Semiconductor firm Microchip Technology Inc. has been awarded $162 million in U.S. government grants as part of a plan to step up domestic production of computer chips and microcontroller units or MCUs that are key components in the consumer and defense industries.

The funds were awarded by the Commerce Department, and will enable Microchip to triple production of its mature-node semiconductor chips and microcontroller units at two factories in the U.S., officials told Reuters today.

Microchip is a publicly listed U.S. corporation that manufactures microcontroller, mixed-signal, analog and Flash-IP integrated circuits. Its products are critical components in everything from cars and washing machines to smartphones and internet routers. They’re also widely used in the defense industry.

Commerce Secretary Gina Raimondo said in a statement that the award is a “meaningful step in our efforts to bolster the supply chain for legacy semiconductors that are in everything.”

The announcement is part of a plan by the Biden administration to shift production of computer chips away from foreign countries such as Taiwan, which dominate the chipmaking industry.

Reuters said the award is the second to be confirmed as part of the $52.7 billion Chips for America program that was approved by Congress back in August 2022, in order to subsidize domestic chip manufacturing and research. The first award came in December, when the British chipmaker BAE Systems Plc was awarded $35 million in funding to manufacture chips for fighter planes.

Microchip’s award is said to consist of $90 million that’s earmarked for the expansion of a chip fabrication plant in Colorado, and $72 million for that will be used to expand a second facility in Oregon. By expanding its facilities, Microchip will be better able to cater to U.S. customers domestically, officials said.

White House National Economic Council Director Lael Brainard said Microchip’s chip technology is critical for the U.S. aerospace, automotive, commercial, defense and industrial industries. According to her, the award will help Microchip reduce its reliance on global supply chains that resulted in long wait times and increased prices for cars and dozens of consumer products during the COVID-19 pandemic.

Microchip Chief Executive Ganesh Moorthy praised the award, saying it is a direct investment that will “strengthen our national and economic security.”

The award comes after Microchip said in early 2023 it is planning to invest $800 million of its own funds to triple the semiconductor production capacity of its Oregon plant.

Although the grant awarded to Microchip appears to be fairly small compared to the amount earmarked for the Chips for America plan, it also reflects how far-reaching the program is intended to be, said Charles King of Pund-IT Inc. “While massive vendors like Intel, Qualcomm, IBM and others will receive far more substantial grants that reflect the size of their own investments, the U.S.-based silicon industry is more diverse and extends well beyond those players,” he said. “Along with providing welcome funding, Chips for America should help highlight the size and diversity of the U.S. semiconductor industry.”

Last year, the Commerce Department announced it would survey how U.S. sources so-called legacy chips to understand its domestic production needs better.

According to the Department, the survey was designed to “reduce national security risks” posed by China, which is also a source of many older computer chips for critical U.S. industries.

Holger Mueller of Constellation Research Inc. said the chip wars are heating up, with Microchip being one of the first recipients of substantial funding given out to the various players in the industry. “The goal is to boost the production capacity of chips on U.S. territory, and that is likely to happen,” Mueller explained. “But we can expect questions to be asked about how well this funding is utilized and how cost-effective it is, though the answers to those will come much later.”

Raimondo said last month that the Commerce Department is planning to announce about a dozen chip funding awards this year, with some expected to run into billions of dollars. The funding will help to “drastically reshape” U.S. chip production, she said.

Photo: Microchip Technology