The United States Department of Energy has confirmed plans to loan $544 million to South Korean tech conglomerate SK Group under the conditions it be used to expand semiconductor production in the Midwest. Finances have been earmarked for a facility operated by subsidiary SK Siltron CSS to expand a plant located in Bay City, Michigan, which had previously expressed plans to build more chips.
Demand has ballooned for silicon carbide semiconductors within the automotive sector in recent years. Like most other modern products, vehicles have become heavily reliant on semiconductor chips in recent years and the supply chain issues witnessed since 2020 have been vexing the industry. Meanwhile, the United States is concerned that any future decisions on the part of China to invade Taiwan would effectively cripple the U.S. capability to manufacture everything from automobiles to military hardware.
According to the Department of Energy’s Loan Program Office, the planned expansion of the SK Group facility would make the site one of the world’s largest producers of silicon carbide wafers on the planet. Considered a matter of national security by the federal government, increasing the factory’s capacity to produce chips is something the Biden administration is keenly interested in. As a bonus, the program should also free up chips for automakers — especially in regard to electric vehicles.
Automotive News quoted SK spokesperson Kelsey Flora as saying that the loan would “enable larger growth and expanded capacity than originally projected” in addition to new employment opportunities.
From Automotive News:
According to the Department of Energy, SK’s project is expected to result in 200 jobs once at full production, in addition to about 200 construction jobs.
SK purchased DuPont’s silicon carbide business in 2020 for $450 million and subsequently said it would invest more than $300 million to quadruple its Michigan footprint with a 250,000-square-foot plant in Bay City.
In 2022, SK Siltron held a ribbon cutting for the new plant, part of a larger commitment by the company to increase its U.S. investments and assets to more than $50 billion by the end of 2025.
There have been some concerns that the loan is unnecessary or perhaps needlessly advantageous to a company of foreign origin. But the United States is understandably desperate to localize chip production with the Biden administration making it a key platform. Meanwhile, Michigan is desperate to secure tech and manufacturing jobs. Despite being synonymous with the Northern United States since before the Civil War, factory work has either been shifting to the South or completely out of the country entirely for decades.
Incentivizing companies to lay roots in Michigan after the 2008 recession has worked out rather well. The plan allowed the region to recoup manufacturing jobs a little faster than the national average. This includes the automotive sector, even though manufacturing jobs not directly tied to the auto industry have technically kept a higher pace. SK has tried to lean into that by asserting that it’s very serious about turning the facility into one of the largest semiconductor producers in the world and seems to have convinced those responsible for government oversight.
“This will not be a compliance facility,” Jigar Shah, director of the Loan Programs Office, explained. “It’s going to be a cutting-edge, next-generation facility.”
Shah also noted that federal loans for clean-energy projects had seen renewed interest since 2023 after a period of inactivity thanks to money being freed up for companies promising to conduct clean-energy projects via the passing of the Inflation Reduction Act and Bipartisan Infrastructure Law. However, critics of the scheme remain concerned that such provisions are advantaging too many foreign entities and argue that promises of projects being environmentally sound does not necessarily make the claim true.
“I think we spent the better part of the past three years overcoming dormancy,” Shah said. “It was a big deal to get us to this point where companies respect our process and equity investors respect our diligence.”
The SK chip agreement was said to be one half of a pair that were announced on Thursday by the Loans Program Office. The other is a $165.9 million loan intended to finance the expansion of American Battery Solutions. That deal has likewise been approved by the Department of Energy, hopefully strengthening Midwestern EV battery production. The company is targeting 4.2 GWh worth of lithium-ion battery packs annually by 2026.
[Image: U.S. Department of Energy]
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