Microchip Technology set to receive $162 million award from U.S. to boost production

The U.S. Commerce Department announced plans on Thursday, 4 January 2024, to grant $162 million to Microchip Technology in government funding, aiming to enhance the production of semiconductors and microcontroller units (MCUs) critical for the consumer and defense industries.

Officials revealed that the funds would enable Microchip to triple the production of mature-node semiconductor chips and microcontroller units at two of its U.S. factories. These components play a crucial role in various sectors, including automobiles, washing machines, cell phones, internet routers, airplanes, and the defense-industrial base.

Commerce Secretary Gina Raimondo emphasized that the award represents a significant stride in efforts to strengthen the supply chain for legacy semiconductors. Raimondo stated that the move marked a significant step in their endeavors to strengthen the supply chain for legacy semiconductors, which are integral components in various devices.

The announcement aligns with the United States’ strategic shift to localize the production of such chips, reducing reliance on foreign sources, particularly in China. The award, part of the $52.7 billion “Chips for America” program approved by Congress in August 2022, is the second in the series.

The planned $162 million award to Microchip includes $90 million for expanding a fabrication facility in Colorado and $72 million for the expansion of a similar facility in Oregon. Officials anticipate that this investment will significantly reduce dependence on foreign production.

Lael Brainard, White House National Economic Council director, emphasized the critical role of these chips in various U.S. industries, including automotive, commercial, industrial, defense, and aerospace. The award is expected to alleviate challenges posed by global supply chain disruptions, such as price spikes and lengthy wait times experienced during the pandemic.

Microchip’s CEO, Ganesh Moorthy, welcomed the award as a direct investment to strengthen national and economic security. This follows Microchip’s earlier announcement in 2023 to invest $800 million in tripling semiconductor production at its Oregon facility.

In January 2024, the Commerce Department unveiled plans to survey how U.S. companies source legacy chips, focusing on current-generation and mature-node semiconductors. The survey aims to mitigate national security risks associated with China and its role in the supply chains of critical U.S. industries.

Commerce Secretary Raimondo indicated that more semiconductor funding awards are expected in 2024, potentially reaching billions of dollars and reshaping the landscape of U.S. chip production.