U.S. to award Microchip Technology $162 million to boost chip production

The U.S. Commerce Department announced plans on Thursday to grant Microchip Technology $162 million to enhance U.S. semiconductor and microcontroller unit (MCU) production. These components, vital to both consumer and defense industries, will see a significant boost in output at two American factories.

This funding will enable Microchip to triple the production of mature-node semiconductor chips and MCUs, essential for a wide array of products including cars, cell phones, internet routers, airplanes, and the defense-industrial base. Commerce Secretary Gina Raimondo described the award as a crucial step in strengthening the supply chain for legacy semiconductors.

This move aligns with the U.S. strategy to reduce dependency on foreign sources like China for chip production. The award, still pending finalization, is part of the $52.7 billion "Chips for America" program, which Congress approved in August 2022 to subsidize semiconductor manufacturing and research.

The first award from this program, a $35 million grant to a BAE Systems facility for fighter plane chips, was announced last December. The proposed grant to Microchip includes $90 million for expanding a facility in Colorado and $72 million for another in Oregon, aiming to decrease reliance on international production.

Lael Brainard, Director of the White House National Economic Council, emphasized the chips' significance for various U.S. industries, including automotive, commercial, industrial, defense, and aerospace. She highlighted the grant's role in mitigating the effects of global supply chain disruptions that caused price surges and long wait times during the pandemic.

Microchip's CEO, Ganesh Moorthy, welcomed the award, recognizing it as a vital investment in national and economic security. This follows Microchip's early 2023 announcement of an $800 million investment to triple semiconductor output at its Oregon facility.

In January, the Commerce Department disclosed plans to survey U.S. companies on their sourcing of current-generation and mature-node semiconductors. The survey aims to address national security risks posed by China and focuses on the use of Chinese-made legacy chips in critical U.S. industry supply chains.

Raimondo told Reuters last month that she anticipates about a dozen semiconductor chip funding awards in 2024, with some potentially running into billions of dollars, significantly impacting U.S. chip production.