(Bloomberg) -- Applied Materials Inc. was informed by US officials that it won’t be receiving Chips Act money for a long-anticipated research and development center, dealing a critical blow to a much-touted project in the heart of Silicon Valley.
The company had hoped to get US funding for the $4 billion facility in Sunnyvale, California — an effort it began promoting more than a year ago — through a program designed for large-scale chip manufacturing sites. But Commerce Department officials rejected it on Monday after concluding that the project didn’t qualify, according to people familiar with the matter.
Chips Act grant rejections aren’t unusual. More than 670 firms expressed interest in funding, and Commerce officials always warned that they’d be forced to turn down many compelling applicants due to limited resources. Yet Applied Materials’ rejection stands out, the people said, given how closely aligned the project is with the Biden administration’s goal of reviving the domestic semiconductor industry.
The company’s announcement of the project in May 2023 coincided with a summit attended by Vice President Kamala Harris and design executives from Applied Materials customers. Chief Executive Officer Gary Dickerson said at the time that the scope of the effort would depend on US incentives.
The decision means the US is unlikely to support any major chip-equipment makers with direct subsidies from the Chips Act, according to the people, who asked not to be identified because the deliberations are private. The legislation — a landmark achievement of President Joe Biden — set aside tens of billions of dollars in grants and other incentives to revitalize the American chip industry after decades of production shifting to Asia.
Applied Materials, the largest US chip-equipment maker, declined to comment. A representative for the Commerce Department, which is in charge of disbursing the government funding, declined to comment on the application’s status. In a statement, an agency representative said “we cannot and do not make any premature determinations or suggestions regarding eligibility.”
Applied Materials had originally hoped to apply for funding through an initiative to support commercial R&D facilities, but Commerce abandoned that program after administration and congressional infighting over a separate effort focused on military chips.
The agency intends to revive the commercial R&D initiative if more funding becomes available, a Commerce official said, but that’s unlikely as a recent effort to boost the Chips Act grant program by $3 billion has stalled in Congress.
There’s a separate $11 billion Chips Act fund dedicated specifically to research and development. The program has hosted summits and opened three funding applications that have received hundreds of concept papers, a Commerce official said. The first awards — plus additional funding opportunities — are slated for this fall.
But some officials worry that Commerce’s R&D office, after months of indecision over how to spend the money, still lacks a detailed strategy, some of the people said. The office of more than 80 employees hasn’t had a designated director since its first leader, Lora Weiss, left in December after just six months on the job.
“The Chips R&D programs have moved deliberatively to execute a strategic vision to advance the development of semiconductor technologies and to enhance the competitiveness of the US semiconductor industry,” a Commerce spokesperson said in a statement, adding that Under Secretary of Commerce Laurie E. Locascio “provides critical strategic direction.”
Most recently, the agency announced a process to select the sites for three new government-backed entities: a prototyping and advanced packaging piloting facility, an administrative and design hub, and a center for extreme ultraviolet lithography, or EUV. Chip packaging involves encasing semiconductors to both protect them and connect them to devices, and is widely considered to be a new innovation battleground between the US and China. EUV lithography, meanwhile, uses light to etch intricate patterns on silicon wafers.
The biggest questions surround the prototyping facility, some of the people said, especially after a recent prototyping announcement from the Defense Department focused on next-generation technologies.
The Commerce project, which aims to establish an end-to-end chip manufacturing line for industry and academic research, is likely to rely on older-generation technologies and could cost billions of dollars to establish, according to the people. While an advisory committee recommended the R&D program offer prototyping capabilities, some of the people said, it’s still not clear what specific demand gap that site is trying to fill.
A Commerce representative said in a statement that officials aim to “directly address the needs of the semiconductor ecosystem.”
--With assistance from Ian King.
©2024 Bloomberg L.P.
