US to award Rocket Lab $23.9 million to boost satellite, spacecraft chips

File photo: A Rocket Lab technician cleans a fuselage in Auckland, New Zealand, October 20, 2015. REUTERS/Nigel Marple/File photo

WASHINGTON (Reuters) - The U.S. Commerce Department said on Tuesday it planned to award Rocket Lab $23.9 million to dramatically boost the production of compound semiconductors used in satellites and spacecraft.

The award for Rocket Lab unit SolAero Technologies Corp "would help create a more robust and resilient supply of space-grade solar cells that power spacecrafts and satellites", the department said, adding it would "increase Rocket Lab's compound semiconductor production by 50% within the next three years."

The funds are to come from the Biden administration's $52.7 billion chip manufacturing and research subsidy program that has benefited companies like South Korea's Samsung Electronics, Intel and Taiwan's TSMC.

Separately, the State of New Mexico has committed to providing financial assistance and incentives worth $25.5 million to Rocket Lab as the company works on the expansion of its facility in Albuquerque.

Rocket Lab, founded in 2006 by New Zealander Peter Beck, is one of two U.S. firms specializing in the production of highly efficient, radiation resistant compound semiconductors called space-grade solar cells, the department said.

Commerce Secretary Gina Raimondo said solar cells were crucial for keeping communication and space technology powered and operational, and the proposed $23.9 million award would help Rocket Lab expand production facilities to meet growing demand for chips from the U.S. military, NASA and the commercial space industry.

The company's solar cells support U.S. space programs, including missile awareness systems, the James Webb Space Telescope, NASA's Artemis lunar explorations, Ingenuity Mars Helicopter, and Mars Insight Lander.

Rocket Lab has won several hundreds of millions of dollars in U.S. federal contracts, including for satellite production, the launch of spacecrafts and a deal to explore delivering cargo using its rockets.

The latest award, like others from the chips subsidy program, have yet to be finalized and amounts could change after the Commerce Department conducts due diligence.

The proposed investment would also benefit Rocket Lab's Albuquerque facility expansion and create more than 100 manufacturing jobs, the company said in a statement.

Rocket Lab also plans to claim the Department of the Treasury's investment tax credit of up to 25% of qualified capital expenditures. The investment tax credit created by the Chips Act is estimated to be worth about $24 billion.

(Reporting by David Shepardson in Washington and Arsheeya Bajwa in Bengaluru; Editing by Jamie Freed and Devika Syamnath)

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