US to give $1.5 billion to computer chip plant to heat up global race

The Biden administration will provide $1.5 billion to help build a vast new computer-chip factory in New York state as part of an effort to bolster the nation's ability to mass-produce the brains of modern consumer and military electronics.

The grant, formally unveiled on Monday, was announced as part of the Chips and Science Act, a $52 billion plan signed by President Biden through 2022 that hopes to supercharge the production of U.S. semiconductors.

The money will help semiconductor company GlobalFoundries build a large-scale fabrication facility, known as a “fab,” at its headquarters in Malta, NY, to produce advanced chips not currently made in the United States. The grant will help the company expand another plant in Malta, called Fab 8, and upgrade a third fab in Burlington, Vt.

A decades-long decline in U.S. chip production has fueled concern in Washington about the country's supply chain for the tiny electrical components that are the foundation of modern life as companies pursue lower costs overseas.

Traditional semiconductors, also known as traditional chips, are used in all modern electronics, from telephones and computers to refrigerators and washing machines. More advanced chips are expected to power sophisticated weapons systems and next-generation artificial intelligence software.

The United States pioneered the technology decades ago, but has fallen behind in the production of both types of chips, even as China's capabilities rise. Although US-based plants made 37 percent of the world's chips in 1990, their share of production has fallen to about 12 percent.

Commerce Secretary Gina Raimondo said at a briefing Sunday that the CHIPS Act is a “once-in-a-generation investment” designed to address the nation's overreliance on foreign manufacturers and protect domestic pipelines for chips critical to U.S. industry and security.

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The funding will “play a critical role in making the US semiconductor ecosystem globally competitive and resilient,” GlobalFoundries chief executive Thomas Caulfield said in a statement. He said the industry should next turn its attention to “increasing demand for U.S.-made chips and growing a skilled U.S. semiconductor workforce.”

The GlobalFoundries grant is the largest announced as part of the legislation. Since December, the administration has said it will give $35 million to BAE Systems, a defense contractor that makes chips used in fighter jets, and $162 million to Microchip Technology, a maker of memory chips and other widely used “microcontrollers.” in Colorado and Oregon. More awards will be announced in the coming weeks, officials said.

A global chip shortage during the Covid pandemic has driven up car prices and shut down auto plants. US officials have also expressed fears that China's threats to invade Taiwan, where the world's most advanced chips are made, pose wider risks to the US supply chain.

Today's chips are built in closely controlled “clean rooms” by printing circuits on shiny, record-size silicon wafers, a sophisticated process that relies on some of the world's most advanced and expensive machines. The world's largest chipmaker, Taiwan Semiconductor Manufacturing Company, or TSMC, said It spent $30 billion on capital expenditures last year.

GlobalFoundries, the Pentagon's “trusted foundry” designation, allows it to build high-end hardware for the military, providing chips used in Internet routers, radio towers and satellites, and the James Webb Space Telescope and International Space Station. . Its clients include automaker General Motors, defense contractor Lockheed Martin and electronics giant Qualcomm.

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Of the world's five largest chipmakers, GlobalFoundries is the only one based in the United States. The other four are in China, South Korea and Taiwan.

GlobalFoundries applied for CHIPS Act grants last year, saying the support was necessary for the company to “continue to grow its U.S. manufacturing footprint.” The company will benefit from the Act's Tax Credit for Advanced Manufacturing Investments, which the Congressional Budget Office estimates will be worth $24 billion over the next decade.

Federally-backed expansions to GlobalFoundries' campus in New York, north of Albany, will triple its capacity over the next decade to 1 million wafers a year, administration officials said. The grant will make the Burlington facility the first in the country to develop next-generation chips for electric vehicles and the power grid.

Fab 8 Update, Meanwhile, it will expand its ability to make automotive chips used by General Motors, which last year signed a deal with GlobalFoundries to provide the automaker with exclusive chip supply. A car contains dozens of specialized chips that control everything from air bags, brakes and backup cameras to electric car motors and power seats.

Beyond the $1.5 billion grant, the Biden administration will make $1.6 billion in loans available to Global Foundries for construction and upgrades. The three projects are expected to total $12.5 billion, including grants and private financing.

Officials have not given a timeline for construction. This money is guaranteed as part of a preliminary agreement that will require a due diligence period before it can be officially awarded. It is paid over time as opposed to a lump sum, based on project milestones.

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The plans are expected to create about 1,500 jobs in manufacturing and 9,000 in construction, many of which will be centered around the new fab, officials said.

Chipmakers have complained that the costs of building new fabs — as DSMC does in Arizona — are higher in the U.S. than in Asia, increasing the need for public subsidies. They have struggled with a shortage of trained American workers qualified to do the delicate work.

Management said about $10 million of its funding will support GlobalFoundries' workforce-development activities, including a training program to teach interns to work in a fab, with no semiconductor experience required.

“This shows that our best days are not over,” said Senate Majority Leader Charles E. Schumer, a New York Democrat whose state will benefit from the funds, said at a conference on Sunday. “We can compete, understand new changes and adapt to them quickly.”

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