WASHINGTON, Feb 19 (Reuters) - The U.S. government is awarding $1.5 billion to GlobalFoundries to expand semiconductor production, the Biden administration said on Monday, in a bid to strengthen domestic supply chains after the COVID pandemic exposed weaknesses.

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.

Raimondo said this is the government's third CHIPS announcement and her department planned to make several funding awards within the coming weeks and months from the government's $39 billion program to boost semiconductor manufacturing.

"We're just getting started," she said.

The Malta facility expansion will secure a stable supply of chips for auto suppliers and manufacturers, including General Motors (GM), Raimondo added.

GlobalFoundries and GM on Feb. 9 announced a long-term deal for the automaker to secure U.S.-made processors that will help it avoid factory-halting chip shortages that kept millions of cars from being manufactured during the COVID-19 pandemic.

"Today's announcement will ensure that this doesn't happen again," Raimondo said Sunday in a briefing on the agreement.

The new facility in Malta will produce high-value chips that are not currently made anywhere in the United States, she added.

The revamped facility in Burlington will become the first U.S. facility capable of high-volume manufacturing of next-generation gallium nitride on silicon semiconductors used in electric vehicles, the power grid and smartphones, she said.

(Reporting by Doina Chiacu; Editing by Scott Malone, Chris Reese, Varun H K and Aurora Ellis)