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CHIPS ACT TO FUND MICROCHIP TECHNOLOGY EXPANSION AGREEMENT HELPS PLAN TO SPEND $1.74 BILLION
from So Colorado Business Forum & Digest Vol. 2, No. 1 | January 30, 2024
by Colorado Media Group :: NORTH, The Digest/CSBJ & So. Colorado Insider!
by WAYNE HEILMAN, Senior Writer
The U.S. Commerce Department has reached a preliminary agreement to award $162 million in incentives to Microchip Technology under a 2022 law to modernize and expand manufacturing plants in Colorado Springs and Gresham, Oregon.
The funding is a critical part of the Arizona-based company’s plans to triple production at two plants: one producing semiconductors used in military weapons systems and another dedicated to aerospace, automotive, commercial and industrial products. The incentives are part of Microchip’s plans to spend $1.74 billion upgrading the two plants during the next six to seven years. The plans will add more than 1,300 manufacturing and construction jobs to the current roster of 1,750 plant employees.
Late last year, Microchip CEO Ganesh Moorthy announced the non-binding preliminary memorandum of terms with the federal agency. Moorthy says the funding under the CHIPS and Science Act signed into law in 2022 will “provide a critical investment to level the playing field for the U.S. semiconductor industry” and help Microchip, the largest provider of microcontroller semiconductors for the U.S. aerospace industry, to bring more of its chip production to the U.S. Most of the company’s chips are now produced by foreign contract manufacturers, mostly in Asia.
“This investment will yield dividends for many generations in U.S. competitiveness and national security,” Moorthy said during the news conference. The funding is divided between the Colorado Springs plant, which will get $90 million to contribute to its $940-million plan to upgrade the existing 580,000-square-foot plant near the Broadmoor World Arena, and the Oregon plant, which will receive $72 million for an $800-million expansion project.
In February of 2023, Microchip announced plans to spend $880 million to retool the Colorado Springs plant and expand production of silicon carbide wafers. These produce a high power output with low energy usage, and they are used in electric vehicles as well as industrial, aerospace and defense applications. Moorthy said that the federal funding, along with state and local incentives, enables the project to move forward and expand to a $940-million capital investment.
In December, the Colorado Economic Development Commission approved up to $10 million in refundable tax credits for Microchip under the code name Project Hydrogen, which will have a cash value of $8 million. To get those credits, Microchip will have to create 371 jobs with average annual wages of $75,000, which is 118% of El Paso County’s annual average wage. The company also is expected to receive $22.6 million in Enterprise Zone tax credits.
“It is important for us to seize the opportunity and we will make the most of this CHIPS Act opportunity,” said Colorado Governor Jared Polis, who also spoke at the news conference. “Colorado is a leader in the semiconductor industry and we are proud to have companies like Microchip expanding in our state and creating more good-paying jobs for Coloradans,” he said later in a news release. “I applaud the federal government’s commitment to investing in this cutting-edge industry.”
The Microchip agreement with the Commerce Department is the second and largest such agreement the agency has announced from more than 170 preliminary or completed applications and more than 400 statements of interest from semiconductor manufacturers and suppliers under the $52-billion CHIPS Act.
More CHIPS Act funding could be on the way. Massachusettsbased Entegris applied for $130 million in such funding after starting construction in June on a 130,000-square-foot plant in northwest Colorado Springs that will produce liquid filter and wafer handling products for the semiconductor industry. The plant is scheduled to begin production late this year and employ about 200 people. After expansion, the 88-acre site could house up to 700,000-square-feet of manufacturing space and employ up to 1,000 people.
For over 30 years, Entegris has operated another plant off Garden of the Gods Road. The company spent up to $10 million to ramp up production of photolithography and advanced wafer packaging products that have added 75 jobs, with another 25 people to be hired. That plant employs 350 people.
At the press conference, Mayor Yemi Mobolade said that he hopes Colorado Springs will soon be able to reclaim its title as “Silicon Mountain,” a term used by local boosters at the industry’s peak in the 1980s and 1990s, when nine companies operated semiconductor plants and employed thousands of people in the city.
Microchip Website: https://www.microchip.com/
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