British arms dealer BAE behind F-35 electronics first in line for US CHIPS funds

British arms dealer BAE Systems will be among the first beneficiaries of the $53 billion US Chips and Science Act.

The US Commerce Department on Monday announced a preliminary memorandum awarding $35 million funding to modernize BAE's Electronic Systems division's Microelectronics Center.

The facility, located in Nashua, New Hampshire, produces several mature-node chips used in US military applications, including the F-35 jet. According to the BAE website it's working on several key components of the F-35, including the crew escape and life support systems, electronic warfare and active interceptor suites, the vehicle management computer, and other communications, navigation, and identification electronics, to name a few.

"This funding will help modernize our Microelectronics Center and fulfill the promise of the CHIPS and Science Act by increasing our capacity to serve national defense programs," BAE CEO Tom Arseneault said in a canned statement.

The funds will go toward replacing aging tools, a move the US administration claims will quadruple the domestic production of chips used in national defense programs.

While it might seem strange for the US Commerce Department to give away funds to a British multinational, the CHIPS and Science Act doesn't exclude foreign chipmakers. As long as a company meets eligibility criteria, the funding is invested in US manufacturing, and recipients agree not to expand their presence in China, it's all fair game for funds.

In a statement, Commerce Department Secretary Gina Raimondo emphasized that the CHIPS for America Program was always about advancing America's strategic supply of semiconductors, particularly those used in defense applications.

"As national security becomes as much about the chips inside of our weapons systems as the weapons systems themselves, this first CHIPS announcement shows how central semiconductors are to our national defense," she said.

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To be clear, BAE Systems doesn't have the cash yet, the preliminary offer is non-binding. Funding will only be dispersed after the agency completes its due diligence process. In other words there's still more red tape to cut through.

While BAE may be one of the first to receive funding since the US Chips Act was signed into law last year, it's likely to be one of the smaller awards. As we've previously reported, semiconductor manufacturing giants like TSMC, Samsung, and Intel are expected to walk away with the lion's share of funding to the tune of billions of dollars. ®