Recently, the U.S. Department of Commerce announced a $458 million subsidy to South Korean chipmaker SK hynix to support its state-of-the-art chip packaging facility and artificial intelligence (AI)-related product research and development facilities in Indiana. The move is intended to alleviate critical pressures on the AI chip supply chain and boost the development of the U.S.-based semiconductor manufacturing ecosystem. However, it is still worth investigating whether this huge subsidy will be able to achieve its goals.
The current situation and challenges of the AI chip supply chain in the United States
1. U.S. chip design advantages
The United States has long held a global leader in chip design, especially in AI chips. NVIDIA's GPUs, Google's TPUs, and AMD's high-performance processors are widely used in AI training and inference tasks, becoming global industry benchmarks. However, the U.S. has relatively weak capabilities in chip manufacturing and packaging, and relies heavily on supply chains from East Asian countries.
2. Key shortcomings: high-bandwidth storage and advanced packaging
As the complexity of AI models increases, the computing power and data throughput requirements of chips increase dramatically. High-bandwidth storage (HBM), as the core technology that supports the performance of AI chips, faces the problem of insufficient supply. Advanced packaging technologies, such as 2.5D and 3D packaging, are also indispensable to improve chip efficiency and reduce power consumption.
3. Geopolitics and supply chain security
The geopolitical tension in the global semiconductor industry has intensified, and the United States has tried to reduce its dependence on East Asian supply chains through policies such as the CHIPS and Science Act. However, this effort to rebalance the supply chain will take a long time and a huge investment to show results. SK hynix's subsidy program is an important part of the U.S. government's attempt to break through this situation.
SK hynix's strategic layout and technological advantages
1. Construction of advanced packaging factory
SK hynix's USD 458 million subsidy will be used to build an advanced packaging plant in Indiana. The plant is expected to create about 1,000 jobs and will support the improvement of the AI chip industry chain in the United States. At the same time, the U.S. government plans to provide an additional $500 million loan for the project, further underscoring its strategic significance.
2. Global leadership in HBM technology
SK hynix has a global competitive advantage in high-bandwidth storage technology. Its HBM3 chip has been adopted by AI giant Nvidia to accelerate the training of generative AI tasks and large language models. In particular, SK hynix was the first to achieve mass production of 8-layer HBM3E and plans to launch a 12-layer HBM3E chip by 2025, further consolidating its leadership position in the AI storage field.
Figure: The U.S. Department of Commerce provided $458 million to SK hynix to build a U.S. factory to develop AI
The support for the CHIPS and Science Act in the United States
1. The core objectives of the Act
Since its passage in 2022, the CHIPS and Science Act has been committed to promoting the construction of local chip manufacturing capacity in the United States. According to the Semiconductor Industry Association (SIA), the bill has attracted more than $200 billion in private investment and announced more than 40 new projects.
2. The criticality of SK hynix’s project
SK hynix's project is one of 17 preliminary agreements supported by the bill. According to the U.S. Department of Commerce, more than $32 billion in subsidies and $28 billion in loans have been allocated for semiconductor manufacturing, packaging and R&D projects. These investments are expected to create about 40,000 high-quality jobs over the next 20 years.
3. Timeline and scale of investment
While the U.S. plans to complete most of its investment by 2030, the semiconductor manufacturing and packaging industry has a long construction cycle. It may take 5-10 years from project initiation to actual mass production, which also means that the mitigation effect on the AI chip supply chain is limited in the short term.
The impact of subsidies on the global semiconductor landscape
1. Supply chain rebalancing
The U.S. semiconductor subsidy policy is accelerating to attract international companies to increase investment in the United States. For example, TSMC's fab construction project in Arizona and Samsung's expansion plans in Texas reflect this trend. SK hynix's packaging plant further completes the U.S. semiconductor manufacturing chain, especially in the field of AI chips.
2. "Technological decoupling" in geopolitical competition
The United States is trying to limit China's development in the field of high-end semiconductors through subsidy policies. However, according to research by the Center for Strategic and International Studies (CSIS) in the United States, the global semiconductor value chain has become deeply integrated, and the cost of complete decoupling is high, which has a negative impact not only on China but also on American companies. For example, Nvidia and AMD still rely on TSMC's advanced processes, making it difficult to achieve full localization in the short term.
3. Potential pressure on China
The U.S. subsidy policy poses a certain challenge to Chinese semiconductor companies. China's pressure on independent innovation in the field of packaging technology and high-bandwidth storage has increased, especially in the large-scale application of advanced packaging technology.
Response strategy of China
1. Enhance the flexibility of industrial policies
China needs to strengthen its support for chip R&D and manufacturing by improving its industrial policies. For example, further optimize the allocation of resources of the national integrated circuit industry investment fund and increase investment in key technologies.
2. International cooperation and competition
China should continue to deepen cooperation with Europe and other emerging market countries to expand its market influence. In addition, under multilateral frameworks such as the WTO, we have actively proposed rule reform proposals to mitigate the impact of U.S. technology restrictions.
3. Path to technical independence
China's breakthrough in high-end storage technologies such as HBM will be an important step in dealing with the US blockade. For example, YMTC's advancement of 3D NAND technology and SMIC's continuous research and development of advanced manufacturing processes demonstrate China's potential in the field of core technologies.
Conclusion: Subsidies alleviate pressure, but it is difficult to solve the fundamental problem
The $458 million subsidy received by SK hynix will indeed help alleviate some of the pressure on the U.S. in the AI chip supply chain. The construction of an advanced packaging plant and the improvement of HBM technology will enhance the competitiveness of the United States in the field of AI. However, this project will take several years from planning to actual production, and the short-term alleviation of AI chip bottlenecks will be limited.
From a global perspective, the U.S. subsidy policy may further intensify geopolitical competition and trigger a deep adjustment of the semiconductor supply chain. For China, challenges and opportunities coexist, and only through technological independence and international cooperation can it seize the initiative in the new round of industrial transformation.
