Biden-Harris Administration announce preliminary terms with Coherent, SkyWater, and X-Fab to advance U.S. supply chain security

Today, the Biden-Harris Administration announced that the U.S. Department of Commerce signed three separate preliminary memoranda of terms (PMT) under the CHIPS and Science Act to provide up to $33 million in proposed direct funding to Coherent, up to $16 million in proposed direct funding to SkyWater Technology Foundry Inc., and up to $50 million in proposed direct funding to X-Fab. President Biden signed the bipartisan CHIPS and Science Act to usher in a new era of semiconductor manufacturing in the United States, bringing with it a revitalized domestic supply chain, good-paying jobs, and investments in the industries of the future. The proposed investment in Coherent would support the expansion and modernization of the company’s existing facility in Sherman, Texas and is expected support approximately 70 direct jobs. The proposed investment in SkyWater would support the modernization of its existing facility in Bloomington, Minnesota and is expected to create approximately 70 jobs. The proposed investment in X-Fab would support the modernization and expansion of its existing silicon carbide fab in Lubbock, Texas while and is expected to create up to an estimated 150 jobs.

“The Biden-Harris Administration’s bipartisan CHIPS and Science Act is making targeted investments to meet market demands for technology critical to our national and economic security,” said U.S. Secretary of Commerce Gina Raimondo. “Today’s proposed investments across Texas and Minnesota would help bolster domestic chip production and help secure our supply chain for decades to come.”

“Today’s three semiconductor announcements recognize that America’s innovative edge is rooted in communities like Sherman and Lubbock, Texas and Bloomington, Minnesota. The President and Vice President’s CHIPS & Science Act is creating jobs, supporting small businesses, and securing the resilience of our supply chains all throughout the United States,” said National Economic Advisor Lael Brainard.

The proposed funding announced today would support the following projects:

• Coherent (Sherman, Texas): The Biden-Harris Administration’s proposed investment of up to $33 million would support the modernization and expansion of a state-of-the-art manufacturing cleanroom in Coherent’s existing 700,000 square-foot facility in Sherman, Texas to establish the world’s first 150mm indium phosphide (InP) manufacturing line by adding advanced wafer fabrication equipment to produce InP devices at scale. InP optoelectronic devices are widely used in applications such as datacom and telecom transceivers, including for AI infrastructure applications, advanced sensing for consumer electronics, and medical and automotive applications. The increased production of Coherent’s InP devices, which are increasingly growing in demand, would allow the U.S. to advance supply chain resiliency and technological leadership and create approximately 70 jobs.

• SkyWater Technology (Bloomington, Minnesota): The Biden-Harris Administration’s proposed investment of up to $16 million in SkyWater would support the modernization of its existing facility in Bloomington, Minnesota to improve the quality of production and wafer services by replacing equipment, upgrading the facility’s cleanroom and space and IT systems, and increase overall production capacity of 90nm and 130nm wafers by approximately 30%. SkyWater’s Bloomington facility offers its customers in the aerospace and defense, automotive, biomedical and industrial markets the ability to prototype and scale to volume production differentiated technology. The company is a Department of Defense (DoD) Trusted Foundry; as a result of proposed CHIPS funding, the company would be able to improve productivity and enhance operational sustainability to support DoD missions as well as grow its commercial business. The proposed CHIPS investment would build upon the company’s 40-year history in Bloomington, Minnesota and is expected to create approximately 70 jobs. SkyWater’s community workforce development efforts include its ongoing partnership with Hennepin Technical College, Greater Minneapolis Saint Paul Regional Economic Development Partnership, and the University of Minnesota Twin Cities and working with the Minnesota CHIPS coalition to support its short and long-term workforce development goals. In addition, the State of Minnesota’s Forward Fund would provide $19 million in dedicated funding to support this proposed project.

• X-Fab (Lubbock, Texas): The Biden-Harris Administration’s proposed investment of up to $50 million would support the expansion and modernization of X-Fab’s Silicon Carbide (SiC) foundry facility, the only high-volume SiC foundry in the U.S. SiC technology is key to the global decarbonization efforts in the automotive and industrial sectors and offers multiple advantages over conventional silicon-based technologies for high-power applications. The proposed CHIPS funding would bolster supply resiliency for critical infrastructure markets that were adversely impacted by foundry capacity shortages and supply chain disruptions during the COVID-19 pandemic. The proposed terms provide support for workforce development efforts including X-Fab’s current partnerships with Texas Tech College of Engineering, South Plains College, Western Technical College, Lubbock Area United Way, SEMI Foundation, and the Lubbock Economic Development Alliance. The proposed CHIPS investment would create an estimated 150 jobs.

“This proposed investment allows Coherent to accelerate its industry leadership in InP technology and manufacturing,” said Dr. Giovanni Barbarossa, Chief Strategy Officer and President, Materials Segment, for Coherent. “We are very excited for this opportunity to accelerate the delivery of world-class optoelectronic products that will enable America’s economic future.”

“We are pleased to receive this important proposed CHIPS funding, including the Advanced Manufacturing Investment Tax Credit to expand our nation’s onshore capacity. We’ve been the beneficiary of many government program awards over the past several years, and we’re proud of our role in helping to expand the domestic microelectronics infrastructure and strengthen the U.S. supply chain,” said SkyWater CEO, Thomas Sonderman. “As America’s Trusted Foundry, through our business model and expanding capabilities, we are creating a national asset for technology development, which is in a critical state domestically. We have been working to meet the specific needs of the Defense Industrial Base and commercial companies developing the technologies of the future. The proposed investments today are another milestone along this path.”

“The demand for silicon carbide technologies will be strong for the long term, and we are proud to provide solutions that support the transition to electric mobility and renewable energy sources, saidRico Tillner, CEO of X-FAB Texas. X-FAB Texas' silicon carbide technologies are leading in quality and yield and provide a long-term perspective for the site. The proposed CHIPS funding will support the future success of X-FAB Texas and will contribute to the establishment of a domestic supply chain for silicon carbide.”

Coherent, SkyWater and X-Fab have indicated they plan to claim the Department of the Treasury’s Advanced Manufacturing Investment Credit (CHIPS ITC), which is 25% of qualified capital expenditures. Click here to learn more about the tax credit.

As explained in its first Notice of Funding Opportunity, the Department of Commerce may offer applicants a PMT on a non-binding basis after satisfactory completion of the merit review of a full application. The PMT outlines key terms for a potential CHIPS incentives award, including the amount and form of the award. The award amounts are subject to due diligence and negotiation of award documents and are conditional on the achievement of certain milestones. After a PMT is signed, the Department of Commerce begins a comprehensive due diligence process on the proposed projects and continues negotiating or refining certain terms with the applicant. The terms contained in any final award documents may differ from the terms of Coherent, SkyWater and X-Fab’s PMT’s being announced today.