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US awards US$35 million to defense firm BAE in first chips grant

Bloomberg • 3 min read
US awards US$35 million to defense firm BAE in first chips grant
A BAE Systems Plc BvSIO All-Terrain tracked vehicle on show at London's Defence and Security Equipment International 2023 exhibition / Photo: Bloomberg
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The US announced the first semiconductor grant under the 2022 Chips Act, awarding US$35 million to the US subsidiary of British aerospace firm BAE Systems Plc to ramp up manufacturing of military chips.

The money will help a BAE facility in Nashua, New Hampshire, quadruple production of chips that are used in F-15 and F-35 fighter jets, the Commerce Department said. Secretary Gina Raimondo, who was travelling to New Hampshire to announce the grant, said it seeks to “set the tone” for the rest of the chips effort.

The Chips Act set aside US$39 billion in direct grants and around US$75 billion worth of loans and loan guarantees to bring chipmaking back to the US after decades of production in Asia. It’s catalyzed more than US$230 billion in private semiconductor investment, including from industry giants like Taiwan Semiconductor Manufacturing Co, Intel Corp, Micron Technology Inc and Samsung Electronics Co.

Several of those companies have said that their facilities — which cost tens of billions of dollars to build — are contingent on US government support. In a briefing ahead of Monday’s announcement, Raimondo said her agency plans to announce more awards in early 2024, with the pace increasing through the first half of the year.

Critical electronic components have become a key tech battleground between the US and China, which is beefing up its own capabilities and earlier this year debuted a breakthrough advanced 7-nanometer chip while Raimondo was visiting the country.

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More than 550 firms have expressed interest in the US program, with nearly 150 having submitted pre-applications.

A senior US official, who asked not to be identified discussing private deliberations, said the BAE grant will be tied to meeting production and pricing expectations over the next several years. It will allow BAE to upgrade their equipment and therefore halve the price of their chips, the official said, but will not involve a facility expansion or additional production lines.

See also: China chipmakers catching up fast in AI, SenseTime’s Xu says

Commerce’s goal, Raimondo has said, is to structure deals that award the minimum amount of government funding necessary to make projects viable on US soil — where labor and other production costs are much higher than in Asia. The US is also negotiating with companies that are weighing subsidy offers from governments around the world, often with fewer strings attached and money already out the door.

BAE’s Nashua facility is part of a Department of Defense program that identifies secure foundries for the military’s semiconductor supply chain. While the Pentagon also sources chips from other international suppliers, the official said, BAE is the key facility in that network. 

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