WASHINGTON, May 13 (Reuters) - Polar Semiconductor is

set to receive a $120 million U.S. government grant to expand

its plant in Minnesota, which will allow the company to double

its U.S. production capacity of sensor and power chips within

two years.

The award, part of the Biden administration's $52.7 billion

semiconductor manufacturing and research subsidy program,

follows an agreement by Polar's current owners to sell down

their stakes to U.S. private equity firms so that the company

can become majority U.S.-owned.

The Commerce Department, which made the grant, noted

shortages of power and sensor chips were a key issue during the

COVID-19 pandemic, disrupting many sectors.

Under Secretary of Commerce Laurie Locascio said Polar's

"technology plays a critical role in high-voltage applications

across the aerospace, automotive, and defense sectors and this

proposed investment would enable new capabilities to manufacture

the next generation of semiconductors."

The state of Minnesota is also contributing $75 million to

the $525 million project.

Polar is currently 70% owned by Sanken Electric ( SANJF ) and

30% held by Allegro MicroSystems ( ALGM ).

Last month Sanken said that Niobrara Capital and Prysm

Capital plan to invest $175 million for around 59% of Polar.

Sanken's holding will drop to around 30% and Allegro's stake

will fall to around 10%.

The Biden administration has announced seven other planned

awards including up to $6.4 billion in grants to South Korea's

Samsung to expand chip production in central Texas.

Intel ( INTC ) won $8.5 billion in grants in March while

Taiwan's TSMC clinched $6.6 billion last month to

build out its American production. The Commerce Department also

said last month it plans to award memory chip maker Micron

Technology ( MU ) $6.1 billion to help fund domestic chip

factory projects. More awards are expected this year.

All the awards have yet to be finalized and amounts

could change after the Commerce Department conducts due

diligence.