By Alicia Diaz, Ian King and Mackenzie Hawkins | Bloomberg
The US plans to award $1.5 billion to GlobalFoundries Inc., the largest domestic maker of made-to-order semiconductors, as part of the Biden administration’s effort to strengthen the nation’s chip production.
The funding, outlined in a non-binding preliminary agreement, would flow to three projects: a new fabrication facility in Malta, New York, the expansion of an existing site in Malta and expansion of its Burlington, Vermont, manufacturing site. The US is also offering the company $1.6 billion in federal loans.
The company has California offices in Carlsbad and Santa Clara.
“Today’s investment will protect our national security by expanding domestic production of chips used in technology such as satellites and space communications,” Lael Brainard, director of the White House’s National Economic Council, said on a call with reporters.
The funding comes under the so-called Chips Act, which Congress passed in 2022 to reinvigorate US semiconductor production in the face of concern over global supply chains, production costs and geopolitical risks including to Taiwan. At the same time, US-China tension over technology is growing ahead of the 2024 presidential election.
GlobalFoundries is a defense and industry contractor whose partners include General Motors Co. and Lockheed Martin Corp. Chips produced at the sites are expected to be exported globally, securing long-term economic benefits, a senior administration official said.
Senate Majority Leader Chuck Schumer, a New York Democrat, said it’s the biggest preliminary award yet under the Chips Act, adding he’s “proud that it’s the biggest announcement yet that has happened in New York State.” The projects are expected to create about 1,500 manufacturing and 9,000 construction jobs over the next decade, according to the Commerce Department.
GlobalFoundries is a contract manufacturer of chips — what’s known as a foundry — meaning it produces semiconductors for other companies. It’s a much smaller competitor to Taiwan Semiconductor Manufacturing Co., which helped pioneer the foundry concept, but the largest such company based in the US.
The Chips Act includes $39 billion in direct grants as well as loans and loan guarantees worth $75 billion, though divvying up the support has been a slow process. Intel Corp. has been in talks with the Biden administration to receive more than $10 billion in subsidies, Bloomberg reported last week. That would be the largest award yet.
Intel has been working on an expansion of its US factories, including a planned project in Ohio that could be the world’s largest. The company has said that the speed of those efforts hinges in part on the amount of government incentives it receives.
The Commerce Department previously announced two smaller Chips Act grants, setting aside funds for the American subsidiary of BAE Systems Plc and Microchip Technology Inc. TSMC and Samsung Electronics Co. are expected to get Chips Act funds as well, helping them pay for new factories in the US.
GlobalFoundries is upgrading to prepare for a chip industry rebound in the coming years. After sliding in 2023, worldwide semiconductor sales are projected to grow 13% in 2024.
For now, semiconductor makers are still contending with a slump, which was evident in GlobalFoundries’ quarterly earnings report last week. It projected sales of $1.5 billion to $1.54 billion in the current quarter, well below the $1.76 billion analysts were projecting.
More than 80% of GlobalFoundries is owned by the government of Abu Dhabi, which assembled the business by acquiring parts of various companies and putting them together.
