The US plans to award BAE a $35 million award to boost chip supply for the F-35. On Monday, the United States Department of Commerce said that it intends to provide BAE Systems (BAES.L.) with a grant of $35 million to increase the manufacturing of crucial semiconductor chips in New Hampshire by a factor of four. These chips are utilized in F-35 fighter jets and commercial satellites.

The “Chips for America” program, a subsidy program for semiconductor manufacturing and research that Congress approved in August 2022, is making its first announcement. The program’s goal is to increase the manufacture of chips in the United States in response to worries about the country’s reliance on Asia.

Joe Biden, the vice president of the United States, issued a statement in which he stated that “over the coming year, the Department of Commerce will award billions more to make more semiconductors in America” and increase funding for research and development.

Specifically, the department stated that it had signed a preliminary memorandum of agreement that was not legally binding to pay $35 million to BAE Systems Electronic Systems, which is a subsidiary of BAE Systems, to fund the modernization of the company’s Microelectronics Center in Nashua, New Hampshire.

The Department of Defense intends to invest $1.7 trillion in the F-35 program, including purchasing 2,500 aircraft over the next few decades. Jake Sullivan, the National Security Adviser for the White House, stated that the chips were essential to the function of F-15s and F-35s.

“We do not want to be in a position where another country can cut us off in a moment of crisis,” Sullivan said to the press following the emergency.

In September, the United States Department of Commerce announced guidelines to prohibit China from using chip subsidies. In October, it moved to stop exports of sophisticated artificial intelligence chips to China. Both of these actions were taken in September. Companies like Intel (INTC.O.), Micron (MU.O.), and GlobalFoundries (GFS.O.) are among those who are looking to get significant financing from the chip initiative.

The announcement of the BAE grant, according to the Secretary of Commerce Gina Raimondo, “is the first of many announcements.” We anticipate that the rate at which these announcements are made will quicken throughout the first part of the following year.

According to a government official, the New Hampshire initiative will cut the cost of future chips by fifty percent, which will more than compensate for the $35 million investment.

For the F-35s manufactured by Lockheed Martin (LMT.N.), the chips are utilized for electronic warfare systems in their respective fighting settings.

According to Raimondo, the First Chip Award highlights that the program “is about national security.” He also shared that the program aims to establish “a thriving and long-lasting domestic semiconductor manufacturing industry.”

In a statement, the Chief Executive Officer of BAE Systems, Tom Arseneault, stated that the cash will improve the company’s microelectronics, which are essential for “defense and aerospace customers.” These customers include everything from next-generation planes and satellites to military-grade GPS and protected communications.