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South Korean chip manufacturer SK Hynix Inc. will receive up to $450 million of federal CHIPS Act support to build its $3.87 billion semiconductor packaging facility at the Purdue Research Park in West Lafayette, the federal government announced early Tuesday morning.
The U.S. Department of Commerce and SK Hynix signed a non-binding preliminary memorandum of terms for the almost half-billion-dollar incentives package, the department said. The parties will continue to work out the terms of the contract. To receive the full investment, SK Hynix must fulfill agreed-upon milestones.
The influx of funding will be in addition to the $700 million incentive agreement between SK Hynix and the Indiana Economic Development Corp—which, at the time of its announcement in April, was the largest economic development incentives package in Indiana history.
Indiana Secretary of Commerce David Rosenberg called the federal award “a testament to the company’s revolutionary work and Indiana’s strong semiconductor ecosystem.”
“This award validates years of work on behalf of the state to develop this important economy of the future for high-paying Hoosier jobs and increased national security,” he said in an emailed statement to IBJ.
Up to $500 million in loans are also available to the company through the CHIPS Program Office. SK Hynix also intends to claim the Department of the Treasury’s Investment Tax Credit, amounting to 25% of qualified capital expenditures, according to a U.S. Department of Commerce news release.
The chip manufacturer announced plans in April to open a 430,000-square-foot building spanning 90 acres in the second half of 2028. Total employment at the site is expected to reach more than 1,000 by 2030.
Federal leaders repeatedly pointed to the project’s planned facilities for R&D and advanced packaging as factors for the investment.
“We deeply appreciate the U.S. Department of Commerce’s support and are excited to collaborate in seeing this transformational project fully realized,” SK Hynix CEO Kwak Noh-Jung said in written comments.”We look forward to establishing a new hub for AI technology, creating skilled jobs for Indiana and helping build a more robust, resilient supply chain for the global semiconductor industry.”
A federal research hub will also be established in Indiana resulting from the investment and the company’s relationship with Purdue University. The university “will play an important role in the U.S. semiconductor ecosystem and advancing U.S. technological leadership,” according to the commerce department. The university will be involved in SK Hynix’s R&D efforts as well as its memory-centric solutions and architecture for generative AI.
“We are excited about CHIPS Act’s support to the largest semiconductor production facility located at a university in the U.S.,” Purdue President Mung Chiang told IBJ in a statement. “This facility will be transformational as SK Hynix leads globally in AI memory chips. And as the leading American university in this area, Purdue University is committed to co-creating jobs, workforce and innovation in our state and the Silicon Heartland.”
The 2022 CHIPS and Science Act is a $280 billion funding plan meant to trigger the innovation, research and manufacturing needed to ensure that the United States can supply its own defense equipment. CHIPS stands for Creating Helpful Incentives to Produce Semiconductors.
This is the 15th federal funding commitment thus far, totaling over $30 billion in proposed funding. SK Hynix’s funds are expected to be dispersed later this year.
Indiana has handsomely benefited from the CHIPS Act funding so far. Two federal tech hubs overlapping in the state—the Silicon Crossroads Microelectronics Commons Hub and Heartland BioWorks Hub—have seen major funding. Silicon Crossroads was one of eight designees and saw $33 million in initial funding, while Heartland BioWorks was one of 12 and received $51 million.
“Today’s announcement supporting the planned work of SK Hynix in West Lafayette is further proof that Indiana is a key player on both the national and economic security stages,” Gov. Eric Holcomb said in a statement to IBJ. “Indiana’s academic and government assets are perfectly aligned with the semiconductor industry mission, and this major announcement today not only underscores our state’s role in the hard tech sector but is also another reminder that Indiana is a safe place to bet on the future.”
U.S. Secretary of Commerce Gina Raimondo told reporters Monday that Indiana’s landing of SK Hynix meant all five leading semiconductor manufacturers have made major commitments to operations in the United States. SK Hynix was a big prize, she said, because the company mass produces high bandwidth memory, or HBM, chips, which are core to the training and growth of artificial intelligence.
“These are the only companies in the world capable of producing leading-edge chips at scale,” she said. “It’s also a huge deal because it means we in the United States will have the most secure and diverse supply chain in the world for the advanced semiconductors that power artificial intelligence.”
The U.S. will soon be producing 28% of advanced logic chips, said Arati Prabhakar, director of the White House Office of Science and Technology Policy. Its share was 0% in 2022.
The funding marks a major win for U.S. Sen. Todd Young of Indiana, who co-authored the CHIPS Act and called (along with the entire Indiana congressional cohort) for SK Hynix to receive part of its funding in a mid-June letter.
“One of the primary goals of the CHIPS and Science Act was to bring semiconductor manufacturing back to the United States,” Young said in a statement. “I’m thrilled that this investment is being made right here in Indiana to help our country continue to shore up our domestic supply chain. We cannot afford to rely on China or other countries for components that are critical to our national security.”
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$1.1B in incentives – most of which is state money – for a $4B plant…
I really hope that these incentives are for more than just the single plant packaging plant.
I totally get the national security concern and the federal grant, but we are talking about $1M in incentives per employee. More than half of that is state money.
You neglected to factor in the cost of building the facility and the jobs its construction alone will require (site prep, materials manufacturing, upgrading/adding utilities infrastructure, crane operators, laborers, etc.) and the fact that the public costs will be amortized over many years. Perhaps the biggest “win” from this project is how it will enhance the state’s ability to attract other, additional high tech businesses. If we seek ways to increase household earnings, this is the path toward that goal.
Robert H’s sworn nemesis is industrial policy
Then there’s the nat’l security factor of having this technology in US. Far too much chip-related technology is Taiwan-based right now, geographically very close to China.
Looks like “all the CHIPS are in”….
In addn to grants, the 25% tax credit + discounted land price have value, too. Will likely be closer to $2 million per “high paying” job DIRECTLY created. (Per ZipRecruiter, avg salary in W Lafayette is under $47K so high paying may be relative.) Nat’l security, indirect economic benefit, possible opportunities for Purdue collaboration, momentum, and hope that Hynix adds addl processes later seem to weigh heavily into equation. Previous job-building grants in Indiana have been solid investments so here’s to another winner!
Thanks, Joe!