The Biden administration on Monday announced a $1.5 billion award to New York-based chipmaker GlobalFoundries, one of the first major grants from a government program to revive semiconductor manufacturing in the United States.
As part of the plan to strengthen GlobalFoundries, the government will also provide an additional $1.6 billion in federal loans. The grants are expected to triple the company’s production capacity in New York State over 10 years.
The funding represents an attempt by the Biden administration and lawmakers from both parties to revive American semiconductor production. Currently, only 12 percent of chips are made in the United States, the majority of them in Asia. America’s reliance on foreign chip sources became a problem early in the pandemic, when automakers and other manufacturers had to delay or close production due to a shortage of critical chips.
The award to GlobalFoundries will help the company expand its existing facility in Malta, NY, and allow it to fulfill a contract with General Motors to ensure dedicated chip production for its cars.
It will also help GlobalFoundries build a new facility to produce critical chips that are not currently made in the US. This includes a new class of semiconductors that are suitable for use in satellites because they can withstand high doses of radiation.
The money will also be used to modernize 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. Without the investment, the Vermont plant would have had to close, according to administration officials.
The plans are part of the Biden administration’s efforts to revitalize American semiconductor production after many factories moved to East Asia in recent decades.
A global chip shortage amid the pandemic led to closures, layoffs and furloughs at American auto factories, slowing the U.S. economy and sending prices for used and new cars soaring. This encouraged 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 distributed by the Commerce Department.
Gina Raimondo, the Commerce Secretary, said on Sunday that the award to GlobalFoundries would help ensure stable chip supplies for key automotive suppliers and manufacturers and prevent supply chain bottlenecks.
“Today’s announcement will ensure this doesn’t happen again,” Ms. Raimondo said.
Sen. Chuck Schumer of New York, majority leader and lead sponsor of the legislation, said the federal funding would allow GlobalFoundries to invest more than $12 billion in the United States and create 9,000 construction jobs and 1,500 permanent manufacturing jobs .
“The value for money that the federal government is investing is tremendous,” Schumer said. and added: “This shows that our best days are not yet over. We can keep up.”
GlobalFoundries will also receive the government’s first grant specifically for workforce development, officials said. The government will provide $10 million to support a company investment of more than $60 million to train new workers for the semiconductor industry. The lack of trained workers is a frequently cited problem for 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 due diligence, including meeting certain construction and production milestones. Once these benchmarks are achieved, the government will provide funding.
The award for GlobalFoundries comes as the company, like many others in the industry, has experienced a decline in sales due to lower demand from many key customers. Thomas Caufield, chief executive, expressed hope that the government would also take steps to boost demand for chips and encourage companies to shift some production to U.S. factories.
“Now that they say we are providing this money, I think the pressure will increase to move more products overseas,” he said in an interview.
GlobalFoundries is one of the few large companies which make chips for other companies that design and market them, a company known in the industry as a foundry.
The company grew out of the previous operations of Advanced Micro Devices, which the company spun off in 2009 to focus on chip development rather than manufacturing. The financing came from Mubadala, an Abu Dhabi sovereign wealth fund that still owns a majority stake.
GlobalFoundries opened a new factory in Malta, NY in 2012 and acquired the former IBM operation in 2014, which included two factories. Both had a large sideline producing special chips for the Pentagon; The Vermont factory in particular is known for radio chips used in most smartphones and military hardware.
As part of a major strategy change, GlobalFoundries decided in 2018 to end the costly practice of developing new production processes that pack more transistors on each piece of silicon. The company chose to specialize in older manufacturing technologies to produce chips needed for cars, consumer devices, and industrial and defense applications.
Biden officials have emphasized that they are singling out GlobalFoundries because the company makes older chips made using older production processes. Chips made with such technologies are typically relatively inexpensive, but they are at the heart of cars and consumer electronics products, which have caused significant disruption during the pandemic-related chip shortage. They are also commonly used in defense applications.
The other companies selected for the first two government grants also used this cutting-edge technology.
Chinese companies are currently building up their capacity to play a much larger role in supplying such legacy chips. The trend has alarmed the Biden administration and some members of Congress, who fear cheap imports from China could undermine new U.S. factories.
So far, the government has not announced awards for companies making more advanced chips, although it is expected to do so in the coming weeks and months. Such chips handle calculations in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware.
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2024-02-19 13:16:47
www.nytimes.com
