Saturday, May 25, 2024

Micron secures $13bn in US support to expand chipmaking capacity

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US chipmaker Micron Technology is set to receive more than $13bn in government funding and loans to help build memory chip factories in New York and Idaho as the Biden administration seeks to shift supply chains away from Asia.

The preliminary agreement, which includes $6.1bn in direct funding and up to $7.5bn in loans, will come under the 2022 Chips Act. Funding packages for Intel, TSMC and Samsung have been announced in recent weeks.

President Joe Biden will be in Syracuse, New York, on Thursday to announce the US chip sector’s latest support package, this time focused on the production of leading-edge memory chips, known as Dram.

The funding will go towards two new manufacturing plants in Clay, New York, as well as a plant in Boise, Idaho, where Micron has its headquarters. Under the agreement, Micron plans to invest up to $125bn in both states in the next two decades.

The Boise plant, which is under construction, should start chip production in 2026, while the two New York factories will come online in 2028 and 2029, respectively, senior US administration officials said.

Micron shares are up more than 30 per cent since the start of the year. The company reported better than expected revenues in March and posted a profit for the first time in 18 months, as it credited soaring demand for AI products.

Micron’s latest HBM3E memory chips are integrated with Nvidia’s H200 GPUs, which power the data centres behind new generative AI products. It is also one of Apple’s smartphone memory chip suppliers.

South Korea’s SK Hynix, one of Micron’s main competitors in the memory chip market, said this month it was investing about $4bn in an advanced AI chip packaging plant in Indiana, in partnership with Purdue University.

Democrats have been rallying to boost Biden’s lacklustre economic approval ratings and preparing for an election that may centre on candidates’ ability to bolster American industry and reduce reliance on rival powers such as China.

The Biden administration aims for 20 per cent of leading-edge chips worldwide to be made in the US by the end of the decade, as it seeks to shift the manufacturing of critical chips away from Asia. Most of the world’s most advanced chips are made by Taiwan’s TSMC.

Micron has previously been caught in the middle of the geopolitical rivalry between the US and China. In May 2023 the company was targeted with sanctions from China’s Cyberspace Administration, which banned crucial infrastructure operators from using its chips on security grounds.

The move came a day after Biden and G7 leaders rebuked China over its economic policies and increasing military assertiveness in the East and South China Sea.

“This is the federal government taking back the reins, and putting its money where its mouth is when we say we want the future of technology to be stamped ‘Made in America’,” said Chuck Schumer, the Democratic Senate majority leader who represents New York.

“That’s going to help deliver assistance to companies, educational institutions and labour unions, to build a pipeline of workers and thousands of good-paying jobs.”

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