US awards Microchip $162 million to boost legacy semiconductors

The US Commerce Department plans to award $162 million to Microchip Technology Inc. to help the company triple its domestic output of older-generation semiconductors that are used in everything from cars to weapons systems.

The award marks the second such commitment from the 2022 Chips Act, which set aside $39 billion in grants, plus $75 billion worth of loans and loan guarantees, to bring chipmaking back to the US. At least $2 billion from that fund will go to so-called legacy chips, less advanced semiconductors that are still essential to the global economy.

The Biden administration has increasingly concentrated on those mature models as China makes an aggressive push into the area, which remains untouched by US export controls singling out the most advanced technology. Administration officials are now considering tariffs to counter low prices from Chinese chipmakers, while surveying companies to understand legacy chip supply chains.

Microchip is among the largest suppliers to the US defense industrial base, according to senior administration officials. Chips Act funding, said Commerce Under Secretary Laurie E. Locascio, will support the firm’s production of microcontrollers, which are “key components of nearly every military and space program and have wide application in the commercial sector.”

Microchip’s $800 million project in Gresham, Oregon, will receive $72 million, the Commerce Department announced. The firm marked a halfway point in construction and hiring last March, and aims to reach full capacity in 2027, according to a senior administration official. And $90 million will support an $880 million expansion in Colorado Springs, Colorado, a project the company announced in February and expects to complete by the end of the decade, the official said, speaking on condition of anonymity to detail the pending award.

The sites have also received $42.4 million and $47 million in state and local incentives respectively. Together, the company estimates, they’ll create more than 700 jobs.

Thursday’s announcement marks the beginning of a years-long federal funding process, according to the administration official, with tranches of the award tied to domestic production milestones. Terms won’t be finalized until Microchip has shown it will successfully secure environmental permits, the official said, adding that they are confident in the company’s review process. 

Commerce Secretary Gina Raimondo has warned that permitting could cause long construction delays. The department is currently seeking comment on a proposal to streamline review for current-generation and mature-node facilities, while lawmakers continue to push for a chips permitting exemption that US House Speaker Mike Johnson blocked last month. 

More than 570 firms have expressed interest in Chips Act program, and Raimondo has said the administration plans to make about a dozen awards this year.