GlobalFoundries, the world's third-largest contract chipmaker, will build a new semiconductor production facility in Malta, New York, and expand existing operations there and in Burlington, Vermont, according to a preliminary agreement with the Commerce Department.

The $1.5 million grant will be accompanied by $1.6 billion in available loans, with the funding expected to generate $12.5 billion in overall potential investment across the two states, the department said.

The projects, funded under the CHIPS and Science Act, would generate more than 10,000 jobs over a decade, said Biden administration officials, adding that the positions will pay fair wages and offer benefits like childcare.

"The chips that GlobalFoundries will make in these new facilities are essential chips to our national security," Commerce Secretary Gina Raimondo told reporters at a briefing.

The chips, as small as a fingernail, are used in satellite and space communications and the defense industry, the officials said, in addition to everyday applications such as blind spot detection and collision warnings in cars and electric vehicles, along with Wi-Fi and cellular connections.

"As an industry, we now need to turn our attention to increasing the demand for U.S.-made chips, and to growing our talented U.S. semiconductor workforce," Thomas Caulfield, president and CEO of GlobalFoundries, said in a statement.

GlobalFoundries opened a $4 billion semiconductor fabrication plant in Singapore in September, as part of a major global manufacturing expansion.