The U.S. Commerce Department has finalized a $123 million grant to Polar Semiconductor, marking a significant milestone in the nation's efforts to bolster domestic chip production. This award, announced on September 24, 2024, is the first to be finalized under the Biden administration's $52.7 billion semiconductor manufacturing and research subsidy program.
The grant will support the expansion of Polar Semiconductor's plant in Minnesota, enabling the company to nearly double its U.S. production capacity of power and sensor chips. This increase is expected to elevate output from approximately 20,000 wafers per month to 40,000, serving critical sectors such as aerospace, automotive, and defense.
Commerce Secretary Gina Raimondo emphasized the importance of this investment, stating that it would contribute to the creation of a new U.S.-owned foundry for sensor and power semiconductors. The semiconductor industry, which began in 1960, has since evolved into a trillion-dollar sector, playing a crucial role in various technological advancements.
The expansion project, valued at $525 million, will receive additional support from the state of Minnesota, which is contributing $75 million. Furthermore, in April 2024, Polar Semiconductor announced that Niobrara Capital and Prysm Capital planned to invest $175 million for approximately 59% ownership of the company.
This grant is part of a broader initiative to strengthen the U.S. semiconductor industry. The Commerce Department has allocated over $35 billion for 26 projects, including substantial grants to major players like Samsung, Intel, TSMC, and Micron Technology. These investments align with the goals of the 2022 CHIPS Act, which aims to enhance U.S. competitiveness with China and significantly expand domestic chip production.
The semiconductor industry's importance extends beyond traditional computing. Modern cars contain over 1,000 semiconductor chips, and these components are essential for renewable energy technologies, artificial intelligence, and space exploration. The global semiconductor market, valued at $556 billion in 2021, continues to grow, with the U.S. industry employing over 250,000 people.
Lael Brainard, a top White House economic adviser, indicated that this grant to Polar Semiconductor is likely to be the first of many awards finalized in the near future. Secretary Raimondo echoed this sentiment, suggesting that more awards and funding announcements can be expected in the coming weeks and months.
The 2022 CHIPS Act, championed by President Biden, not only provides direct subsidies but also includes a 25% investment tax credit for building chip plants, estimated to be worth $24 billion. This comprehensive approach aims to address the challenges highlighted by the semiconductor shortage during the COVID-19 pandemic, which underscored the industry's critical role in global supply chains.
In a related development, Congress gave final approval on September 23, 2024, to legislation that will streamline federal permitting processes for semiconductor manufacturing projects. This move is expected to accelerate the implementation of these crucial investments and further support the growth of the U.S. semiconductor industry.
As the semiconductor landscape continues to evolve, with advancements in technologies like extreme ultraviolet lithography (EUV) and the emergence of new materials such as gallium nitride, these investments position the United States to play a leading role in shaping the future of this vital industry.
"You're going to start to see more awards like this, dollars to companies in the coming weeks and months."
This grant to Polar Semiconductor represents a significant step towards reducing U.S. reliance on foreign semiconductor manufacturing and fostering innovation in a sector that underpins much of modern technology.