(Bloomberg) -- SK Hynix Inc. plans to spend $3.87 billion building an advanced packaging plant and research center for artificial intelligence products in Indiana, marking a win for the Biden administration as it seeks to increase semiconductor output on American soil. 

The world’s No. 2 memory chipmaker said it will build its first US facility in the city of West Lafayette, with plans to begin mass production in the second half of 2028. The plant will center on a production line for next-generation high-bandwidth memory chips, critical components of the graphic processors that train AI systems.

SK Hynix has evolved into a key player in the AI development boom as the leading designer and producer of so-called HBM chips, which work in tandem with Nvidia Corp.’s processors. Its decision comes about two years after the company announced plans to invest in the US. At the time, SK Group Chairman Chey Tae-won said his conglomerate would set aside some $15 billion to build chip facilities and bolster research programs in the US. 

Wednesday’s announcement is part of that total commitment, the Korean company said. SK Hynix has also applied for grants from the Chips and Science Act, which is aimed at promoting the return of semiconductor manufacturing to the US. 

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SK Hynix’s project marks a significant step forward for US ambitions to add advanced packaging capacity — a bottleneck in Washington’s efforts to revitalize the domestic semiconductor industry. The US has only 3% of the world’s packaging capacity, meaning that firms manufacturing chips in America often still have to ship them to Asia to be assembled for use.

Chips have become a battleground between Washington and Beijing, with the US spending tens of billions of dollars to wean itself off Asian suppliers. It’s dangled hefty financial incentives to get global chipmakers to add capacity. 

Semiconductor firms have pledged to invest more than $230 billion on American soil since President Joe Biden took office, spurred by the 2022 chips legislation. 

Intel Corp. last month won $8.5 billion in grants and as much as $11 billion in loans from the US to support more than $100 billion investments at home. The Biden administration also plans to award more than $6 billion to SK Hynix rival Samsung Electronics Co. and more than $5 billion to Taiwan Semiconductor Manufacturing Co., Bloomberg News reported earlier. 

Most of those investments have so far gone to Texas, New York and Arizona. The Grand Canyon State alone has secured more than $60 billion in investments from TSMC, Intel, Amkor Technology Inc. and dozens of others. 

SkyWater Technology Inc. in 2022 announced its plan to build a $1.8 billion semiconductor research and development and production facility through a partnership with Indiana and Purdue.

--With assistance from Ian King.

(Updates with comments from company on Chips Act funding in the fourth paragraph.)

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