

The emphasis on strengthening the semiconductor supply chain aligns with broader efforts to secure critical industries such as automotive, defense, and aerospace.

The coordinated efforts between the government and industry players underscore a shared commitment to advancing semiconductor capabilities within the United States.

Commerce Secretary Gina Raimondo has indicated that more semiconductor funding awards are on the horizon in 2024. These awards, potentially running into billions of dollars, are expected to reshape the U.S. chip production landscape significantly. 

As the United States strives for technological sovereignty, investments in semiconductor production become instrumental in securing critical industries. This will reduce vulnerabilities and position the nation at the forefront of global technological innovation. 

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