In visit to SkyWater chip plant, Klobuchar, Phillips tout Minnesota as tech center

The U.S. government should make a sizable investment in the semiconductor industry because the nation can't afford to fall behind China in producing chips, two Minnesotans in Congress said Tuesday in a visit to the state's largest chipmaking plant.

"When you look at something as critical as semiconductors, we want to have it made in America," Sen. Amy Klobuchar said after an hour-long tour at SkyWater Technology in Bloomington.

A measure due for a Senate vote next week represents the largest government outreach to the chip industry since the 1980s. Among its provisions is $49.5 billion over five years to help chipmakers and other technology firms, and $10 billion in annual spending over five years on at least 10 regional technology hubs.

Klobuchar and Rep. Dean Phillips, who also attended the event at SkyWater Technology's plant in Bloomington, said they will seek to make Minnesota one of the hubs.

"It's not just California, not just New York and not just Arizona in the case of semiconductors," Klobuchar said. "It's also places like Minnesota."

The growing competitiveness of China's chip industry, along with its government's target to lead several high-tech sectors, became a strategic priority for the federal government during the Trump administration, which imposed export controls on some chipmaking equipment and chips.

As well, the pandemic demonstrated that, in several industries, the U.S. was critically short of products. "We have ceded too much [to other countries] and now is the time to get back and lead," Phillips said.

With the auto industry and others forced to cut back on work in recent months because of backlogged production at chip plants, President Joe Biden and congressional leaders in both parties have proposed steps the government can take to bolster chip manufacturing in the U.S. The country has lost market share in chip production to South Korea, Taiwan and other Asian countries since the 1990s.

SkyWater's Bloomington plant chiefly produces chips that are used in electronics, automobiles, medical devices and aerospace. But since it was built in the 1980s by Control Data Corp., the plant has met standards for production of military chips. And last year, the company added a new clean room with an investment from the Department of Defense.

The company operated at capacity throughout the pandemic and is also the site of a research project on new technologies, including copper-based chips and nanotubes.

SkyWater could ramp up production of chips for vehicle manufacturers with an infusion of government investment, said Tom Sonderman, the company's chief executive.

"More high-tech jobs in Minnesota can be created quickly," Sonderman said. "With a modest investment for additional manufacturing equipment, we can rapidly address some of the supply constraints we're seeing today."

The firm has the space to double its output without adding to its building, which would save time. He said the firm could add 100 jobs if it receives government help to boost its capacity.

SkyWater was formed by Oxbow Industries, a St. Louis Park investment firm, in 2017 when it purchased the Bloomington chip plant from Cypress Semiconductor, which it had targeted for closing. Since then, SkyWater has grown from 280 to more than 500 employees and it listed as a publicly-traded firm this spring.

"We came in and saved the jobs and we added even more, which was very meaningful," said Loren Unterseher, managing partner of Oxbow and a director at SkyWater.

The legislation to help the chip industry is getting bipartisan backing — "The vast majority of the Senate is supporting this," Klobuchar said — and that represents a shift for many lawmakers who believe the government should play a limited role in business.

But for Klobuchar and Phillips, both Democrats, the industrial policies of other nations demand a response.

"We have airliners, in the case of Airbus, being made in Europe, subsidized by other nations. It is hard in China to distinguish between the private enterprise and a state-subsidized enterprise," Phillips said. "We have a choice to make as Americans and as a Congress: Are we going to be competitive? My hope and expectation is we will."