US finalizes $123 million grant to expand Polar Semiconductor

The US Department of Commerce has approved a $123 million grant to Polar Semiconductor, enabling the company to significantly expand its chip manufacturing facility in Minnesota.

This expansion will almost double its production capacity for power and sensor chips, addressing growing demand in key sectors such as automotive, aerospace, and defense.

This grant is a milestone in the Biden administration’s ambitious $52.7 billion semiconductor subsidy program, aimed at strengthening domestic manufacturing and research.

The financial support for Polar Semiconductor represents the first finalized award from this fund, with more expected to follow as companies meet project benchmarks.

Expansion to boost US chip output

With this expansion, Polar Semiconductor will increase production from approximately 20,000 to 40,000 wafers per month, according to Commerce Secretary Gina Raimondo.

She emphasized the importance of this move, stating it would lead to the creation of a new US-owned facility dedicated to sensor and power semiconductors, reinforcing the nation’s position in the global chip supply chain.

In addition to federal funding, the state of Minnesota is contributing $75 million toward Polar’s $525 million expansion, demonstrating broad support for enhancing domestic chip production capabilities.

Private investment is also playing a significant role in this expansion.

In April, Polar Semiconductor, which is 70% owned by Japan’s Sanken Electric and 30% by Allegro MicroSystems, announced a new investment from Niobrara Capital and Prysm Capital.

The two firms plan to invest $175 million in Polar, gaining a 59% stake in the company.

This influx of capital underscores investor confidence in the semiconductor industry, which has become increasingly vital in the global economy.

Broader US efforts to bolster chip manufacturing

The $123 million grant for Polar Semiconductor is part of a broader push by the US government to expand domestic chip production in the face of growing competition from China.

In addition to grants, the 2022 CHIPS Act, backed by President Joe Biden, provides a 25% investment tax credit for building semiconductor plants, estimated to be worth $24 billion.

To date, the Commerce Department has earmarked over $35 billion in funding for 26 semiconductor projects, including notable allocations of $6.4 billion to Samsung for its Texas-based operations, $8.5 billion to Intel, $6.6 billion to Taiwan’s TSMC, and $6.1 billion to Micron Technology to boost US factory capacity.

However, final approval for these awards depends on the completion of due diligence and fulfillment of project milestones.

More grants to follow

According to top White House economic adviser Lael Brainard, this award to Polar Semiconductor marks the beginning of a series of finalizations expected in the coming weeks.

Commerce Secretary Raimondo echoed this, suggesting that additional companies will soon receive similar financial backing, further advancing the administration’s goal of making the US a leader in semiconductor manufacturing.

In a related development, Congress recently approved legislation to streamline federal permitting processes for semiconductor manufacturing projects.

This is expected to accelerate the development of new plants and the expansion of existing facilities, further supporting the country’s efforts to boost its domestic chip production capacity.