Purdue University President Mung Chiang highlights the role the university played in attracted the South Korean manufacturer. Photo by Whitney Downard of the Indiana Capital Chronicle.

By Whitney Downard
Indiana Capital Chronicle

WEST LAFAYETTE — South Korean company, SK hynix, Inc., 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.

Purdue University President Mung 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.

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 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.

A worldwide shortage of semiconductor chips, whose production is currently concentrated in China, during the COVID-19 pandemic led to months-long 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.

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.

Rosenberg and Gov. Eric Holcomb observed that there were several large economic development projects across the state, including the LEAP Innovation District in Boone County, auto investments in Kokomo and Meta in southern Indiana.

Through 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.

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.

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 the acknowledged the increased competition from other states, and defended the agency — which some have vowed to curtail or even eliminate if elected.