December 23, 2024

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The logo of SK Hynix is seen at its booth during the 26th Semiconductor Exhibition in Seoul on Oct. 23. (Reuters-Yonhap)

SK hynix, the world’s second-largest memory chip maker, has finalized a deal with the US government to secure direct funding of up to $458 million for building its advanced chip packaging plant in the US, safeguarding the grant ahead of President-elect Donald Trump's second term.

As the US Commerce Department finalizes chip grants for all four major chip manufacturers, including SK hynix, attention now shifts to when the crosstown rival Samsung Electronics will also complete the deal for federal funding of $6.4 billion, as it signed a preliminary agreement earlier this year.

On Thursday, the US Commerce Department announced that it would provide direct funding and a government-backed loan of up to $500 million to SK hynix under its CHIPS and Science Act -- the bipartisan program signed by US President Joe Biden to attract foreign chipmakers to invest in the US.

Thursday's final agreement is slightly more than the initial $450 million promised in the preliminary contract signed in August.

According to the department, the funding will support the company's investment of about $3.87 billion in building a high-bandwidth memory advanced packaging plant and an advanced packaging research and development program in West Lafayette, Indiana.

“By investing in companies like SK hynix and communities like West Lafayette, the bipartisan CHIPS and Science Act continues to supercharge America’s global technology leadership,” said US Secretary of Commerce Gina Raimondo.

“With this investment in SK hynix -- the world’s leading producer of HBM chips -- and their partnership with Purdue University, we are solidifying America’s AI hardware supply chain in a way no other country on Earth can match, creating hundreds of jobs in Indiana, and ensuring the Hoosier State plays an important role in advancing US economic and national security.”

SK hynix is the dominant producer of HBM chips, a crucial component used with graphic processing units to boost AI processing performance. It outpaces rival Samsung Electronics and US-based Micron Technology, serving as the main supplier to Nvidia, the largest customer for the advanced DRAM chips.

“SK hynix looks forward to collaborating with the US government, the State of Indiana, Purdue University and our US business partners to build a robust and resilient AI semiconductor supply chain in the US,” said SK hynix CEO Kwak Noh-Jung.

Chipmakers and the Biden administration are rushing to complete their deals for federal subsidies before Trump's inauguration on Jan. 20. The president-elect has expressed skepticism toward Biden's industrial support programs, advocating for tariffs as a more effective way to boost domestic manufacturing.

According to the US Department, the Biden administration has awarded over $26 billion of the over $36 billion in proposed incentives funding under the chip support program.

Major chipmakers TSMC, Intel, Micron Technology and SK hynix have finalized their contract with the Commerce Department for direct subsidies, while Samsung Electronics, the world's largest memory chip maker, has yet to complete its deal.

The chip giant has signed a preliminary agreement to invest $45 billion to build two new advanced chip manufacturing facilities in Taylor, Texas, and is currently negotiating with the US government to receive a subsidy under the chip support program.

Intel is receiving federal subsidies amounting to $7.86 billion, TSMC will receive $6.6 billion and Micron Technology will receive $6.1 billion.

By Jo He-rim (herim@heraldcorp.com)