NVIDIA supplier is set to build a $4billion plant in rural Indiana to meet exploding demand for chips to fuel AI tech

NVIDIA supplier SK Hynix is set to build a $4 billion chip packaging facility in West Lafayette, Indiana, to meet booming demand for artificial intelligence tech. 

The South Korean company is the top supplier of high-bandwidth memory (HBM) chips which are an essential component for complex AI applications like OpenAI or ChatGPT. 

Operations at the new facility could start as early as 2028 and will create over 800 jobs, according to a report in the Wall Street Journal. 

The plant will handle packaging of the chips and will be supported by a mix of federal and state tax incentives.

It's the latest plan to meet soaring demand for artificial intelligence tech as President Joe Biden seeks to re-establish the US as a semiconductor superpower and reduce reliance on foreign - particularly Chinese - components. 

SK Chairman Chey Tae-won met virtually with President Biden in July to discuss planned investment in the US 

The South Korean company is the top supplier of high-bandwidth memory (HBM) chips

The plant would be the first major facility for large-scale HBM production in the US. 

It will be funded, in part, by government subsidies under the US Chips Act, which sets aside at least roughly $3 billion to expand such domestic production.

SK Hynix had considered Arizona for the site, but settled on Indiana due to its proximity to Purdue University which holds one of the US' biggest semiconductor and microelectronics-engineering programs.

US based chipmaker SkyWater Technology also has plans to open a $1.8billion site in the area.

As NVIDIA's partner and the dominant force in the production of HBM chips, SK Hynix has seen its profile and revenue skyrocket throughout the boom. 

Its market cap has more than doubled in the past year to roughly $96 billion.

A SK Hynix spokeswoman told the Journal that the company still needs to make a 'final decision' on the Indiana plant, but a vote is expected soon.

A burgeoning number of AI data centers and factories in the US has raised concerns in recent years over water supply and the strain placed on the grid. 

Projections for electricity demand over the next nine years have more than doubled from 221,000 gigawatt hours last year to 564,000 gigawatt hours this year, according to the North American Electric Reliability Corp.

US based chipmaker SkyWater Technology also has plans to open a $1.8billion site in the area

The rise is being driven largely by developments in AI, cloud computing and cryptocurrency mining all of which require large data centers which in turn consume vast amounts of power. 

The International Energy Agency (IEA) predicts that globally 'electricity consumption from data centers, artificial intelligence (AI) and the cryptocurrency sector could double by 2026.'

By 2026, they say global data centers' energy demand will equal that of the entirety of Japan. 

There are currently an estimated 2,700 data centers within the US according to the IEA, which sapped over four percent of the nation's electricity in 2022. 

They predict that by 2026, their consumption will rise to six percent.