In a significant move to strengthen America's semiconductor sector, the Biden administration is on the verge of granting $35 million to BAE Systems under the CHIPS and Science Act of 2022. This marks the first grant from President Biden's signature law and will primarily focus on enhancing BAE's national security efforts in semiconductor manufacturing.

Commerce Secretary Gina Raimondo expressed her enthusiasm for this development, stating, "This is the first of many," and she expects an acceleration in the pace of similar announcements in the first half of next year. To commemorate this milestone, Raimondo will travel to BAE's manufacturing facility in Nashua, New Hampshire, for the formal announcement on Monday.

The timing of the announcement is strategic, emphasizing the Biden administration's recognition of the link between semiconductors and national security. National Security Advisor Jake Sullivan also briefed reporters in advance, highlighting the significance of this grant in terms of national security. A considerable portion of BAE's expanded chipmaking capacity will be allocated to quadrupling the production of chips required for critical defense programs like the Pentagon's F-35 fighter jet program.

The $35 million funding will be dedicated to BAE's microelectronics efforts at their Nashua plant. BAE's US CEO, Tom Arseneault, expressed his gratitude, stating that the grant will help modernize their Microelectronics Center and reinforce the onshore supply chain while boosting their capacity to cater to national defense programs and nurturing a skilled technical workforce.

While the preliminary memorandum of terms between BAE Systems and the government has been agreed upon, additional steps and a due diligence process remain. The agreement is not yet binding, and further discussions and negotiations will take place between the two parties.

Furthermore, it should be noted that other prominent chip companies, such as Intel, Micron, IBM, and the Taiwan Semiconductor Manufacturing Company (TSMC), will have to wait until at least early 2024 to finalize their awards. The delay is attributed to ongoing discussions and the need to resolve certain issues in the coming awards.

The overarching goal of the Biden administration's efforts is to reverse the decline of the US semiconductor industry, which has witnessed a significant decrease in global market share from nearly 40% in 1990 to a mere 12% in recent years. Additionally, the US is entirely reliant on overseas manufacturers for the most advanced semiconductors, as no production took place domestically in 2019.

By focusing on bolstering national security through semiconductor manufacturing, the Biden administration aims to break free from this dependency on Southeast Asia's chipmaker facilities. Monday's grant announcement is expected to mark the beginning of a shift in this trend, promoting the revival of the domestic semiconductor sector and reducing risks associated with foreign supply chains.

The Biden administration's commitment to revitalize America's semiconductor industry reflects its recognition of the sector's strategic importance in national security and technological independence. With further grants on the horizon and ongoing negotiations with other companies, the administration remains dedicated to fostering a resilient and advanced domestic semiconductor industry.