How Michigan could benefit from Washington’s $76B investment in microchips

A rural stretch between Bay City and Midland offers a glimpse into what federal incentives to boost semiconductor chip manufacturing in the U.S. could mean to Michigan.

That is where SK Siltron CSS has made wafers — which eventually get sliced into microchips, the “brains” for electronics in vehicles, appliances, televisions and phones.

But as the U.S. confronted a chip shortage early in the pandemic — one that continues today, in turn prompting ongoing product shortages — the South Korean-owned company decided to increase capacity.

The company is more than doubling manufacturing by building a second, $300 million facility near its current one that, it said, should also at least double its 130 employees in the Great Lakes Bay region.

That kind of growth in a region’s existing semiconductor footprint will help give Michigan an edge as it seeks a piece of the $76 billion federal plan to expand semiconductor manufacturing and research in the U.S., said John Walsh, president and CEO of the Michigan Manufacturers Association.

The measure — which passed the House Thursday after earlier approval by the Senate — awaits President Joe Biden’s signature. The act offers incentives for more companies to establish operations in the U.S., as the nation seeks to diminish reliance on overseas chips and related products as it competes with China, Taiwan and South Korea. 

“The availability of funding and incentives, together with what we have here in the state of Michigan, could make us a very, very eligible target for investment,” Walsh said.

Michigan is among the top states in the nation for semiconductor manufacturing, with industry jobs growing 12 percent between 2015 and 2020. Chips are critical to the automotive industry, and also to the state’s medical device, agriculture and defense sectors.

The semiconductor incentive spending plan is part of the $280 billion CHIPS and Science Act that Biden said he intends to sign. He may be heading to Saginaw Tuesday for an event tied to the legislation, according to the Detroit News.

Final approval will be “game-changing,” Michigan Gov. Gretchen Whitmer said in a statement before the Congressional votes.

Funding “will make a real difference in people’s lives if we get it done, and it’s the kind of policy that can set us up for decades of economic prosperity.” Whitmer said.

U.S. spending targeted to semiconductors will include:

  • $39 billion for an incentive program to build new semiconductor facilities, with $2 billion dedicated to making automotive-grade chips that also are used in medical devices;
  • $11 billion for programs aimed at research and development and workforce development;
  • $2 billion for chip development for the Department of Defense;
  • $24 billion to fund a 25-percent investment tax credit for semiconductor plants.

It is “exactly what we need to be doing to grow our economy right now,” Biden said in a statement after the House vote, which took place as data showed national business productivity declined for the second straight quarter.

About a dozen new large-scale chip-making plants — known in the industry as “fabs — could be built across the U.S. by 2025, with each costing at least $1 billion and requiring thousands of workers, Shari Liss, executive director of the SEMI Foundation, a global nonprofit tech industry association based in California, told Bridge Michigan.

Increased chip production will prompt expansion of supporting industries that produce products that form the building blocks for chips or fill out the rest of the supply chain to let them become functional, said Todd Brassard, vice president and COO of Calumet Electronics Corporation, a circuit board maker in the Upper Peninsula.

Michigan is among several states with existing chip-related industry clusters, including places like California, Texas, Arizona, New York, Oregon and Ohio, which recently landed a $20 billion Intel chip plant just outside of Columbus.

Besides SK Siltron and Calumet Engineering, Michigan companies already operating in the sphere include Hemlock Semiconductor, a leading global maker of polysilicon based in Saginaw, and KLA Corp., which opened a second headquarters for its semiconductor support equipment manufacturing in Ann Arbor late last year.  

Brassard said that while the state plays an important role with the microelectronics going into electric vehicles, more opportunities exist.

“Michigan also has a tremendous opportunity to push much more deeply into aerospace, space, and defense (which are) all industries that require a highly advanced electronics manufacturing ecosystem focused around the latest semiconductor technologies,” he told Bridge.