SK Hynix, Prominent South Korean Chipmaker, Likely To Set Up Chip Packaging Facility In India: Report

South Korean chipmaker SK Hynix is considering India's semiconductor manufacturing incentive scheme and is currently in contact with the Centre to explore the possibility of establishing a packaging facility in the country.

The company is reportedly in the final stages of preparing its proposal.

Although SK Hynix primarily focuses on manufacturing memory chips, including computing memory, consumer and network memory, and graphics memory, it is now looking at India as a potential destination for assembly and testing, following the example of Micron.

“SK Hynix has shown interest in our scheme, and is currently evaluating it to assess it from their business’s perspective. We believe they are in the final stages of submitting a proposal to set up a packaging plant, similar to that of Micron’s,” a senior government official was quoted as saying by The Indian Express.

This comes after Micron had earlier last month announced that it will set up a packaging facility in Gujarat, with a total cost of $2.75 billion. The company will receive 70 per cent of this cost in subsidies from the Central and state government, while investing $825 million from its own funds.

According to data from research agency TrendForce, Samsung and SK Hynix currently dominate the global sales of dynamic random-access memory chips.

In the final quarter of 2022, Samsung held a market share of 41 per cent, followed by SK Hynix at 29 per cent, and Micron at around 26 per cent.

The Centre has introduced an incentive scheme for the semiconductor industry, with a total outlay of $10 billion. This scheme offers capital subsidies of up to 50 per cent of the total project cost for the establishment of assembly and testing plants. Although these plants may not be the most advanced part of the ecosystem, they play a crucial role.

According to the official, larger companies are expected to initially test the Indian market through packaging plants, as they are less capital intensive and pose a lower risk.

"If things click, we expect some of them to also eventually start manufacturing chips here,” the official said. As an example, Micron is expected to begin production at its Gujarat plant by the end of 2024.

However, the company is also expected to produce chips in India in the future.

Earlier, Rajeev Chandrasekhar, Minister of State for Electronics and IT, had stated that the government's strategy is to establish a global presence in the labor market and supply chains through packaging. “Our strategy is that packaging will create a global presence for us in the labour market and the supply chains, and we can use that capability to vertically integrate back into fabs. Certainly it is clearly our expectation that Micron, at some point, will also start making the wafers,” Rajeev Chandrasekhar had said in an interview with The Indian Express.

While SK Hynix has not officially submitted its proposal yet, persuading the company to set up a packaging plant in India would be a significant boost to the country's chip-making plans.

India aims to develop the overall ecosystem in the country and is also waiting for a prominent name to establish a fabrication plant.

When asked about their investment plans in India, a spokesperson from SK Hynix stated that no concrete decision has been made yet.

“There is no concrete decision or an ongoing process with regard to investments in India,” the spokesperson was quoted as saying by The Indian Express.