U.S. Foundry Bets on Subsidies to Build $1.8 Billion Fab in Indiana
SkyWater Technology, an emerging U.S. contract chip manufacturer, announced plans to invest $1.8 billion for a research and production facility in Indiana, in a partnership with state officials and Purdue University.
But executives said the facility, which will be located on the campus of Purdue University in West Lafayette, will require federal subsidies and tax credits for the chip industry—a proposal debated by Congress for months now.
The fab is planned as a public-private partnership that will pursue incentives in the form of grants from the CHIPS for America Act, which would roll out about $52 billion to help build up the U.S. chip industry.
The funding for the CHIPS Act has been tied down as Senate and House leaders try to resolve differences between a broader Senate bill passed last year as the U.S. Innovation and Competition Act, and the separate America COMPETES Act, which made it through the House. The aim is to rebuild the U.S. semiconductor industry and help boost U.S. competition with China.
“This endeavor to bolster our chip fabrication facilities will rely on funding from the CHIPS Act," said Thomas Sonderman, SkyWater’s CEO, in a statement. "Federal investment will enable SkyWater to more quickly expand our efforts to address the need for strategic reshoring of semiconductor manufacturing."
Conditional Construction
If the legislation falls apart, SkyWater signaled it would have to re-evaluate its plans for the project. But a spokesperson said the company would still work with Purdue and the state to pursue different opportunities in Indiana.
The new facility would contribute to a U.S. effort to expand domestic production of chips and reduce the risk of chip shortages, like the one that has plagued many sectors of the U.S. economy during the pandemic.
Founded in 2016, SkyWater is currently the only U.S.-owned pure-play foundry in the country. The company also serves as a Category 1A trusted foundry for the U.S. Department of Defense.
SkyWater revealed that it plans to start building the 600,000-square-foot facility with 100,000 square feet of clean room space, by 2023. A spokesperson said that it would take another two-and-a-half to three years to ramp up production.
The location will help it—and its customers—get access to collaboration with Purdue and its pipeline of talent, from faculty in the semiconductor field to recent graduates prepared to pursue careers in the sector. According to the company, the new facility will create as many as 750 jobs in three years after completion.
Purdue is also doing its part to reinvigorate America’s chip-making prowess amid a chip shortage that is plaguing the U.S. economy. In May, the university launched what it calls its first “comprehensive” degree program in semiconductor engineering in the U.S. The program, which will educate both graduate and undergraduate students in-person and online, aims to meet the overwhelming demand for chip talent.
Purdue said that the nation needs a minimum of 50,000 new semiconductor engineers—more than double the number currently produced by U.S. universities—to run an estimated 13 new fabs coming to the U.S. in the next five years.
New Foundry on the Block
SkyWater is one of the upstarts in the $100 billion foundry business. It manufacturers chips based on its 90-nm process technology for the medical, industrial, consumer, aerospace, defense, and other markets.
The Defense Department plans to invest around $170 million to expand the company’s production capacity in the U.S. The DoD is also funding the development of a new production process for chips in satellites and other space-bound systems that can handle potentially damaging radiation. The U.S. military also uses rad-hard chips to make sure critical electronics can withstand a nuclear weapon.
In addition, SkyWater has partnered with GlobalFoundries, the largest U.S.-based chip foundry and the Pentagon’s main chip manufacturing partner, to build up a secure secondary supply of chips for the U.S. military.
The facility will provide many of the same development, volume production, and heterogeneous integration services offered at its two other U.S. locations, outside of Minneapolis, Minnesota, and Orlando, Florida.
The company’s plans to build up its U.S. chip-making operations was praised by the Defense Department. Devanand Shenoy, head of microelectronics in the agency's Research and Engineering arm, said the planned project represents a “major step forward” in “fostering a robust and thriving domestic microelectronics industry.”
SkyWater is also joining forces with the Defense Advanced Research Projects Agency (DARPA) on a program to use 90-nm process technology and unique materials to develop chips that rival some of the world’s most advanced.
Chip Funding Looking Up
The planned facility is the latest preview of what the U.S. hopes to accomplish with the CHIPS Act. The prospect of federal incentives for building fabs has lured investments from U.S. and non-U.S. companies alike.
The company said the new facility will boost security for intellectual property and support a more resilient and comprehensive supply chain, providing benefits for both U.S. government and commercial customers.
The White House, with the backing of technology giants, has been trying for months to persuade Congress to roll out subsidies to help fight against future chip shortages and reduce U.S. reliance on fabs in Asia. The U.S. is also hoping to hedge against future geopolitical instability, specifically amid concerns about Chinese aggression against Taiwan, where the vast majority of the world’s most advanced chips are made today.
Reviving U.S. manufacturing and giving a boost to engineering jobs are other priorities of the legislation. On top of that, U.S. politicians have pushed the subsidies package to help rein in inflation for consumers and curtail soaring prices for cars and a range of consumer electronics that have been hit by chip shortages.
The announcement comes after the Senate overwhelmingly voted in favor of a more focused CHIPS Act that aims to shore up the American semiconductor industry and curb China’s chip-making ambitions.
"We are on the verge of passing a major investment in next-generation technologies that is vital for the success of this and future projects," Indiana Senator Todd Young said in a statement.
