South Korean company SK hynix, a supplier for Nvidia, will be spending an estimated $3.87 billion on a West Lafayette advanced chip packaging facility, the state’s largest economic development investment to date.
State leaders said Indiana beat out competing states like Arizona and Michigan for the deal with a $685 million incentive package.
The company is considered to be one of the world’s leading producers of high-bandwidth memory chips that power artificial intelligence like ChatGPT and electronics like cell phones.
“This announcement completes the missing link in building a resilient supply chain for the digital economy in the United States,” said Purdue University President Mung Chiang to the assembled crowd. “… This propels and leapfrogs our state to the forefront of AI, chips and hardware.”
Chiang said the announcement at Purdue University, which partnered with the state through the Indiana Economic Development Corp. along with the federal government to attract SK hynix to the area, was nearly two years in the making.
The facility, originally reported by the Wall Street Journal last week, is expected to add 800 jobs by 2030 though company officials hinted at the potential for future growth.
“We believe that this project will lay the foundation for a Silicon Heartland or semiconductor ecosystem centered right here,” said Kwak Noh-Jung, SK hynix’s CEO.
Deal details
The Indiana Economic Development Corporation offered SK hynix $3 million in incentive-based training grants, another $3 million in Manufacturing Readiness Grants and $80 million in conditional structured performance payments, according to a release.
Additionally, the company is eligible for up to $554.7 million in Innovation Development District tax rebates and will be supported by $45 million through the Industrial Development Grant Fund for infrastructure improvements in the area.
A key attraction to West Lafayette, SK hynix officials said, was the potential for collaboration with Purdue University and its engineering offerings in chip manufacturing.
“With the brilliant minds at Purdue, we will work with them on research and development that will help to change and transform the world,” said Woojin Choi, SK hynix’s executive vice president, holding a chip package aloft. “The world needs a supply chain that is globally distributed and not just concentrated in one or two places. Locating it in Indiana will help not only the U.S. but the entire world.
“We want to make sure that the day never comes when our computers, our defensive systems and our cars suddenly go dark because one country has outsized control,” Choi continued.
A worldwide shortage of semiconductor chips, whose production is currently concentrated in China, during the COVID-19 pandemic led to monthslong delays of technology deliveries and supply chain disruptions.
Wednesday’s move was celebrated by federal officials, including key White House figures, for attracting domestic factories in a critical technology sector. The 2022 CHIPS and Science Act, authored in part by Indiana’s U.S. Sen. Todd Young, provided the foundation to pursue such semiconductor deals and bring chip manufacturing to domestic factories.
Young’s bipartisan CHIPS Act allotted $52.7 billion for American semiconductor research, development, manufacturing and workforce development, as described in a White House fact sheet.
That sum includes $39 billion in manufacturing incentives with $2 billion for legacy chips used in automobiles and defense systems as well as $13.2 billion in research and development and workforce development.
Semiconductor manufacturers additionally would qualify for a 25% investment tax credit for qualified capital expenses.
Secretary of Commerce David Rosenberg, who leads the IEDC, said the amount of federal investment for this chip packaging project hasn’t been finalized.
And former Gov. Mitch Daniels, who preceded Chiang as president of Purdue, said the work isn’t done.
“Indiana has … established itself as one of the best places to do business of any kind. We all know that making semiconductors went elsewhere for a reason: they were too expensive to make,” said Daniels, who now leads the university’s research foundation. “… it’s going to take some continued work because the U.S. is still at a cost disadvantage compared to other places. That’s why innovation is important.”
Daniels also praised Chiang for his role in crafting Purdue’s semiconductor degree program, which he said prepared the student workforce for jobs with companies like SK hynix.
Spotlight on economic development
Large economic development deals have been in the spotlight in recent weeks during several gubernatorial debates, with many candidates decrying the IEDC’s work and criticizing the entity for focusing too much on high-dollar deals.
“We’re delivering results that speak for themselves. I’ll let others distinguish themselves,” said Gov. Eric Holcomb.
Rosenberg and Holcomb observed that there were several large economic development projects across the state, including the LEAP Lebanon Innovation District in Boone County, auto investments in Kokomo and Meta in southern Indiana.
“We’re talking with the global elite now who want to excel in their sector. And that’s put Indiana, truly, as a leader in this, in the ‘Silicon Heartland,’” Holcomb said.
Though the LEAP project hasn’t yet had a second tenant announced after Eli Lilly’s promise nearly a year ago, Rosenberg said that there is nearly $60 billion in the investment pipeline for the site.
“This was a multi-decade investment that the state made to do a research triangle,” Rosenberg said. “We start to see that fill up even faster, in less than two years since we’ve announced it. So the market has absolutely responded to that vision.”
The quasi-public agency announced its highest amount on projected investments in one term with $20.7 billion in the first quarter of this year, following back-to-back years of record-breaking investment announcements.
Republican Brad Chambers, who preceded Rosenberg and is running to succeed Holcomb, was credited by others multiple times for his role in negotiating the deal. Some of his opponents have criticized him for favoring large economic deals but he said it provided contrast between the candidates.
“I’m the guy that’s growing the economy and puts more money in people’s pockets,” Chambers said. “Just think about all the Purdue grads who are now staying and working at SK hynix.”
He said smaller businesses — like the sandwich shops, realtors and home builders — benefit from big investments like this, helping “hundreds of small- and medium-sized businesses” thrive.
In particular, Chambers jabbed at competitor U.S. Sen. Mike Braun for showing up to the chip packaging announcement for a “photo op” when he voted against the CHIPS Act.
And Daniels, who founded the IEDC as governor, called these mega deals essential when done responsibly, though he acknowledged the increased competition from other states, and defended the agency — which some have vowed to curtail or even eliminate if elected.
“… the competition, I must say, has gotten a little out of hand from other states … throwing money around, I think, in an irresponsible way,” Daniels said. “But it was essential that we have this organization.”