The binding contract provides up to $1.5 billion in direct funding and comes under the CHIPS and Science Act, a suite of incentives to boost research and US semiconductor production.

The United States produces just about 10 percent of the global supply of chips, relying on East Asia for 75 percent of world production, the White House noted in 2022.

"By investing in GF's domestic manufacturing capabilities, we are helping to secure a stable domestic supply of chips that are found in everything from home electronics to advanced weapons systems," said US Commerce Secretary Gina Raimondo.

The finalized award comes after a preliminary agreement announced in February, and means that funds can begin flowing when milestones are reached.

The Biden administration has unveiled billions in grants through the CHIPS Act but much of the funds have not been disbursed.

Officials have since been working to get deals across the finish line.

Tuesday's announcement comes about two months before President-elect Trump, who has previously criticized the CHIPS Act, takes office.

The award is aimed at supporting broader investment of around $13 billion by GlobalFoundries (GF) over the next 10 years or so, in its manufacturing sites in New York and Vermont, the Commerce Department said.

This will improve US "competitiveness in current-generation semiconductor production," the department added.

The sites produce semiconductor tech in key areas like automotive, aerospace and defense, as well as communications.

There are currently just four companies outside China that provide "current and mature foundry capabilities at the scale of GF," said the Commerce Department.

And GF is the only one of these firms headquartered in the United States.

"We are strategically strengthening every part of the semiconductor supply chain to ensure we meet our national security objectives and have the ability to out-compete and out-innovate the rest of the world," Raimondo added in a statement.

The aim is to boost economic and national security by increasing domestic manufacturing capacity and bringing back technologies key to US defense and intelligence communities.

The company's investment is estimated to generate about 1,000 manufacturing jobs across both sites.

Last week, US officials finalized a grant to Taiwanese chip giant TSMC as well, for up to $6.6 billion in direct funding to help build facilities on American soil.