by The Biden administration on Monday announced a $1.5 billion grant to New York-based chipmaker GlobalFoundries, one of the first major grants from a government program aimed at revitalizing semiconductor manufacturing in the United States.
As part of the plan to bolster GlobalFoundries, the administration will also make available another $1.6 billion in federal loans. The grants are expected to triple the company’s production capacity in New York state within ten years.
The funding represents an effort by the Biden administration and lawmakers from both parties to try to revitalize semiconductor manufacturing in the United States. Currently, only 12 percent of chips are made in the United States and most are made in Asia. The United States’ dependence on foreign sources of chips became an issue in the early part of the pandemic, when automakers and other manufacturers had to delay or shut down production amid a shortage of critical chips.
The award to GlobalFoundries will help the company expand its existing facilities in Malta, New York, allowing it to fulfill a contract with General Motors to ensure the production of dedicated chips for its cars.
It will also help GlobalFoundries build a new facility to manufacture critical chips not currently manufactured in the United States. This includes a new class of semiconductors suitable for use in satellites because they can survive high doses of radiation.
The money will also be used to improve the company’s operations in Vermont, creating the first U.S. facility capable of producing a type of chip used in electric vehicles, the power grid and 5G and 6G smartphones. If not for the investment, administration officials said the facilities in Vermont would have faced closure.
The plans are part of the Biden administration’s effort to revitalize semiconductor manufacturing in the United States after many factories moved to East Asia in recent decades.
The global chip shortage amid the pandemic led to closures, layoffs and suspensions at U.S. auto manufacturing plants, slowing the U.S. economy and skyrocketing prices for new and used cars. That spurred Congress to pass a bill that would provide more than $50 billion to the semiconductor industry, including $39 billion in grants and $11 billion for research and development that the Commerce Department is doling out. .
Commerce Secretary Gina Raimondo said Sunday that the award to GlobalFoundries would help ensure a stable supply of chips for key suppliers and automakers and avoid supply chain setbacks.
“Today’s announcement will ensure this does not happen again,” Raimondo said.
Sen. Chuck Schumer of New York, the majority leader who was a leading proponent of the legislation, said government funding would allow GlobalFoundries to invest more than $12 billion in the United States, as well as create 9,000 jobs. construction work and 1,500 permanent manufacturing jobs.
“The investment that the federal government is investing is enormous,” Schumer said. He added: “This shows that our best days are not over. “We can compete.”
GlobalFoundries will also receive the first government grant issued specifically for workforce development, officials said. The government will donate $10 million to support a more than $60 million investment by the company to train new workers for the semiconductor industry. The lack of trained workers is a problem commonly cited by chipmakers trying to operate in the United States.
Officials emphasized that the announcement was only a preliminary agreement and that the company would be subject to a period of due diligence, including meeting certain milestones in construction and production. The government will provide funds as those benchmarks are met.
The award for GlobalFoundries comes as the company, like many others in the industry, has seen reduced revenue due to declining demand among many key customers. Thomas Caufield, its chief executive, expressed hope that the government would also take steps to help boost demand for chips and encourage companies to move some production to American factories.
“Now that they’re saying we’re putting up this money, I think the pressure will increase for more product relocation,” he said in an interview.
GlobalFoundries is among the few large-scale companies that build chips for other companies that design and market them, a business known in the industry as a foundry.
The company emerged from former operations of Advanced Micro Devices, which spun off the business in 2009 to focus on design rather than making chips. The financing was provided by Mubadala, an Abu Dhabi sovereign wealth fund that still owns a majority stake.
GlobalFoundries opened a new factory in 2012 in Malta, New York, and in 2014 took over former IBM operations that included two factories. Both had important side businesses manufacturing specialized chips for the Pentagon; The Vermont factory, in particular, is known for the radio chips used in most smartphones and military hardware.
In a major shift in strategy, GlobalFoundries decided in 2018 to stop the costly practice of developing new production processes that pack more transistors into each piece of silicon. It chose to specialize in older manufacturing technology to make chips needed for cars, appliances, and industrial and defense applications.
Biden officials have emphasized that they are singling out GlobalFoundries because it makes legacy chips, which are created using older production processes. Chips made with these technologies tend to be relatively inexpensive, but they are at the core of automobiles and consumer electronics that caused major disruptions during the pandemic-induced chip shortage. They are also widely used in defense applications.
The other companies chosen for the first two government grants also used cutting-edge technology.
Chinese companies are currently beefing up their capabilities to play a much larger role in supplying such legacy chips. The trend has alarmed the Biden administration and some members of Congress, who worry that cheap imports from China could undercut new American factories.
So far, the administration has not announced awards for companies making the most advanced chips, although it is expected to do so in the coming weeks and months. These chips handle calculations in artificial intelligence, smartphones, supercomputers, and the most sensitive military hardware.
