By David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department said Friday it reached a preliminary deal with German auto supplier Bosch for up to $225 million in subsidies to build silicon carbide power semiconductors in California that are key for electric vehicles.

The department said the funding will support Bosch’s planned $1.9 billion investment to transform its manufacturing facility in Roseville, California for production of SiC power semiconductors. Commerce is also offering Bosch approximately $350 million in proposed government loans for the project.

The department is tapping the $52.7 billion fund to subsidize U.S. semiconductor production and research approved in 2022. Officials have been racing to finalize terms for major loans in the weeks before President-elect Donald Trump takes office.

Bosch expects to produce its first chips on 200-millimeter wafers in its Roseville facility starting in 2026. SiC chips are key components for automotive, telecommunications, and defense industries. They utilize less energy and are critical for boosting the efficiency of electric vehicle driving and charging, the department said.

In 2023, Bosch acquired key assets of California-based TSI Semiconductors and said producing the chip would “be heavily dependent on federal funding opportunities.”

Like other automotive manufacturers, Bosch was hit hard by disruptions to semiconductor production in Asia exacerbated by the COVID-19 pandemic.

In October, the department said it reached preliminary agreement with Wolfspeed for $750 million in grants for its new North Carolina silicon carbide wafer manufacturing plant facility.

Commerce said when the Bosch facility reaches full capacity, the project could comprise more than 40% of all U.S.-based SiC device manufacturing capacity.

“The Roseville investment enables Bosch to locally produce silicon carbide semiconductors, supporting U.S. consumers on the path to electrification,” said Paul Thomas, president of Bosch in North America in a statement.

Representative Doris Matsui, a California Democrat who helped write the 2022 law, said the award to Bosch would allow them to build “essential components for advances in clean mobility, electric vehicles and other clean energy technology.”

(Reporting by David Shepardson; Editing by Michael Perry)