GlobalFoundries To Scoop $1.5 Billion In CHIPS Act Grants: What It Means For Semiconductor Sector

U.S. semiconductor maker GlobalFoundries Inc GFS is the first recipient of a government grant from the Commerce Department under the Biden administration’s $53-billion CHIPS Act.

GlobalFoundries announced Monday it would receive $1.5 billion to support the expansion of its production facility in Malta, New York, including the construction of a new fabrication plant. The company will also use the funds to help modernize and expand capacity at its Vermont plant.

Alongside the grant, GlobalFoundries said it plans to invest more than $12 billion over the next decade as it seeks to keep pace with demand for chips from the automotive, aerospace, defense and artificial intelligence industries.

Also Read: Why The CHIPS Act Is Good News For Intel, Bad News For Nvidia, Advanced Micro Devices

What Is The CHIPS Act?

The CHIPS Act, launched in 2022, was enacted in response to the U.S.’s dwindling share in global semiconductor production as companies moved manufacturing facilities to cheaper sites in Asia and other regions.

The industry suffered a crippling supply chain crisis as the economy recovered from the COVID-19 pandemic. While demand soared in post-lockdown U.S. and Europe, manufacturing facilities in Asia — particularly China, where strict lockdown measures remained in force — struggled to cope.

Such were the shortages, the supply of semiconductors became a question of national security and the law was devised to boost domestic production. It was also enacted as part of U.S. efforts to limit China’s influence over the industry.

“It was the shortages of semiconductors during the COVID-19 pandemic that raised prices for consumers and led to the shutdown of automobile manufacturing sites across the country,” said Commerce Secretary Gina Raimondo.

She added: “Thanks to the CHIPS and Science Act, we’re working to onshore these critical technologies in order to bolster the supply of domestic chips that are essential to manufacturing cars, electronics, and national defense systems.”

Semiconductor Stocks To Watch With Federal Dollars Flowing

While the act was seen as a signature piece of legislation for President Joe Biden, it has been slow to get moving, with Monday’s announcement by GlobalFoundries the first to be approved.

As the president hits the campaign trail ahead of the November election, he is expected to highlight the CHIPS Act as one of his administration’s key successes, so further announcements from some of the 170 companies to have applied for grants can be expected in the coming days and weeks.

Among the other companies to have submitted applications for grants, Intel Corporation INTC has been reported to be in discussions with the Commerce Department for grants, loans and other financial incentives worth around $10 billion.

Intel is seeking to boost capacity at its recently constructed production facility in Ohio, which is expected to cost around $100 billion when fully built over the next decade, and at its existing foundries in Arizona and New Mexico.

Texas Instruments Incorporated TXN is also expected to receive grants and tax incentives from the Commerce Department to help fund its new fabrication plant in Sherman, Texas, that was started in May 2022.

Non-US Companies Could Also Benefit

Other, non-U.S. companies looking for an investment boost to bring semiconductor production to American shores include Samsung Foundry which, along with its parent company, counts Qualcomm among its customers.

The company announced plans in 2021 to construct a new fab in Texas, where it has operated since 2009. The new project is expected to cost $17 billion.

Taiwan Semiconductor Manufacturing TSM announced in June 2020 plans for a new fab in Phoenix, Arizona.

Advanced Micro Devices Inc. AMD, one of GlobalFoundries’ key customers, welcomed news of the rollout of CHIP Act grants.

Lisa Su, chair and CEO, said: “The planned investment demonstrates the commitment of the U.S. government to strengthen the domestic chip supply chain for economic growth and ensure the long-term competitiveness of the U.S. semiconductor ecosystem.”

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