Equities

SK Hynix to Invest $3.87 Billion in First US Chip Plant, Focusing on AI Chips

SK Hynix to invest $3.87 billion in its first US chip plant in Indiana, focusing on advanced HBM chips, creating up to 1,000 jobs.

By Mackenzie Crow

4/3, 15:26 EDT
Intel Corporation
NVIDIA Corporation
Taiwan Semiconductor Manufacturing Company Ltd.
article-main-img

Key Takeaway

  • SK Hynix announces a $3.87 billion investment in its first US chip plant in Indiana, focusing on advanced HBM chips for AI.
  • The move aligns with the Biden administration's push to enhance US semiconductor production, underpinning a broader $230 billion industry pledge.
  • Expected to create 800-1,000 jobs and leverage Purdue University's talent pool, the project highlights strategic US advancements in semiconductor manufacturing.

SK Hynix's Strategic US Investment

SK Hynix Inc., the world's second-largest memory chipmaker, has announced plans to invest $3.87 billion in constructing an advanced packaging plant and research center in Indiana. This move is part of the broader initiative by the Biden administration to bolster semiconductor production within the United States. The facility, which marks SK Hynix's first in the US, will be located in West Lafayette and is expected to commence mass production in the second half of 2028. The focus of this plant will be on next-generation high-bandwidth memory (HBM) chips, essential for AI system training and operations. SK Hynix's commitment to the US semiconductor industry aligns with its position as a leading designer and producer of HBM chips, working closely with Nvidia Corp.’s processors.

Boosting US Semiconductor Capabilities

The establishment of SK Hynix's facility in Indiana represents a significant advancement in the US's efforts to enhance its semiconductor manufacturing capabilities, particularly in advanced packaging. Currently, the US holds only 3% of the global packaging capacity, often necessitating the shipment of domestically manufactured chips to Asia for assembly. This investment is a part of the broader strategy under the Chips and Science Act to encourage semiconductor manufacturing return to the US, with SK Hynix applying for grants under this act. The Biden administration has been actively promoting such investments, with semiconductor firms pledging over $230 billion in US investments since President Joe Biden took office, driven by the incentives provided by the 2022 chips legislation.

Economic and Employment Implications

The SK Hynix project in Indiana is expected to create between 800 to 1,000 new jobs, leveraging the proximity to Purdue University, known for its significant semiconductor and microelectronics-engineering programs. This initiative is anticipated to receive a mix of state and federal tax incentives and other forms of support to facilitate the investment. The decision to locate the facility in Indiana, chosen over other potential locations such as Arizona, was influenced by the availability of skilled engineers through Purdue and the strategic importance of establishing a major facility for large-scale HBM packaging in the US. The investment is projected to increase SK Hynix's operational costs by 30% to 35% compared to a similar facility in South Korea, with US government funding expected to offset some of these additional expenses.

Management Quotes

  • Chey Tae-won, SK Group Chairman:

    "SK Hynix has evolved into a key player in the AI development boom as the leading designer and producer of so-called HBM chips, which work in tandem with Nvidia Corp.’s processors."