The Biden administration on Monday announced a $1.5 billion grant to New York-based chipmaker GlobalFoundries. This is one of the first large grants from a government program aimed at revitalizing semiconductor manufacturing in the United States.
As part of its plan to strengthen GlobalFoundries, the administration will also make available an additional $1.6 billion in federal financing. The grant is expected to triple the company's production capacity in New York state over 10 years.
The funding represents an effort by the Biden administration and lawmakers from both parties to jump-start 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 for chips became a problem early in the pandemic, forcing automakers and other manufacturers to slow or halt production amid shortages of critical chips.
The award to GlobalFoundries will help the company expand its existing facility in Malta, New York, and enable it to fulfill a contract with General Motors that guarantees the production of chips specifically for cars.
It will also help GlobalFoundries build a new facility to manufacture critical chips not currently manufactured in the United States. This includes new types of semiconductors that are suitable for use in satellites because they can withstand high doses of radiation.
The funding will also be used to upgrade the company's operations in Vermont, creating its first U.S. facility capable of producing a type of chip used in electric vehicles, power grids, and 5G and 6G smartphones. Without the investment, the Vermont facility faced closure, officials said.
The plan is 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 closures, layoffs and furloughs at U.S. auto manufacturing plants, slowed the U.S. economy and soared prices for used and new cars. That prompted Congress to pass a bill that would give the semiconductor industry more than $50 billion, including $39 billion in subsidies and $11 billion in research and development funding allocated by the Commerce Department.
Commerce Secretary Gina Raimondo said Sunday that the award to GlobalFoundries will help ensure a steady supply of chips to major auto suppliers and manufacturers and prevent supply chain problems.
“Today's announcement will ensure that something like this never happens again,” Raimondo said.
The bill's main sponsor and majority leader, Sen. Chuck Schumer of New York, said the government loan would allow GlobalFoundries to invest more than $12 billion in the U.S. and create 9,000 construction jobs and 1,500 additional workers. Permanent manufacturing jobs will be created.
“The return on investment for the federal government is tremendous,” Schumer said. He added, “This shows that our best days are not over. We can compete.”
GlobalFoundries will also receive the first government grant issued specifically for workforce development, officials said. The government will contribute $10 million to support the company's more than $60 million investment in training new workers for the semiconductor industry. A lack of trained workers is a common problem cited by semiconductor manufacturers looking to do business in the United States.
Officials emphasized that the announcement is only a preliminary agreement and that the company is subject to a period of due diligence, including achieving certain milestones in construction and production. The government plans to provide funding once these standards are met.
GlobalFoundries' award comes at a time when the company, like many others in the industry, is experiencing a decline in revenue due to reduced demand from many of its major customers. The company's CEO, Thomas Caulfield, expressed hope that the government would also take steps to support growing demand for semiconductors and encourage companies to shift some production to U.S. factories. .
“Now that they're saying they're bringing this money forward, there's going to be pressure to push for more product reshoring,” he said in an interview.
GlobalFoundries is one of the few large companies A company that manufactures chips for other companies that design and sell chips, a business known in the industry as a foundry.
The company evolved from the previous business of Advanced Micro Devices, which spun off in 2009 to focus on chip design rather than chip manufacturing. Funding was provided by Mubadala, Abu Dhabi's sovereign wealth fund, which still holds a controlling stake.
GlobalFoundries opened a new factory in Malta, New York in 2012 and took over the former IBM operations, including two factories, in 2014. Both had big side jobs making specialized chips for the Pentagon. The Vermont factory in particular is known for its wireless chips, which are used in most smartphones and military equipment.
GlobalFoundries made a major strategic shift in 2018, deciding to abandon the costly practice of developing new manufacturing processes that cram more transistors into each piece of silicon. The company has chosen to specialize in older manufacturing techniques to produce chips needed for automobiles, consumer electronics, industrial and defense applications.
Biden officials emphasized that they selected GlobalFoundries because it makes legacy chips made using older manufacturing processes. Chips made using such technology tend to be relatively cheap, but they are central to cars and consumer electronics products, which caused major disruption during the pandemic-induced chip shortage. It is also widely used in defense applications.
Other companies selected for the first two government grants also used these cutting-edge technologies.
Chinese companies are now ramping up their capabilities to play an even bigger role in supplying these legacy chips. The trend has alarmed the Biden administration and some lawmakers, who worry that cheap imports from China could overwhelm new U.S. factories.
So far, the administration has not announced awards for companies making more advanced chips, but more are expected in the coming weeks and months. Such chips handle calculations for artificial intelligence, smartphones, supercomputers, and the most sensitive military hardware.
