U.S. Awards $1.5 Billion to Chipmaker GlobalFoundries

The Biden administration on Monday announced a $1.5 billion award to the New York-based chipmaker GlobalFoundries, one of the first sizable grants from a government program aimed at revitalizing semiconductor manufacturing in the United States.

As part of the plan to bolster GlobalFoundries, the administration will also make available another $1.6 billion in federal loans. The grants are expected to triple the company’s production capacity in the state of New York over ten years.

The funding represents an effort by the Biden administration and lawmakers of both parties to try to revitalize American semiconductor manufacturing. Currently, just 12 percent of chips are made in the United States, with the bulk manufactured in Asia. America’s reliance on foreign sources of chips became an issue in the early part of the pandemic, when automakers and other manufacturers had to delay or shutter production amid a dearth of critical chips.

The award to GlobalFoundries will help the firm expand its existing facility in Malta, N.Y., enabling it to fulfill a contract with General Motors to ensure dedicated chip production for its cars.

It will also help GlobalFoundries build a new facility to manufacture critical chips that are not currently being made in the United States. That includes a new class of semiconductors suited for use in satellites because they can survive high doses of radiation.

The money will also be used to upgrade the company’s operations in Vermont, creating the first U.S. facility capable of producing a kind of chip used in electric vehicles, the power grid, and 5G and 6G smartphones. If not for the investment, administration officials said the facility in Vermont would have faced closure.

The plans are part of the Biden administration’s effort to reinvigorate American semiconductor manufacturing after many factories moved to East Asia in recent decades.

A global chip shortage in the midst of the pandemic led to shutdowns, layoffs and furloughs at American auto manufacturing plants, slowing the U.S. economy and sending prices for used and new cars soaring. That encouraged Congress to pass a bill that would award more than $50 billion to the semiconductor industry, including $39 billion in grants and $11 billion for research and development that is being distributed by the Commerce Department.

Gina Raimondo, the secretary of commerce, said on Sunday that the award to GlobalFoundries would help secure a stable supply of chips for key auto suppliers and manufacturers, and prevent supply chain hiccups.

“Today’s announcement will ensure that this doesn’t happen again,” Ms. Raimondo said.

Senator Chuck Schumer of New York, the majority leader who was a major proponent of the legislation, said the government financing would enable GlobalFoundries to invest more than $12 billion in the United States, as well as create 9,000 construction jobs and 1,500 permanent manufacturing jobs.

“The bang for the buck that the federal government is investing is huge,” Mr. Schumer said, adding, “This shows our best days are not over. We can compete.”

GlobalFoundries will also receive the government’s first grant issued specifically for work force development, officials said. The government will give $10 million to support a more than $60 million investment from the company to train new workers for the semiconductor industry. A lack of trained workers is a commonly cited issue for chipmakers trying to operate in the United States.

Officials emphasized that the announcement was just a preliminary agreement and that the company would be subject to a period of due diligence, including meeting certain milestones in construction and production. The government will hand out funding as those benchmarks are met.

The award for GlobalFoundries comes as the company, like many others in the industry, has experienced reduced revenue because of decreased demand among many key customers. Thomas Caufield, its chief executive, expressed hopes that the government would also take steps to help boost chip demand and encourage companies to shift some production to U.S. factories.

“Now that they are saying we’re putting this money forward, I think the pressure will come on to bring more reshoring of products,” he said in an interview.

GlobalFoundries is among the few large-scale companies that build chips for other companies that design and market them, a business known in the industry as a foundry.

The company grew out of former operations of Advanced Micro Devices, which spun off the business in 2009 to focus on designing rather than manufacturing chips. Funding was provided by Mubadala, an Abu Dhabi sovereign wealth fund that still owns a controlling stake.

GlobalFoundries opened a new factory in 2012 in Malta, N.Y., and in 2014 took over former IBM operations that included two factories. Both had major sidelines in making specialized chips for the Pentagon; the factory in Vermont, in particular, is known for radio chips used in most smartphones and in military hardware.

In a major strategy shift, GlobalFoundries in 2018 decided to stop the costly practice of developing new production processes that pack more transistors on each piece of silicon. It chose to specialize in older manufacturing technology to make chips needed for cars, consumer appliances, and industrial and defense applications.

Biden officials have stressed that they are singling out GlobalFoundries because it manufactures legacy chips, which are created with older production processes. Chips manufactured using such technologies tend to be relatively inexpensive, but they are at the heart of cars and consumer electronic products that caused major disruptions during the pandemic-driven chip shortage. They are also widely used in defense applications.

The other companies picked for the first two government grants also used such trailing-edge technology.

Chinese companies are currently beefing up capabilities to play a much bigger role in supplying such legacy chips. The trend has alarmed the Biden administration and some members of Congress, who are concerned that cheap imports from China could undercut new U.S. factories.

So far, the administration has not announced awards for companies making more advanced chips, though it is expected to in the coming weeks and months. Such chips handle calculations in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware.