Microchip Pauses CHIPS Act Application Amid Inventory Woes

Microchip Technology Inc. has paused its application for US semiconductor subsidies, becoming the first known company to step back from the program aimed at revitalizing American chip manufacturing, Mackenzie Hawkins reported for Bloomberg News.

Microchip's decision is a setback for the Biden administration, which is racing to finalize awards from the bipartisan law before President-elect Donald Trump takes office. I Photo: DigitalIceAge Wikimedia Commons

The company was eligible for $162 million in grants from the CHIPS and Science Act to support plants in Oregon and Colorado. However, it has since furloughed workers at its Oregon plants twice and announced plans to shut down a factory in Arizona, affecting 500 employees.

“I have put the negotiations with the CHIPS office on hold for now,” CEO Steve Sanghi said Tuesday at a UBS conference, confirming earlier Bloomberg reporting.

Microchip, which produces chips for cars, consumer products, and other items, cited financial concerns as a key reason for the pause. According to Sanghi, the subsidies cover only 15% of the company's financial needs, meaning it must spend $100 to access a $15 subsidy.

Microchip's decision is a setback for the Biden administration, which is racing to finalize awards from the bipartisan law before President-elect Donald Trump takes office.

The Commerce Department, which administers the CHIPS Act, has reached agreements with over 20 companies, including Intel Corp. and Taiwan Semiconductor Manufacturing Co. (TSMC).

These agreements account for nearly 50% of the program’s direct funding, which includes $39 billion in grants, loans, and tax breaks to bolster US semiconductor production.

Commerce Secretary Gina Raimondo has expressed her intent to allocate as much of the funding as possible before her term ends.