The US Department of Commerce (DOC) has reached a non-binding preliminary memorandum of terms (PMT) with South Korea’s SK hynix to potentially provide up to $450 million in federal incentives. This funding provided under the CHIPS and Science Act will help facilitate the construction of a new chip packaging site by SK hynix in Indiana.&nbsp;
The new facility will specifically focus on high bandwidth memory (HBM) advanced packaging and research and development (R&amp;D).&nbsp;This comes after the company had previously pledged to invest about $3.87 billion to set up a memory packaging plant and an advanced R&amp;D facility in West Lafayette, Indiana.&nbsp;
<h3 class="wp-block-heading" id="new-technology-enhances-data-processing-capabilities">New technology enhances data processing capabilities</h3>
The new facility based in the Purdue University Research Park and is predicted to generate nearly a thousand jobs, aiding the key shortcomings in the American semiconductor industry. It will include a state-of-the-art semiconductor packaging line for manufacturing high bandwidth memory (HBM) chips necessary for GPUs used in AI systems.&nbsp;
The plant will manufacture HBM chips, which will be able to handle 1.18 terabytes of data per second, which is a huge improvement over existing devices. Production is expected to commence in the second half of 2028. As stated in the DOC, the proposed funding is to create a research hub in Indiana with the aim of enhancing the US semiconductor ecosystem and technological dominance in collaboration with Purdue University.&nbsp;
The company will also provide training programs and interdisciplinary degree courses in cooperation with the Purdue University and Ivy Tech Community College for the enhancement of talent pool.&nbsp;
<h3 class="wp-block-heading" id="chips-act-opens-doors-for-additional-funding-opportunities">CHIPS Act opens doors for additional funding opportunities</h3>
Besides the direct funding, which is capped at $450 million, the CHIPS Program Office may also offer up to $500 million in loans out of the $75bn loan guarantee under the CHIPS and Science Act.
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
 “We are moving forward with the construction of the Indiana production base, working with the State of Indiana, Purdue University, and our US business partners to ultimately supply leading-edge AI memory products from West Lafayette.” <cite>SK Hynix CEO Kwak Noh-Jung </cite>
</blockquote>
In May 2024, SK Hynix stated that it had completely sold out its HBM chips for the year due to the increased demand for AI solutions. The company also stated that the chips that may become available next year might also be sold out quickly, indicating the significance of HBM chips in AI chipsets.&nbsp;
In addition to SK Hynix’s investment, the Commerce Department in May revealed a $75 million grant to Absolics for the construction of a new plant in Georgia. This facility will provide key materials necessary for the semiconductor industry, thus strengthening the U.S. semiconductor ecosystem.

U.S. Commerce Department grants $450 million to SK hynix for AI chip facility in Indiana

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