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Microchip Technology has struck a big deal with the US government under the CHIPS and Science Act which focuses on beefing up the region’s chips industry against Chinese competition.
As part of its bid to boost its indigenous semiconductor industry, the US government said it is planning to invest “approximately $162m” in one company operating in the sector. The announcement was made today (4 January) by the US government’s Department of Commerce.
The money will go to Arizona-headquartered company Microchip Technology, which manufactures and supplies chips to a variety of clients in industries such as automotive, consumer, aerospace, defence and computing.
The company and the US government reached a non-binding preliminary memorandum of terms (PMT) agreement under which the US state will provide millions in “federal incentives”. The funding will be divided across two main projects by Microchip Technology. It’s expected that of the $162m total, approximately $90m will go to modernising and expanding the company’s fabrication facility in Colorado Springs, Colorado. Approximately $72m will go to expanding its fabrication facility in Gresham, Oregon.
The two projects are projected to nearly triple the output of semiconductors that the company produces at these sites. According to the US government, this will have the knock-on effect of “decreasing [the company’s] reliance on foreign foundries and strengthening supply chain resilience and creating good-paying jobs in construction and manufacturing”.
Today’s investment will enable Microchip Technology to significantly increase its domestic production of microcontroller units (MCUs) and other specialty semiconductors.
Ganesh Moorthy, president and CEO of Microchip Technology, welcomed the investment announcement. He said that semiconductors are “the backbone of electronic applications across vital industries”.
The importance of semiconductors has been highlighted by a number of industry stakeholders and governments worldwide.
As part of its own efforts to address the scarcity of semiconductors, the US government signed the CHIPS and Science Act into law in 2022. Its main goal was to make the US semiconductor industry more competitive and productive. The deal with Microchip Technology falls under the remit of this act. According to today’s announcement, more similar deals will follow into 2024. This deal is the second deal of its kind to have been reached under the act; BAE Systems was already awarded $35m to make semiconductor chips for fighter planes.
Over the past while, the US and its allies have been locked in a trade war against China as both powers competed for control of the chips market. Tensions really came to a head during the pandemic, but the market is possibly stabilising as we enter into 2024.
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