The US government is awarding US$1.5 billion to GlobalFoundries to expand semiconductor production, the Biden administration said on Monday, in a bid to strengthen domestic supply chains after the Covid-19 pandemic exposed weaknesses.

GlobalFoundries, the world’s third-largest contract chip maker, will build a new semiconductor production facility in Malta, New York, and expand existing operations there and in Burlington, Vermont, according to a preliminary agreement with the Commerce Department.

The US$1.5 billion grant will be accompanied by US$1.6 billion in available loans, with the funding expected to generate US$12.5 billion in overall potential investment across the two states, the department said.

The projects, funded under the Chips and Science Act, are expected to create 1,500 manufacturing jobs and 9,000 construction jobs over a decade, said Biden administration officials, adding that the positions will pay fair wages and offer benefits like childcare.

As part of the terms of the deal, US$10 million would be dedicated to training workers and GlobalFoundries will extend its existing US$1,000 annual subsidy for child care and child care support services to construction workers.

“The chips that GlobalFoundries will make in these new facilities are essential chips to our national security,” Commerce Secretary Gina Raimondo told reporters at a briefing.

Senate Majority Leader Chuck Schumer was an architect of the law that enables the funding of chips factories, a technology that he said was as essential to the US economy and national security as food.

Schumer said in an interview with Associated Press that the US could be vulnerable to disruptions as it was during the coronavirus pandemic when auto plants lacked enough chips to keep making vehicles.

“The Democrats are going to do what it takes to see that other countries – China, Russia and others – don’t gain economic advantage over all of us,” Schumer said.

The chips, as small as a fingernail, are used in satellite and space communications and the defence industry, the officials said, in addition to everyday applications such as blind spot detection and collision warnings in cars and electric vehicles, along with Wi-fi and cellular connections.

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“As an industry, we now need to turn our attention to increasing the demand for US-made chips, and to growing our talented US semiconductor workforce,” Thomas Caulfield, president and CEO of GlobalFoundries, said in a statement.

GlobalFoundries opened a US$4 billion semiconductor fabrication plant in Singapore in September, as part of a major global manufacturing expansion.

Raimondo said this is the government’s third chips announcement and her department planned to make several funding awards within the coming weeks and months from the government’s US$39 billion programme to boost semiconductor manufacturing.

“We’re just getting started,” she said.

The Malta facility expansion will secure a stable supply of chips for auto suppliers and manufacturers, including General Motors (GM), Raimondo added.

GlobalFoundries and GM on February 9 announced a long-term deal for the carmaker to secure US-made processors that will help it avoid factory-halting chip shortages that kept millions of cars from being manufactured during the Covid-19 pandemic.

“Today’s announcement will ensure that this doesn’t happen again,” Raimondo said on Sunday in a briefing on the agreement.

The new facility in Malta will produce high-value chips that are not currently made anywhere in the United States, she added.

The revamped facility in Burlington will become the first US facility capable of high-volume manufacturing of next-generation gallium nitride on silicon semiconductors used in electric vehicles, the power grid and smartphones, she said.

Additional reporting by Associated Press