By Doina Chiacu and David Shepardson
WASHINGTON (Reuters) -The U.S. government is awarding $1.5 billion to GlobalFoundries (NASDAQ:GFS) to subsidize semiconductor production, the first major award from a $39 billion fund approved by Congress in 2022 to bolster domestic chip production.
GlobalFoundries, the world's third-largest contract chipmaker, will build a new semiconductor production facility in Malta, New York, and expand existing operations there and in Burlington (NYSE:BURL), Vermont, according to a preliminary agreement with the Commerce Department.
The department in January announced a $162 million planned award to Microchip Technology (NASDAQ:MCHP) and $35 million to a BAE Systems (LON:BAES) facility in New Hampshire in December.
The $1.5 billion GlobalFoundries grant will be accompanied by $1.6 billion in available loans, with the funding expected to generate $12.5 billion in overall potential investment across the two states, the department said.
"The chips that GlobalFoundries will make in these new facilities are essential chips to our national security," Commerce Secretary Gina Raimondo told reporters Sunday.
Raimondo told Reuters this month the agency is in active talks with numerous applicants and expects to make several announcements by the end of March.
"We're in the process of really complicated, challenging negotiations with these companies," Raimondo told Reuters. "These are highly complex, first-of-their-kind facilities. The kind of facilities that TSMC, Samsung (KS:005930), Intel (NASDAQ:INTC), are proposing to do in the United States -- these are new-generation investments -- size, scale complexity that's never been done before in this country."
The GlobalFoundries chips are used in satellite and space communications and the defense industry along with blind spot detection and collision warnings in vehicles, along with Wi-Fi and cellular connections.
"As an industry, we now need to turn our attention to increasing the demand for U.S.-made chips, and to growing our talented U.S. semiconductor workforce," GlobalFoundries CEO Thomas Caulfield said in a statement.
GlobalFoundries opened a $4 billion semiconductor fabrication plant in Singapore in September, as part of a major global manufacturing expansion.
The Malta facility expansion will secure a stable supply of chips for auto suppliers and manufacturers, including General Motors (NYSE:GM), Raimondo added.
GlobalFoundries and GM on Feb. 9 announced a long-term deal for the automaker to secure U.S.-made processors that will help it avoid factory-halting chip shortages like ones during the COVID-19 pandemic.
"GlobalFoundries’ investment in New York both ensures a robust supply of semiconductors in the U.S. to help GM meet demand and supports U.S. leadership in automotive innovation," said General Motors President Mark Reuss.
The new facility in Malta will produce high-value chips that are not currently made anywhere in the United States, Raimondo added.