GlobalFoundries IncGFS, a U.S. semiconductor maker, has been bestowed the first grant from the Biden administration’s $53-billion CHIPS Act, securing a whopping $1.5 billion from the Commerce Department. This windfall is set to propel the expansion of its production facility in Malta, New York, along with the construction of a new fabrication plant. The grant will also fuel the modernization and capacity expansion at its Vermont plant.
In addition to the grant, the company has pledged a decade-long investment of over $12 billion to meet the surging demand for chips from the automotive, aerospace, defense, and artificial intelligence sectors.
Also Read: Why The CHIPS Act Is Good News For Intel, Bad News For Nvidia, Advanced Micro Devices
The Birth of the CHIPS Act
Launched in 2022, the CHIPS Act was a response to the US’s waning share in global semiconductor production, exacerbated by companies relocating manufacturing facilities to cheaper sites in Asia and other regions.
The industry was barraged by a supply chain crisis as the economy recuperated from the COVID-19 pandemic. While demand skyrocketed in post-lockdown U.S. and Europe, manufacturing facilities in Asia faced struggles in coping, particularly in China, where stringent lockdown measures lingered.
The resulting shortages transformed the supply of semiconductors into a national security dilemma, prompting the implementation of the law to bolster domestic production. The Act also served as a means for the US to curtail China’s sway over the industry.
“The semiconductor shortages during the COVID-19 pandemic not only inflated consumer prices but also led to the shutdown of automobile production sites nationwide,” emphasized Commerce Secretary Gina Raimondo.
She iterated, “Thanks to the CHIPS and Science Act, we’re striving to bring these critical technologies back to US shores to fortify the supply of domestic chips vital for automobile manufacturing, electronics, and national defense systems.”
Semiconductor Stocks in the Limelight
Conceived as a signature legislation for President Joe Biden, the CHIPS Act has been slow to gain traction, with GlobalFoundries’ recent grant approval marking the first major breakthrough.
As the President embarks on the campaign trail ahead of the November election, the CHIPS Act is poised to feature as a key triumph for his administration. Consequently, further grant approvals for some of the 170 companies that have applied can be anticipated in the days and weeks ahead.
Among the pool of companies vying for grants is Intel CorporationINTC, reportedly in talks with the Commerce Department for grants, loans, and other financial incentives worth approximately $10 billion.
Intel aims to ramp up capacity at its newly constructed Ohio facility, with a projected total cost of around $100 billion upon full completion over the next decade, along with its existing foundries in Arizona and New Mexico.
Texas Instruments IncorporatedTXN is also primed to receive grants and tax incentives from the Commerce Department to aid in the financing of its new fabrication plant in Sherman, Texas, kickstarted in May 2022.
International Companies in the Fray
International companies eyeing an investment fillip to bring semiconductor production to American shores include Samsung Foundry and its parent company, which boasts Qualcomm among its clientele.
Having announced plans in 2021 to erect a new fab in Texas, with operations since 2009, the new project is on track to entail a cost of $17 billion.
Taiwan Semiconductor ManufacturingTSM unveiled plans in June 2020 for a new fab in Phoenix, Arizona.
Advanced Micro Devices IncAMD, a key customer of GlobalFoundries, lauded the rollout of CHIP Act grants.
Lisa Su, chair and CEO, affirmed, “The planned investment underlines the government’s commitment to fortify the domestic chip supply chain for economic growth and ensure the enduring competitiveness of the US semiconductor ecosystem.”
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