Silicon Valley Chosen for $4 Billion Chip Research Center

Silicon Valley got its name from computer chips, but no longer plays a central role in shaping how they are made. A major supplier to the industry hopes to change that.

Applied Materials, the biggest maker of machines for producing semiconductors, said on Monday that it planned to build a massive research facility near its hometown, Santa Clara, Calif., to allow chip makers and universities to collaborate on advances to make more powerful chips. Silicon Valley hasn’t seen a comparable semiconductor construction project in more than 30 years, industry analysts say.

The company expects to invest up to $4 billion in the project over seven years, with a portion of that money coming from federal subsidies, while creating up to 2,000 engineering jobs.

The plan is the latest in a string of chip-related projects spurred by the CHIPS Act, a $52 billion package of subsidies that Congress passed last year to reduce U.S. dependence on Asian factories for the critical components. What sets Applied Materials’ move apart is that it focuses on research, rather than manufacturing, and is a substantial new commitment to the industry’s original hub.

Chip makers that grew up in Silicon Valley have long chosen to build new “fabs,” the sophisticated factories that fabricate chips from silicon wafers, in less costly states and countries. But Applied Materials is betting that technical talent at nearby universities and the local companies that design chips will spur innovation quickly, making up for cost differences with other locations.

“You can connect more leaders in this ecosystem here than anyplace in the world,” said Gary Dickerson, the chief executive of Applied Materials. “There’s no place like this.”

Applied Materials hosted an event on Monday in Sunnyvale, Calif., to discuss the project, drawing a large audience that included employees, customers, city officials and Vice President Kamala Harris.

The company said it would use a 150-pound piece of silicon, which one executive called “easily the biggest piece of silicon in Silicon Valley,” as a cornerstone for the new center.

Politicians from both parties supported the CHIPS Act, partly out of fears that China will one day exert control over Taiwan and factories there that produce the most advanced chips. Besides encouraging domestic chip manufacturing, the legislation allocated about $11 billion to spur related research and development.

Chip research now takes place in several phases in multiple locations, including university labs and collaborative centers such as the Albany NanoTech Complex in New York. Applied Materials participates with other companies in that center and operates a research fab in Silicon Valley where chip makers can work with its machines and those of other toolmakers.

But many of the core chores in developing new production processes are carried out by chip manufacturers in fabs outfitted with a broad array of equipment. The proposed center, which Applied Materials calls Epic, is set to have ultraclean production space bigger than three football fields and is designed to give university researchers and other engineers comparable resources to experiment with new materials and techniques for creating advanced chips.

One goal is to reduce the time it takes for new ideas to flow from the research labs to companies designing new manufacturing gear, information that is now often delayed as it is filtered through the chip makers.

“The trouble is, those customers need time to figure out what they need,” said H.-S. Philip Wong, a Stanford professor of electrical engineering who was briefed on the company’s plans. “There is a big hole in there.”

Applied Materials also said chip makers would be able to reserve space in the center and try out new tools before they were commercially available.

The plan hinges partly on whether Applied Materials can win subsidies under the CHIPS Act, which the Commerce Department says has already attracted expressions of interest from more than 300 companies. Mr. Dickerson said that the company planned to build the center in any case, but that government funding could affect the project’s scale.

Assuming the center evolves as planned, it could substantially bolster Silicon Valley’s role in the evolution of chips, said G. Dan Hutcheson, vice chair at the market research firm TechInsights.

“It really is a vote of confidence for the Valley,” he said.