Microchip pauses US Chips Act application amid ‘capacity’ woes – report

Microchip Technology (NASDAQ:MCHP) is pausing its application for U.S. chip subsidies, making it the first known company to step back from a program aimed at boosting U.S. chip manufacturing capabilities, Bloomberg News reported.

The chipmaker was in line for $162M in grants under the U.S. Chips and Science Act to support facilities in Oregon and Colorado. Since then, Microchip has furloughed employees twice at the plants in Oregon and announced plans to shut down a factory in Arizona, impacting about 500 staff, the report added.

“I have put the negotiations with the Chips office on hold for now,” said CEO Steve Sanghi at a UBS conference, according to the report. “Probably, by the time I get my arms around it, we’re into the new administration.”

The Commerce Department has announced preliminary deals with more than 20 companies and has finalized agreements with six companies, including Taiwan Semiconductor Manufacturing (TSM), Intel (INTC) and GlobalFoundries (GFS). The Biden administration is racing to get the deals finalized before President-elect Donald Trump returns to the White House.

“We are in communication with Microchip on their Chips process and continue to have productive conversations with them about their long-term plans,” said a Commerce Department spokesperson, as per the report.

It is not known if the Commerce Department will reallocate the funds set aside for Microchip.

“The grant was applied to maybe almost a year ago, when everybody thought that the factory capacity was never enough, and the world was gonna build silicon fabs forever,” said Sanghi on Tuesday. “Today, we have too much capacity.”

Earlier this week, Microchip lowered its revenue guidance for the December 2024 quarter and announced manufacturing restructuring plans.