The Biden administration recently announced a substantial $1.5 billion award to GlobalFoundries, a chipmaker based in New York. This grant is one of the first major disbursements from a government program aimed at revitalizing semiconductor manufacturing in the United States.
In addition to the $1.5 billion award, the administration plans to provide another $1.6 billion in federal loans to GlobalFoundries. This financial support is expected to triple the company’s production capacity in the state of New York over the next decade.
The funding provided to GlobalFoundries reflects the joint efforts of the Biden administration and lawmakers from both parties to revive American semiconductor manufacturing. Currently, only 12 percent of chips are made in the United States, with the majority being manufactured in Asia. The country’s reliance on foreign chip suppliers became a significant issue during the early stages of the pandemic, leading to production delays and disruptions in various industries.
This award to GlobalFoundries will not only support the expansion of its facility in Malta, N.Y., but also ensure dedicated chip production for General Motors. Additionally, the funds will enable GlobalFoundries to establish a new facility dedicated to manufacturing critical chips that are currently not being produced in the United States. This includes semiconductors suitable for use in satellites due to their ability to withstand high levels of radiation.
Furthermore, the investment will be used to upgrade GlobalFoundries’ operations in Vermont, creating the first U.S. facility capable of producing chips used in electric vehicles, the power grid, and 5G/6G smartphones. Without this funding, the Vermont facility would have faced closure.
These plans align with the Biden administration’s broader strategy to reinvigorate American semiconductor manufacturing, which has seen a significant decline as many factories moved to East Asia in recent decades.
The global chip shortage during the pandemic exposed vulnerabilities in the U.S. economy, leading to shutdowns, layoffs, and skyrocketing prices for used and new cars. To address this issue, Congress passed a bill allocating over $50 billion to the semiconductor industry. The funding includes $39 billion in grants and $11 billion for research and development, which will be distributed by the Commerce Department.
Gina Raimondo, the secretary of commerce, emphasized that the award to GlobalFoundries will help secure a stable supply of chips for key auto suppliers and manufacturers, thereby preventing supply chain disruptions.
By investing in GlobalFoundries, the Biden administration aims to create opportunities for job growth and construction. According to Senator Chuck Schumer, the financing provided by the government will enable GlobalFoundries to invest more than $12 billion in the United States. This investment is expected to generate 9,000 construction jobs and 1,500 permanent manufacturing jobs.
The government’s support for GlobalFoundries extends beyond financial assistance, as the company will also receive the first grant specifically dedicated to workforce development. The government plans to provide $10 million to support GlobalFoundries’ investment of over $60 million in training new workers for the semiconductor industry. The shortage of skilled workers has been a significant challenge for chipmakers operating in the United States.
It’s important to note that the announcement of the award to GlobalFoundries is a preliminary agreement, subject to a period of due diligence. The company will need to meet specific construction and production milestones to receive the funding from the government.
GlobalFoundries’ revenue has been impacted by decreased demand from key customers, similar to other companies in the industry. Thomas Caufield, the CEO of GlobalFoundries, expressed optimism regarding the government’s investment and called for additional steps to boost chip demand and incentivize companies to shift production to U.S. factories.
GlobalFoundries is a notable player in the industry as it acts as a foundry, building chips for other companies involved in chip design and marketing. The company emerged from former operations of Advanced Micro Devices, with funding provided by Mubadala, an Abu Dhabi sovereign wealth fund that currently holds a controlling stake.
One significant strategy shift for GlobalFoundries occurred in 2018 when it decided to specialize in older manufacturing technology to produce legacy chips. These chips, while relatively inexpensive, are crucial for various industries, including automotive, consumer appliances, and defense applications.
The Biden administration’s focus on supporting GlobalFoundries and companies utilizing trailing-edge technology is driven by concerns over China’s growing capabilities in supplying legacy chips. Cheap imports from China pose a potential threat to new U.S. factories and have raised alarms within the administration and Congress.
Although the Biden administration has not announced awards for companies manufacturing more advanced chips, it is expected to do so in the coming months. These chips play a crucial role in artificial intelligence, smartphones, supercomputers, and sensitive military hardware.
The investment in GlobalFoundries symbolizes the efforts to secure America’s chip supply chain and reduce dependency on foreign countries, particularly China. This initiative aligns with broader trends in the semiconductor industry, where countries worldwide are seeking to strengthen their domestic chip manufacturing capabilities.
As technology continues to advance, the demand for chips will only grow, driven by emerging trends such as artificial intelligence, the expansion of the Internet of Things, and the increasing reliance on electric vehicles. The development and production of advanced chips domestically will not only enhance national security but also position the United States as a leader in cutting-edge technologies.
In conclusion, GlobalFoundries’ grant is a significant step towards revitalizing American semiconductor manufacturing. The investment underscores the Biden administration’s commitment to secure the chip supply chain, create job opportunities, and boost the country’s technological competitiveness. With ongoing efforts to support companies like GlobalFoundries and incentivize chip production in the United States, it is expected that the domestic semiconductor industry will experience growth and innovation in the coming years.
