Microchip Technology Inc

Latest story

125 Shares189 Views

U.S. Awards Chip Supplier $162 Million to Bolster Critical Industries

by

The Biden administration said its second grant under a new program would help Microchip Technology expand its facilities in Oregon and Colorado.The Biden administration on Thursday announced plans to provide $162 million in federal grants to Microchip Technology, an Arizona-based semiconductor company that supplies the automotive, defense and other industries.The agreement is the second award announced under a new program intended to help ensure that American companies that rely on semiconductors have a stable supply. Last month, the Biden administration announced a $35 million grant for BAE Systems, a defense contractor.The investment will enable Microchip to increase its production of semiconductors that are used in cars, airplanes, appliances, medical devices and military products. The administration said it expected the award to create more than 700 jobs in construction and manufacturing.“Today’s announcement with Microchip is a meaningful step in our efforts to bolster the supply chain for legacy semiconductors that are in everything from cars to washing machines to missiles,” Commerce Secretary Gina M. Raimondo said in a statement.Microchip plans to use $90 million to modernize and expand a facility in Colorado Springs and $72 million to expand a facility in Gresham, Ore. The administration said the funding would help Microchip triple its output at the two sites and decrease the company’s reliance on foreign facilities to help make its products.The company’s chips aren’t cutting-edge but are key components of nearly every military and space program. Microchip is one of the largest suppliers of semiconductors to the defense industrial base and a designated trusted foundry for the military. It also plays a crucial role in industries that are important for the national economy, U.S. officials said.That role became more obvious during the pandemic, when a global chip shortage cast a spotlight on domestic suppliers like Microchip. With foreign chip factories shut down to help contain the virus, automakers and other companies scrambled to secure supplies. As a result, demand for Microchip’s products surged.Those shortages also helped motivate lawmakers to pull together a funding bill aimed at shoring up American manufacturing and reduce reliance on foreign chips. The 2022 CHIPS and Science Act gave the Commerce Department $53 billion to invest in the semiconductor industry, including $39 billion for federal grants to encourage chip companies to set up U.S. facilities.The Commerce Department is expected to begin announcing larger awards in the coming months for major chip fabrication facilities owned by companies like Intel and Taiwan Semiconductor Manufacturing Company, known as TSMC.Microchip previously announced plans to increase its capacity in both Oregon and Colorado, but the government funding would be used to expand those enhancements and bring more production back to the United States, officials said. According to its filings, Microchip relies on outside facilities to make a significant proportion of its products — roughly 63 percent of its net sales in 2023 — a relatively common practice in the industry.While attention has focused on ensuring that U.S. facilities can manufacture some of the world’s most advanced chips, there are growing concerns about Chinese investments in less advanced semiconductors, also known as legacy chips, which help power cars, computers, missiles and dishwashers.U.S. officials are questioning whether such investments could increase the United States’ reliance on China or allow Chinese firms to undercut competitors. The Commerce Department has said it plans to begin a survey this month to identify how U.S. companies are getting their legacy chips and reduce security risks linked to China.The deal announced Thursday is a nonbinding preliminary agreement. The Commerce Department will carry out due diligence on the project before reaching the award’s final terms.The department said it had received more than 570 statements of interest and more than 170 pre-applications, full applications and concept plans from companies and organizations interested in the funding.Don Clark More

More stories

  • 75 Shares179 Views

    in Economy

    Chip Shortage Creates New Power Players

    by

    SAN FRANCISCO — Since 1989, Microchip Technology has operated in an unglamorous backwater of the electronics industry, making chips called microcontrollers that add computing power to cars, industrial equipment and many other products.Now a global chip shortage has elevated the company’s profile. Demand for Microchip’s products is running more than 50 percent higher than it can supply. That has put the company, based in Chandler, Ariz., in an unfamiliar position of power, which it began wielding this year.While Microchip normally lets customers cancel a chip order within 90 days of delivery, it began offering shipment priority to clients that signed contracts for 12 months of orders that couldn’t be revoked or rescheduled. These commitments reduced the chances that orders would evaporate when the scarcity ended, giving Microchip more confidence to safely hire workers and buy costly equipment to increase production.“It gives us the ability to not hold back,” said Ganesh Moorthy, president and chief executive of Microchip, which on Thursday reported that profit in the latest quarter tripled and that sales rose 26 percent to $1.65 billion.Such contracts are just one example of how the $500 billion chip industry is changing because of the silicon shortage, with many of the shifts likely to outlive the pandemic-fueled dearth. The lack of the tiny components — which has pinched makers of cars, game consoles, medical devices and many other goods — has been a stark reminder of the foundational nature of chips, which act as the brains of computers and other products.Chief among the changes is a long-term shift in market power from chip buyers to sellers, particularly those that own factories that make the semiconductors. The most visible beneficiaries have been giant chip manufacturers like Taiwan Semiconductor Manufacturing Company, which offer services called foundries that build chips for other companies.But the shortage has also sharply bolstered the influence of lesser-known chip makers such as Microchip, NXP Semiconductors, STMicroelectronics, Onsemi and Infineon, which design and sell thousands of chip varieties to thousands of customers. These companies, which build many products in their own aging factories, now are increasingly able to choose which customers get how many of their scarce chips.Longer-term purchase commitments from customers “gives us the ability to not hold back,” said Ganesh Moorthy, chief executive of Microchip Technology, at the company’s headquarters.Tomás Karmelo Amaya for The New York TimesMany are favoring buyers who act more like partners, by taking steps like signing long-term purchase commitments or investing to help chip makers increase production. Above all, the chip makers are asking clients to share more information earlier about which chips they will need, which helps guide decisions about how to lift manufacturing.“That visibility is what we need,” said Hassane El-Khoury, chief executive of the chip maker Onsemi, a company previously known as ON Semiconductor.Many of the chip makers said they were using their new power with restraint, helping customers avoid problems like factory shutdowns and raising prices modestly. That’s because gouging customers, they said, could cause bad blood that would hurt sales when shortages end.Even so, the power shift has been unmistakable. “Today there is no leverage” for buyers, said Mark Adams, chief executive of Smart Global Holdings, a major user of memory chips.Marvell Technology, a Silicon Valley company that designs chips and outsources the manufacturing, has experienced the change in power. While it used to give foundries estimates of its chip production needs for 12 months, it began providing them with five-year forecasts starting in April.“You need a really good story,” said Matt Murphy, Marvell’s chief executive. “Ultimately the supply chain is going to allocate to who they think are going to be the winners.”It’s a substantial change in psychology for a mature industry where growth has generally been slow. Many chip makers for years sold largely interchangeable products and often struggled to keep their factories running profitably, particularly if sales slumped for items like personal computers and smartphones that drove most chip demand.But the components are essential for more products now, one of many signs that rapid growth may linger. In the third quarter, total chip sales surged nearly 28 percent to $144.8 billion, the Semiconductor Industry Association said.Years of industry consolidation has also wrung out excess manufacturing capacity and left fewer suppliers selling exclusive kinds of chips. So buyers that could once place and cancel orders with little notice — and play one chip maker off another to get lower prices — have less muscle. More