US plans $162 million award to Microchip Technology to boost production

By David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department said on Thursday it plans to award Microchip Technology (NASDAQ:) $162 million in government grants to step up U.S. production of semiconductors and microcontroller units (MCUs) key to the consumer and defense industries.

The funds will allow Microchip to triple production of mature-node semiconductor chips and microcontroller units at two U.S. factories, officials said.

The components are crucial for cars, washing machines, cell phones, internet routers, airplanes, and the defense-industrial base.

The award “is a meaningful step in our efforts to bolster the supply chain for legacy semiconductors that are in everything,” Commerce Secretary Gina Raimondo said in a statement.

The announcement comes as the United States wants to shift production of such chips from foreign sources like China.

The award, not yet finalised, is the second in a $52.7 billion program, “Chips for America”, that Congress approved in August 2022 to subsidise semiconductor manufacturing and research.

The first award, of $35 million to a BAE Systems (LON:) facility to produce chips for fighter planes, was announced in December.

The planned award to Microchip, which consists of $90 million to expand a fabrication facility in Colorado and $72 million for expansion of a similar facility in Oregon, will help cut reliance on foreign production, officials said.

The chips are crucial for the U.S. automotive, commercial, industrial, defense, and aerospace industries, said Lael Brainard, White House National Economic Council director.

The award will help reduce “reliance on global supply chains that led to price spikes and long wait lines for everything from autos to washing machines during the pandemic,” Brainard added.

In a statement, Microchip’s CEO, Ganesh Moorthy, hailed the award as “a direct investment to strengthen our national and economic security.”

It comes after Microchip announced plans early in 2023 to invest $800 million to triple semiconductor production at its Oregon facility.

In January, the Commerce Department said it planned to survey how U.S. companies are sourcing so-called legacy chips – current-generation and mature-node semiconductors.

The survey aims to “reduce national security risks posed by” China and will focus on the use and sourcing of Chinese-made legacy chips in the supply chains of critical U.S. industries.

Last month, Raimondo told Reuters she expected to make about a dozen semiconductor chips funding awards in 2024, including some running into billions of dollars that could drastically reshape U.S. chip production.