The Department of Commerce’s CHIPS Program Office on Monday announced it signed a non-binding letter of intent (LOI) with USA Rare Earth (USAR) that could provide up to $277 million in direct funding and up to $1.3 billion in a senior secured loan to bolster domestic semiconductor supply chains.
Under the proposal, USAR would be the only U.S. company mining rare earth-containing critical minerals, extracting rare earth oxides, converting them to metals and strip-casting those metals “as feedstock for the manufacture of neodymium iron boron (NdFeB) permanent magnets.”
Those magnets, also known as rare earth magnets, are components used in semiconductor manufacturing tools and other advanced technologies.
“The CHIPS Program’s proposed $277 million funding and $1.3 billion loan will be instrumental for the construction of a domestic integrated supply chain for critical minerals and NdFeB magnets which are essential for semiconductor chip manufacturing,” said Bill Frauenhofer, director of the CHIPS Program, in a Jan. 26 press release.
Combined capital investment for the projects in Texas and Oklahoma is estimated at $3.3 billion, according to the department.
Commerce said USAR’s mine in Round Top, Texas, will extract 40,000 metric tons per day of rare earth and critical mineral feedstock. It is expected to begin commercial production in 2028.
USAR’s advanced manufacturing project in Stillwater, Okla., will increase its production capacity of NdFeB magnets to 10,000 metric tons per annum – doubling the previously planned capacity.
In addition to the proposed funding, the Commerce Department said it will receive about 16.1 million USAR shares and a warrant for another 17.6 million shares.
Separately, the Department of Energy’s National Energy Technology Laboratory also signed an LOI to collaborate with USAR to advance heavy rare earth element separation technologies. That work will take place at USAR’s Wheat Ridge, Colo., lab and its Round Top deposit, and it will leverage digital twin technology.
Congress approved the CHIPS and Science Act in 2022, making up to $52 billion of funding available to incentivize semiconductor makers to establish new manufacturing operations in the United States.
More recently, President Donald Trump issued an executive order in March 2025 that wraps the Commerce Department’s CHIPS Program Office into a newly created United States Investment Accelerator, which aims to smooth the way for foreign and domestic business investments exceeding $1 billion.