Nvidia’s partner SK hynix to get up to $450M from US for chip facility in Indiana

SK hynix said it signed a tentative agreement with the U.S. Department of Commerce to receive up to $450M in proposed direct funding and access to potential loans of $500M to help build a production base for semiconductor packaging in Indiana.

The South Korean company — which supplies Nvidia (NASDAQ:NVDA) with high bandwidth memory, or HBM, chips — said the non-binding preliminary memorandum signed was to receive funding under the U.S. CHIPS and Science Act.

Separately, SK hynix plans to seek from the U.S. Department of the Treasury a tax benefit equal to up to 25% of the qualified capital expenditures via the Investment Tax Credit program.

The company noted that it will proceed with constructing the Indiana production base as planned to meet the plan to provide AI memory products.

The agreement follows SK hynix’s announcement in April that it plans to invest $3.87B to build a production base for advanced packaging in Indiana. The move is expected to create around 1,000 jobs.

The tech giant will also collaborate with local research institutions, including Purdue University, for research and development of semiconductors.

“We are moving forward with the construction of the Indiana production base, working with the State of Indiana, Purdue University and our U.S. business partners to ultimately supply leading-edge AI memory products from West Lafayette,” said SK hynix CEO Kwak Noh-Jung.

SK hynix is on an investment spree amid rising demand for AI applications, wherein its HBM chips also play a major role.

Last month, it was reported that SK hynix plans to invest 103T won (about $74.8B) through 2028 to bolster its chips business. Around 80% would be set aside to invest in HBM chips — the worldwide market for which is led by SK hynix, Samsung (OTCPK:SSNLF), and to a lesser extent by American chipmaker Micron (MU).

The company has also decided to invest about 9.4T won (around $6.8B) to build its first chip plant in the South Korean city of Yongin.

The CHIPS Act funding aims to increase U.S. semiconductor manufacturing and research, especially in advanced semiconductors. Several companies including, Intel (INTC) Samsung, Taiwan Semiconductor Manufacturing (TSM), and Micron, are getting funds under the act.