The Biden administration announced a $1.5 billion allocation to New York-based chipmaker GlobalFoundries on Monday, one of the first significant grants in a government program aimed at revitalizing semiconductor manufacturing in the states -United.
As part of the plan to strengthen GlobalFoundries, the administration will also make available an additional $1.6 billion in federal loans. These grants are expected to triple the company’s production capacity in New York State over ten years.
The funding represents an effort by the Biden administration and legislatures of both parties to try to revitalize U.S. semiconductor manufacturing. Currently, only 12% of chips are made in the United States, with the majority made in Asia. America’s dependence on foreign sources of chips became a problem early in the pandemic, when automakers and other manufacturers had to delay or halt production due to a shortage of critical chips .
The GlobalFoundries award will help the company expand its existing facilities in Malta, NY, allowing it to fulfill a contract with General Motors to provide dedicated production of chips for its cars.
It will also help GlobalFoundries build a new factory to make critical chips that are not currently made in the United States. This includes a new class of semiconductors suitable for use in satellites because they can survive high doses of radiation.
The money will also be used to modernize the company’s operations in Vermont, creating the first U.S. factory capable of producing a kind of chip used in electric vehicles, the power grid and 5G and 6G smartphones. Without that investment, administration officials said the Vermont facility would have been closed.
The plans are part of the Biden administration’s efforts to reinvigorate U.S. semiconductor manufacturing after many factories moved to East Asia in recent decades.
A global chip shortage amid the pandemic has led to shutdowns, layoffs and furloughs at U.S. auto manufacturing plants, slowing the U.S. economy and sending prices for new and used 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 department. Trade.
Gina Raimondo, Commerce Secretary, said Sunday that the award to GlobalFoundries would help ensure a stable supply of chips for major suppliers and automakers, and avoid supply chain problems.
“Today’s announcement will ensure this never happens again,” Ms Raimondo said.
Sen. Chuck Schumer of New York, the majority leader and a key supporter of the legislation, said the government funding would allow GlobalFoundries to invest more than $12 billion in the United States, as well as create 9,000 jobs in the construction sector and 1,500 permanent jobs in the manufacturing sector.
“The value for money that the federal government is investing is enormous,” Mr. Schumer said: adding: “It shows that our best days are not over. “We can compete.”
GlobalFoundries will also receive the government’s first grant awarded specifically for workforce development, officials said. The government will provide $10 million to support the company’s investment of more than $60 million to train new workers for the semiconductor industry. The lack of skilled workers is a frequently cited problem among chipmakers trying to operate in the United States.
Officials stressed that the announcement was only a preliminary agreement and that the company would be subject to a period of due diligence, including meeting certain construction and production milestones. The government will distribute funds once these criteria are met.
This award to GlobalFoundries comes as the company, like many others in the industry, has experienced a decline in revenue due to a drop in demand from many key customers. Thomas Caufield, its chief executive, expressed hope that the government would also take steps to help boost demand for chips and encourage companies to shift some of their production to U.S. factories.
“Now that they’re saying we’re releasing this money, I think the pressure is going to be on for there to be more reshoring of products,” he said in an interview.
GlobalFoundries is one of the few large-scale companies that make chips for other companies that design and market them, a business known in the industry as a foundry.
The company grew out of the former operations of Advanced Micro Devices, which spun off the company in 2009 to focus on design rather than chip manufacturing. The financing was provided by Mubadala, an Abu Dhabi sovereign wealth fund which still holds a majority stake.
GlobalFoundries opened a new factory in 2012 in Malta, New York, and in 2014 took over IBM’s former operations which included two factories. Both had an important secondary role in manufacturing specialized chips for the Pentagon; The Vermont factory, in particular, is known for its radio chips used in most smartphones and in military hardware.
As part of a major strategy shift, GlobalFoundries decided in 2018 to end the costly practice of developing new production processes that pack more transistors onto each piece of silicon. It chose to specialize in older manufacturing technologies to make the chips needed for cars, appliances, and industrial and defense applications.
Biden officials stressed that they were targeting GlobalFoundries because it makes existing chips, created with older production processes. Chips made using these technologies tend to be relatively inexpensive, but they are at the heart of cars and consumer electronics that have caused major disruption during the pandemic-driven chip shortage. They are also widely 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 capabilities to play a much larger role in supplying these traditional chips. The trend has alarmed the Biden administration and some members of Congress, who worry that cheap imports from China could hurt new U.S. factories.
So far, the administration has not announced rewards for companies making more advanced chips, although that is expected in the coming weeks and months. These chips manage the calculations of artificial intelligence, smartphones, supercomputers and the most sensitive military equipment.
