U.S. Awards $120 Million to Polar Semiconductor to Expand Chip Facility

U.S. Awards $120 Million to Polar Semiconductor to Expand Chip Facility

Federal officials will provide up to $120 million in grants to Polar Semiconductor to help the company expand its chip manufacturing facility in Minnesota, the Biden administration announced Monday. This is the latest in a series of awards designed to bolster U.S. semiconductor supplies.

Commerce Department officials said the grant would help Polar improve technology and double production capacity at its Bloomington, Minnesota, plant within two years. The company produces chips that are critical to cars, defense systems and power grids, federal officials said.

“We are keeping taxpayer dollars flowing as far as possible while pushing private and government investments to create jobs, secure our supply chains and strengthen manufacturing in Minnesota,” said Laurie Locascio, Undersecretary of Commerce for Standards and Technology.

The funding comes from the bipartisan CHIPS and Science Act, which lawmakers passed in 2022 to boost domestic production of commercial semiconductors, the tiny chips critical to most electronic devices, including smartphones, computers, cars and weapons systems are. The law gave the Commerce Department $39 billion to distribute to companies to incentivize the construction and expansion of new plants in the United States.

Expanding domestic chip production is a key part of President Biden's economic policy agenda, which focuses primarily on strengthening American manufacturing and restoring jobs that were moved abroad. Only about 10 percent of the world's semiconductors are made in the United States, down from about 37 percent in 1990.

Biden administration officials have announced more than $29 billion in grants so far. Last month, the Commerce Department announced up to $6.1 billion in grants to Micron to help the chipmaker build plants in New York and Idaho. Other chipmakers — including Samsung, Taiwan Semiconductor Manufacturing Company and Intel — have won multibillion-dollar awards. GlobalFoundries, Microchip Technology and BAE Systems received the first three federal awards.

The United States is trying to increase domestic production of semiconductors in part to prevent the expensive and economically damaging chip shortages that have emerged during the pandemic. Federal officials said Polar's award would help prevent disruptions of this kind.

“During the Covid-19 pandemic, the shortage of these chips has been one of the biggest shortages,” Ms 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 must meet certain milestones before receiving the payments, federal officials said. The company also plans to take advantage of federal tax credits that will help reduce the cost of building and equipping factories with production equipment.

Minnesota is also providing about $75 million in grants for 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. foundry, which will allow the company to expand its customer base, administration officials said. So-called foundry services involve the production of chips that are developed and marketed by other companies.

Surya Iyer, Polar's president and chief operating officer, said the money was critical to the company's expansion and that a project of this magnitude would not be possible without it.

“We are talking about a small single-digit percentage increase and not the enormous effort that we are going to make now,” Mr. Iyer said.