Tech nationalism is continuing with the SK Hynix award from the CHIPS Act. Which is definitely interesting.
The U.S. Department of Commerce said it awarded SK Hynix $458 million in direct funding for its West Lafayette, Indiana, project to build a $3.87-billion packaging plant and R&D facility. The agency says this site is intended for artificial intelligence products and will fill “a critical gap in the U.S. semiconductor supply chain.” Aside from that, it will also offer up to $500 million in loans to the company—all of which are coming from the funding provided by the CHIPS Act.
When completed, this project will allow HBM chips to be manufactured within the United States, which is crucial for making AI chips. With TSMC already operating as an Arizona fab (and getting better yields than comparable facilities in Taiwan), the U.S. could build most of the components of its most advanced chips within its borders. In addition, it’s expected to create a thousand new jobs in the State of Indiana and even push research and development forward with its partnership with nearby Purdue University.
It is not a huge amount of money when we consider just how much fabs / packaging plants / research facilities cost these days but it is definitely something. $458 million in direct funding and $500 million in loans is nothing to laugh at. Still, considering the state of the world I would think that the money wont go as far as SK Hynix or the Biden Administration would like. Everything is just so expensive.
A packaging plant and research and development center are a very welcome addition to the tech ecosystem inside the United States. A packaging plant for HBM, focusing on artificial intelligence products, helps fulfill the desperate need for packaging facilities / AI focused chips manufacturing inside the United States. And the more research facilities the better.
It should be noted just how slow the Biden Administration is at finalizing these CHIPS Act deals. They claimed they were going to wrap these deals up before the Trump Administration comes in and they only have like 30 days left to do it. And some of those days are holidays. I mean they might be able to do it… they could be working concurrently on a number of deals that they can wrap up in 30 days. But I have doubts about that.
I’d also note that the CHIPS Act continues the trend towards technological nationalism that both the United States and China are following. Both want supremacy in technology because it is the only way to maintain military superiority and therefore deterrence. Nuclear weapons after all are worthless if they can be intercepted by hypersonic drones / missiles. Deterrence cannot be maintained through simple ballistic missiles anymore.
That leaves the United States and China racing to support domestic manufacturing capabilities. Those capabilities being focused on are semiconductor manufacturing and obviously packaging. However more funding is needed in the United States to ensure a supply of inputs for the tech industry.
Direct funding is the easiest way to create and maintain a semiconductor ecosystem, a technological ecosystem, an electronics ecosystem… whatever you’d like to call it. Direct funding of the domestic United States ecosystem is necessary in my opinion. We can’t keep handing out what are only moderate sums, saddle companies with debt if they need more cash, and just say good luck.
This is a national security concern and should be seen through that lens at all times. It doesn’t even matter if some of these companies do not make a profit. We have a United States Postal Service situation here where making money has to be secondary to maintaining service to all Americans. It’s more important we have the ability to manufacture semiconductors and finished electronics than it is for some company to make tens of billions of dollars in profit.
I believe we as a nation need a CHIPS Act II and an Electronics Act to encourage the semiconductor ecosystem and an ecosystem for finished electronics. We cannot keep depending on Taiwan for 40% of the world’s fab capacity and China for 40% of all of America’s electronics imports. Both are too big of risks to tolerate. Taiwan can be taken out by a single earthquake and China could just say screw you at any time.
So basically I’m saying that technological nationalism is good, the CHIPS Act is a step in the right direction, it’s nice SK Hynix got funding, but we need to go even further to ensure the United States maintains technological superiority.