The U.S. Department of Commerce today announced the launch of a new federal funding competition that aims to spur the research and development of more advanced computer chip packaging technologies.

The Biden administration has earmarked $1.6 billion in funding, in the latest attempt by the White House to revitalize the U.S. semiconductor industry.

In an announcement, the Commerce Department said the money will come via the 2022 Chips and Science Act, and will be used to fund grants in five research areas. The funds will also help to finance the development of prototype technologies, said Commerce Undersecretary for Standards and Technology Laurie E. Locascio.

Packaging refers to the process of encasing semiconductors and connecting them to devices, and is an essential subset of the chipmaking industry. But the U.S. is something of a laggard in the sector, accounting for just 3% of the world’s chip packaging capacity. The vast majority of this work is done in Asian countries such as Taiwan and South Korea.

The U.S. government wants to change this so as to reduce its reliance on foreign suppliers. It has already given incentives to companies including Intel Corp., SK Hynix Inc., Amkor Technology Inc. and Samsung Electronics Co. Ltd., in order to entice them to build chip packaging plants in the U.S.

Bloomberg reported that the funding will inspire companies to innovate in areas such as creating more rapid data transfer technologies and more efficient heat management. Additionally, the funds will also go toward R&D in areas such as high-performance computing and low-powered semiconductor systems for artificial intelligence models.

“Our research and development efforts in advanced packaging will heavily focus on high-demand applications like high-performance computing and low-power electronics, both needed to enable leadership in AI,” Locascio said.

She said the announcement is just the latest example of the Biden administration’s commitment to investing in cutting edge R&D that is critical to creating quality jobs in the U.S. The government intends to help the U.S. regain its status as “a leader in advanced semiconductor manufacturing,” she added.

“Within a decade, through R&D funded by CHIPS for America, we will create a domestic packaging industry where advanced node chips manufactured in the U.S. and abroad can be packaged within the United States and where innovative designs and architectures are enabled through leading-edge packaging capabilities,” she said.

Today’s announcement is the largest funding opportunity to arise from an $11 billion fund set aside by the CHIPS Act. That legislation also set aside $39 billion worth of grants, plus $75 billion in loans and loan guarantees, and 25% tax credits, to tempt semiconductor manufacturers to build new facilities on U.S. soil, after decades of production shifting to Asia.

A good deal of those funds have already been doled out to chipmakers. In April, the Commerce Department agreed to an award package worth $6.6 billion in grants, and up to $5 billion in loans, plus potential tax credits, for Taiwan Semiconductor Manufacturing Co., to fund the construction of a new chip packaging facility in Arizona. All told, the administration has committed to providing more than $27 billion in funding to TSMC.

Intel Corp. has also received a huge chunk of CHIPS Act money to support the development of a new chip plant at its Ocotillo campus in Chandler, Arizona, while Samsung received a package worth $6.4 billion for its proposed plant in Taylor Texas. Others, such as GlobalFoundries Inc., have also received billions of dollars in grants and loans.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that the Biden administration realizes it’s not enough to just build chip factories if it wants to lead the world in semiconductors. “It also needs to support the adjacent needs of the industry, such as packaging, R&D and shipping,” the analyst said. “But it remains to be seen if the U.S. can actually produce competitively-priced chips. Europe tried a similar thing in the past and largely failed, and back then there was no palpable threat from China. This time there is.”

The federal funding program announced today will help to advanced R&D in five categories relating to chip packaging, including equipment and tools, power delivery and heat management, connector technology, electronic design automation and chiplets, which are modular components of computer chips. The Commerce Department hopes to make multiple awards of up to $150 million in each category.