By David Shepardson

(Reuters) – The U.S. Commerce Department said Monday it plans to award $325 million to Hemlock Semiconductor to significantly expand production capacity of semiconductor-grade polysilicon as it seeks to shift the chips supply chain.

The government grant from the $52.7 billion semiconductor manufacturing and research subsidy program would support construction of a new manufacturing facility on the company’s existing site in Hemlock, Michigan.

“Polysilicon is the bedrock of semiconductors, and it’s important we have a reliable source of this material to manufacture the chips that help support our economic and national security,” said Commerce Secretary Gina Raimondo.

The Biden administration has proposed billions in grants to major chips manufacturers like Intel, TSMC, Samsung and Micron and wants a steady supply of polysilicon to address the expanded production.

Hemlock is a joint venture owned by Corning Inc and Shin-Etsu Handotai, a unit of Shin-Etsu Chemical.

Hemlock Semiconductor said it is “planning for a once-in-a-generation investment in advanced technologies to continue serving as a top polysilicon supplier to the leading-edge semiconductor market.”

In total, the Biden administration has announced preliminary awards totaling $36 billion of the $39 billion set aside for manufacturing subsidies but has only finalized one. Officials expect to come to final terms on numerous others before the end of the year.

(Reporting by David Shepardson; Editing by Chizu Nomiyama)