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South Korean chipmaker SK Hynix has chosen the state of Indiana for a cutting-edge facility in the US that will give a major boost to the Biden administration’s efforts to bring more of the AI chip supply chain on to home soil.
SK Hynix is the world’s leading producer of high-bandwidth memory chips, crucial components in Silicon Valley giant Nvidia’s graphics processing units, which are used to train systems such as Open AI’s ChatGPT.
SK’s new packaging plant in Indiana will specialise in stacking standard dynamic random access memory chips to create HBM ones, before they are integrated with Nvidia’s GPUs, according to two people briefed on the company’s plans.
SK Hynix currently produces its HBM chips in South Korea. They are then shipped to Taiwan, where they are integrated by Taiwan Semiconductor Manufacturing Company into Nvidia’s GPUs alongside other TSMC-made processors.
However, analysts said with TSMC already building two advanced fabrication plants in Arizona, SK Hynix’s new Indiana plant would bring Nvidia a step closer to onshoring all of its GPU production.
“If SK Hynix builds an advanced packaging plant for HBM memory in the US, together with TSMC’s Arizona fabs this means Nvidia could eventually be able to have its GPUs produced in the US,” said Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade.
“This is what the US government wanted to see from the beginning and is the result of its recent industrial policy of giving subsidies for localised production.”
SK Hynix’s investment suggests US efforts to reduce dependence on Taiwan-based manufacturing are beginning to bear fruit. Washington is concerned about the possibility of crippling trade disruptions resulting from a Chinese invasion or blockade of the island, which accounts for production of more than 90 per cent of the world’s advanced semiconductors.
“The idea is to have more advanced chips produced within the US and reduce reliance on Taiwan,” a US official told the FT. “This move is especially critical when we consider AI.”
“Advanced packaging” refers to the process by which the different components of a chip product are closely integrated to speed up interconnections and overall performance. It has become a key technique in leading-edge chipmaking, as performance improvements gained from shrinking chips begin to dwindle.
The US had only 3 per cent of the world’s packaging capability in 2021, but the Biden administration allocated $3bn of Chips Act funding in November to a National Advanced Packaging Manufacturing Program. It said it aimed to make the US “home to multiple high-volume advanced packaging facilities” by the end of the decade.
“Fabricating chips in America but then shipping them overseas to be packaged creates supply chain and national security risks that we just can’t accept,” the administration said, in a reference to US reliance on Asia and particularly Taiwan for chip production.
SK Hynix said during an earnings calls in October that its advanced HBM production capacity for 2024 had already been secured by customers, and it was already in talks over HBM supply in 2025.
“The rising demand for HBM from American customers and the need to work closely with chip designers have made the construction of advanced packaging factories in the US a must,” said a person close to SK Hynix.
One person familiar with the plans said integrating SK Hynix’s advanced packaging techniques deeper into Nvidia’s supply chain would help the South Korean company fight off competition from fellow HBM producers Samsung and Micron.
The Indiana plant will be funded out of a $22bn investment in the US that was announced by the SK Group conglomerate’s chair Chey Tae-won during a public conference call with Biden in 2022.
It will take several years to build, said analysts, while construction of TSMC’s fabrication plant in Arizona has been delayed as the world’s leading contract chipmaker struggles with US approaches to construction and labour.
SK Hynix said: “Our official position is that we are currently considering a possible investment in the US but haven’t made a final decision yet.”
Additional reporting by Song Jung-a in Seoul
