Benzinga - by Anusuya Lahiri, Benzinga Editor.
On Tuesday, the U.S. Department of Commerce announced the first CHIPS Act award of $35 million to BAE Systems Plc (OTC: BAESY) (OTC: BAESF), a British aerospace firm.
This grant will enable BAE's Nashua, New Hampshire facility to quadruple the production of chips necessary for critical defense programs, including the F-35 fighter jet program. Commerce Secretary Gina Raimondo announced the grant in New Hampshire, emphasizing its role in reducing dependency on Asian countries for advanced semiconductors and marking a new phase in the U.S. chips effort, Bloomberg reports.
Also Read: New York's $10B Gamble: Can It Become the Next Big Hub in the Global Chip Race?
Raimondo mentioned the grant as relatively small compared to plans, with expectations of 10 to 12 more significant announcements next year. The Chips Act supports bringing chip manufacturing back to the U.S. and has catalyzed over $230 billion in private investment from significant semiconductor companies, the report added. These investments are often contingent on government support.
The grant to BAE is tied to meeting production and pricing goals over the next few years, allowing BAE to upgrade its equipment and reduce chip costs. The U.S. focuses on structuring deals to minimize government funding while making domestic projects viable, competing with international subsidy offers. The report further noted that the BAE's Nashua facility is a crucial part of the Defense Department's secure semiconductor supply chain for the military.
Citi analyst Christopher Danely continues to expect Intel Corp (NASDAQ: INTC) and Micron Technology, Inc (NASDAQ: MU) to be the biggest beneficiaries of CHIPS act money as contingencies - such as buyback limitations, profit sharing, preference for union labor - tied to the CHIPS act make them unattractive to highly profitable chip makers.
The analyst noted these conditions could render the goal of bringing leading-edge semiconductor manufacturing back to the U.S. complicated, given higher costs and regulations, and are causing many companies to stay below the $150 million threshold.
Price Actions: MU shares traded higher by 2.57% at $80.17, and INTC shares traded higher by 1.26% at $44.60 on the last check Wednesday.
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