The Biden Administration has awarded $162 million in funding from the CHIPS and Science Act to Microchip Technology, a semiconductor manufacturer. The funding will help expand production capacity at Microchip’s factory in Colorado Springs, supporting the administration’s goal of boosting domestic semiconductor manufacturing.
Background on CHIPS Act Funding
The funding comes from the $52 billion CHIPS and Science Act, signed into law in 2022. The legislation provides subsidies, tax credits, and other incentives aimed at rebuilding America’s semiconductor industry and reducing reliance on suppliers in Asia. Specifically, the subsidies are designed to:
- Support new semiconductor fabrication plants (or “fabs”) in the U.S.
- Expand existing domestic fabs to increase production.
- Conduct advanced semiconductor research and development.
By boosting domestic chipmaking capabilities, the Biden Administration hopes to address shortages that disrupted automotive and electronics supply chains during the pandemic. The funding is also vital for U.S. national security interests, particularly as they relate to competition with China.
Details on Microchip’s $162 Million Award
Microchip, a major designer and manufacturer of microcontroller and integrated circuit chips, will use the new federal funds to equip a new silicon carbide chip fabrication facility currently under construction in Colorado.
- $72 million will expand production capacity at Microchip’s existing 300mm wafer fab in Gresham, Oregon. This will allow Microchip to ramp up volumes of analog, microcontroller, and memory chips.
- $90 million will help equip the new facility in Colorado Springs, positioning it as an initial location for volume production of Microchip’s silicon carbide power device chips.
Silicon carbide semiconductors are critical components in electric vehicles and other high-efficiency power applications. By adding silicon carbide to its U.S. production mix, Microchip aims to create 1,700 jobs between the two facilities.
Commerce Secretary Gina Raimondo called the funding a “major milestone toward increasing domestic semiconductor production across the country.”
Microchip’s Comments on Securing CHIPS Act Funding
Microchip CEO Ganesh Moorthy said the company spent years making large investments to expand capacity to address “structural shortages” in the semiconductor industry.
He said the federal incentives allow Microchip to move forward more quickly with plans that were already in motion:
“The CHIPS Act allows us to accelerate our capacity expansion to help ease this critical supply shortage. We plan to create thousands of domestic manufacturing jobs while also doing our part to secure the semiconductor supply chain for the U.S. economy and defense.”
With substantial operations already located in the U.S., as well as headquarters in Arizona and design centers in multiple states, Microchip was among the first companies to actively seek CHIPS Act funding after passage of the bill.
Next Steps for Microchip after Receiving CHIPS Subsidies
- Current expansions continue – Microchip will push forward with hiring and facility modifications needed to bring the Gresham and Colorado Springs expansions online. Early work was self-funded by Microchip based on confidence Congress would pass CHIPS legislation.
- More investments down the road – Ganesh Moorthy said the $162 million in subsidies represent just an “opening salvo” as Microchip pursues future expansions at U.S. sites. The company is committing $5.8 billion through 2025 to boost fabrication capabilities across various technologies.
- Industry leadership – As an established player moving swiftly to claim CHIPS incentives, analysts say Microchip bolstered its first-mover reputation. Its progress will be monitored by peers as they determine their own strategies for participating.
Impact on Efforts to Reshape the Semiconductor Industry
The Microchip subsidies, among the first major CHIPS Act investments, fuel momentum behind Biden Administration goals to reshuffle global semiconductor supply chains.
Table 1 shows domestic fab investment commitments made to date by major chipmakers in the wake of the legislation’s enactment. Industry organization SIA projects these early announcements will create tens of thousands of high-paying American jobs.
|New Fabs Planned
|New U.S. Jobs
|$15 billion (expansion)
|$30 billion (expansion)
However, these long-term capital projects face tricky economics, especially if demand trends down in the notoriously cyclical chip market. Executives warn sustained government support will be needed – through mechanisms like the CHIPS Act – to ensure planned capacity comes online.
What Comes Next
The subsidies mark an early win for the White House after the CHIPS law cleared its final hurdles just weeks ago.
- More incentive awards are imminent, especially for manufacturers of mature chipmaking technology located in the U.S. or allies abroad.
- Stricter rules govern eligibility for funding new fabs producing advanced, cutting-edge semiconductors. Awards through those programs will take longer to evaluate.
Going forward, scrutiny will focus on monitoring corporate commitments made to secure the generous CHIPS incentives. Lawmakers built in oversight provisions requiring disclosure and accountability around how recipients use the subsidies.
With Microchip moving rapidly to make use of its newly awarded funds, the administration secures a benchmark example that future recipients will need to emulate. The deal also adds fresh momentum at a vital moment – just as scrutiny builds around early execution of the ambitious CHIPS strategy.
So in summary, the Biden Administration’s $162 million investment in Microchip Technology marks an initial milestone that kicks off broader efforts to reconstitute domestic semiconductor manufacturing through passage of the landmark CHIPS and Science Act.
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