Commerce Department Signs Terms for Nearly $100 Million in Chipmaker Funding

Employees work inside the clean room of semiconductor manufacturer SkyWater Technology in Bloomington, Minnesota, in April 2022. SkyWater Technology/Reuters

The U.S. Department of Commerce said on Dec. 6 that it had signed preliminary terms for nearly $100 million in proposed direct funding for chip manufacturers in Texas and Minnesota under the CHIPS and Science Act, to strengthen domestic semiconductor production.

The agreements involve three chip manufacturers: Coherent, SkyWater Technology Foundry Inc., and X-Fab.

Under the proposed terms, Coherent could receive up to $33 million to expand and modernize its existing Sherman, Texas facility, according to the Commerce Department.

X-Fab’s project in Lubbock, Texas, could secure up to $50 million for expanding its silicon carbide (SiC) foundry, which the company states is the only high-volume SiC foundry in the United States. The investment is expected to create 150 jobs, according to the Commerce Department.

SkyWater Technology’s Bloomington, Minnesota, facility could receive $16 million in federal incentives.

Each set of proposed funds is subject to due diligence, negotiation, and the achievement of certain milestones before any final awards are confirmed. Coherent, SkyWater, and X-Fab have also indicated plans to claim the Department of the Treasury’s Advanced Manufacturing Investment Credit, a 25 percent tax credit on qualifying capital expenditures.

SkyWater said in a statement that it would combine the proposed federal funding with $19 million in incentives from the State of Minnesota’s Forward Fund and $320 million in customer-funded capital investments, projecting a total of more than $350 million in outside investments this decade.

The company expects to increase its production capacity by about 30 percent and to create 70 new jobs. As a supplier to aerospace, defense, and other critical markets, the company stated that it anticipates improved capabilities to meet the escalating demand for domestically produced microelectronics.

SkyWater CEO Thomas Sonderman said that the company is proud of its role in expanding the domestic microelectronics infrastructure and strengthening the U.S. supply chain.

“As America’s Trusted Foundry, through our business model and expanding capabilities, we are creating a national asset for technology development, which is in a critical state domestically,” Sonderman said. “We have been working to meet the specific needs of the Defense Industrial Base and commercial companies, developing the technologies of the future.”

Coherent’s proposed funding would help establish a 150mm indium phosphide manufacturing line, while X-Fab’s would support high-power applications essential to automotive and industrial sectors.

X-FAB CEO Texas Rico Tillner said demand for silicon carbide technologies will remain strong and that the company was “proud to provide solutions that support the transition to electric mobility and renewable energy sources.”

“X-FAB Texas’ silicon carbide technologies are leading in quality and yield and provide a long-term perspective for the site,” Tillner said. “The proposed CHIPS funding will support the future success of X-FAB Texas and will contribute to the establishment of a domestic supply chain for silicon carbide.”

Coherent Chief Strategy Officer Giovanni Barbarossa said the proposed investment would allow the company to accelerate its industry leadership in indium phosphide technology and manufacturing.

The Department of Commerce’s CHIPS for America program has so far awarded more than $19 billion of the more than $36 billion in proposed incentives, according to the department’s statement.