The Biden Administration has recently announced a prospective $1.5 billion agreement with American semiconductor manufacturer GlobalFoundries to bolster semiconductor manufacturing capacity in the United States. This grant is a part of the CHIPS and Science Act, signed into law by President Joe Biden in 2022, which aims to boost domestic research and manufacturing of semiconductors with $280 billion in new funding.
The agreement with GlobalFoundries, one of the world’s leading semiconductor manufacturers, is a nonbinding preliminary memorandum of terms. If it goes ahead, it will significantly increase the domestic production of semiconductors, particularly benefiting the local auto and aerospace industries that heavily rely on shipments from overseas. The deal also aims to enhance U.S. competitiveness in current-generation and mature-node semiconductor production.
Secretary of Commerce Gina Raimondo emphasizes the importance of semiconductors in various aspects of our daily lives, including cellphones, refrigerators, cars, and even advanced weapons systems. The shortage of semiconductors during the COVID-19 pandemic led to price increases for consumers and forced automobile manufacturing sites across the country to shut down. By strengthening semiconductor manufacturing capacity in the United States, the Biden administration aims to prevent such disruptions in the future.
GlobalFoundries plans to use the government funding to establish a new state-of-the-art semiconductor production facility in Malta, New York. This facility will produce technologies that are not currently available in the local area. Additionally, a portion of the grant will be used to expand an existing GlobalFoundries facility in New York, tripling the existing capacity of the Malta campus over the next decade. Furthermore, a facility in Burlington, Vermont, will undergo revitalization with some of the government funds.
Thomas Caulfield, president and CEO of GlobalFoundries, believes that these new and refurbished facilities will play a crucial role in making the U.S. semiconductor ecosystem more globally competitive and resilient. He sees this agreement as a way to establish the New York Capital Region as a global semiconductor hub. Caulfield emphasizes the need to increase the demand for U.S.-made chips and grow the talented U.S. semiconductor workforce alongside the expansion of production capacity.
In addition to the $1.5 billion grant, GlobalFoundries will have access to approximately $1.6 billion in loans under the preliminary memorandum of terms. The total investment, combining public and private funds, for all the announced projects is expected to be at least $12.5 billion.
Currently, there are only a few companies that produce microchips in significant quantities, with the majority located in China. To slow China’s development of advanced military technology, the Biden administration has expanded restrictions on semiconductor exports to the country. U.S. firms now have limitations on selling advanced semiconductors or the machinery needed for their manufacturing without government notification or licenses.
Overall, the prospective $1.5 billion agreement between the Biden administration and GlobalFoundries represents a significant step towards strengthening domestic semiconductor manufacturing capacity in the United States. By investing in new production facilities and expanding existing ones, this agreement aims to improve supply chain stability and enhance U.S. competitiveness in the semiconductor industry.
