Federal officials will provide up to $120 million in grants to Polar Semiconductor to help the company expand its chip manufacturing plant in Minnesota, the Biden administration announced Monday, the latest in a series of awards intended to strengthen the US supply of semiconductors.
Commerce Department officials said the grant would help Polar upgrade technology and double production capacity at its facility in Bloomington, Minnesota, within two years. The company makes chips critical to automobiles, defense systems and power grids, federal officials said.
“We're making taxpayer money go as far as possible by crowding in private and state investment to create jobs, protect our supply chains and strengthen manufacturing in Minnesota,” said Laurie Locascio, Under Secretary of Commerce for standards and technology.
The funding comes from the bipartisan CHIPS and Science Act, passed by lawmakers in 2022 to boost domestic production of commercial semiconductors, the tiny chips crucial to most electronic devices, including smartphones, computers, cars and weapons systems. The law gave the Commerce Department $39 billion to distribute to companies to encourage the construction and expansion of new plants in the United States.
Increasing domestic chip production is an important component of President Biden's economic policy agenda, which largely focuses on strengthening American manufacturing and bringing back jobs that have moved overseas. Only about 10% of the world's semiconductors are produced in the United States, down from about 37% in 1990.
Biden administration officials have so far announced more than $29 billion in rewards. Last month, the Commerce Department announced grants of up to $6.1 billion to Micron to help the chipmaker build plants in New York and Idaho. Other chipmakers, including Samsung, Taiwan Semiconductor Manufacturing Company and Intel, have received multibillion-dollar awards. GlobalFoundries, Microchip Technology and BAE Systems received the top three federal awards.
The United States is looking to boost domestic semiconductor production, in part to prevent the kind of costly and economically damaging chip shortages that have occurred during the pandemic. Federal officials said the Polar award would help prevent these types of outages.
“During the Covid-19 pandemic, the shortage of these chips has been one of the most acute bottlenecks,” Locascio said. “Thanks to President Biden's leadership, the future of the semiconductor industry is being built right here in the United States.”
Similar to other recipients, Polar will have to meet certain milestones before receiving payments, federal officials said. The company also plans to apply for federal tax credits that will help reduce the costs of building and equipping factories with manufacturing equipment.
Minnesota is also providing about $75 million in grants to Polar's expansion project, which is expected to cost more than $525 million. The company's expansion will create more than 160 manufacturing and construction jobs in Minnesota, federal officials said.
The federal award will help Polar establish itself as an independent, U.S.-owned foundry, which will allow the company to expand its customer base, administration officials said. So-called foundry services involve the production of chips designed and marketed by other companies.
Surya Iyer, Polar's president and chief operating officer, said money is critical to the company's expansion and that without it a project of this size would not be possible.
“We are talking about a small single-digit percentage expansion rather than the huge effort we will make now,” Iyer said.