Your trusted source for the latest news and insights on Markets, Economy, Companies, Money, and Personal Finance.

Can Indiana Transform Into a Chip Hub? Testing the Heartland

Over the past 14 months, Indiana began converting 10,000 acres of corn and bean fields into an innovation park. State leaders met with the chief executives of semiconductor giants in South Korea, Taiwan, and Japan. And they hosted top Biden administration officials to show off a $100 million expansion of chip research and development facilities at a local university.

The actions were driven by one main goal: to turn Indiana into a microchip manufacturing and research hub, almost from scratch.

“We’ve never done anything at this scale,” said Brad Chambers, who was Indiana’s commerce secretary in charge of economic development. “It’s a multibillion-dollar commitment by the state to be ready for the transitions that are happening in our global economy.”

Indiana’s moves are a test of the Biden administration’s efforts to stimulate regional economies through the $52 billion CHIPS and Science Act, a landmark package of funding that is planned to begin going out the door in the next few months. The program is intended to bolster domestic manufacturing and research of semiconductors, which act as the brains of computers and other products and have become central to the U.S. battle with China for tech primacy.

The Biden administration has promised that the CHIPS Act will seed high-paying tech jobs and start-ups even in places with little foundation in the tech industry. In a speech in May last year, Commerce Secretary Gina Raimondo, who oversees the chips program, said she was looking at how the program would help “different places in the heartland of America.”

She added, “I think we will really unleash an unbelievable torrent of entrepreneurship and capital opportunity.”

That makes Indiana a prime case study for whether the administration’s efforts will pan out. Unlike Arizona and Texas, which have long had chip-making plants, Indiana has little experience with the complicated manufacturing processes underlying the components, beyond electric vehicle battery manufacturing and some defense technology projects that involve semiconductors.

Indiana now wants to catch up to other places that have landed big chip manufacturing plants. The push is supported by Senator Todd Young, a Republican from Indiana, who was a co-author on the CHIPS Act and has been a leading voice on increasing funds for tech hubs. Companies and universities in Indiana have applied for multiple CHIPS Act grants, with the aim of winning awards not only for chip manufacturing but also for research and development.

Some economists said the Biden administration’s goals of turning farmland into advanced chip factories might be overly ambitious. It took decades for Silicon Valley and the Boston tech corridor to thrive. Those regions succeeded because of their strong academic research universities, big anchor companies, skilled workers, and investors.

Many other areas don’t have that combination of assets. Indiana has for decades faced a brain drain among some of its more educated young people who flock to larger cities for work, according to the Indiana Chamber of Commerce. Some industrial policy proponents see the investments as a way to reverse that exodus, as well as a broader trend toward deindustrialization that hollowed out communities in the Rust Belt.

But it’s unclear whether the program can achieve such ambitious goals — or whether the Biden administration will judge it to be more effective to spread out investments around the country or concentrate them in a few key hubs.

“Many pieces have to come together,” said Mark Muro, a senior fellow at the Brookings Institution. He added that the federal government’s plan to initially put $500 million into tech hubs was too small and estimated it would take $100 billion in government aid to create 10 sustainable tech hubs.

Indiana does have some advantages. The state has ample land and water — which are necessary for large chip factories that use water to cool equipment and rinse silicon wafers — and it has relatively stable weather for the highly sensitive production process. It also has Purdue University, with an engineering school that has promised to turn out the technicians and researchers needed for chip production.

Yet the state faces stiff competition. In January 2022, Indiana lost a bidding war to Ohio over plans by Intel, the big U.S. chip-maker, to build two factories valued at $20 billion.

“We learned a lot of lessons,” Mr. Chambers said about the failure. The biggest, he said, was to have a more attractive package of land, infrastructure, and workforce programs ready to offer big chip companies.

A year later, Indiana won a $1.8 billion investment from SkyWater, a Minneapolis-based chip-maker, to build a factory with 750 jobs adjacent to Purdue’s campus.

State leaders acknowledge that any tech transformation could take years, especially if there is no anchor plant by even larger chip manufacturers such as TSMC, the world’s biggest maker of cutting-edge chips.

Mr. Young said he and other state leaders were in talks with big chip makers for a contract that would compare to the $20 billion that Intel committed to Ohio. But “all net new job creation in my lifetime has been created by new firms and young firms,” he said.

Indiana’s chip-making metamorphosis is now centered on a tech park, LEAP Innovation District, in the town of Lebanon near Interstate 65, which connects Indianapolis and Purdue in West Lafayette. The town is surrounded by 15,000 square miles of corn and bean farms.

The park began taking shape along with the CHIPS Act. In 2019, Mr. Young was a co-author of the Endless Frontier Act with Senator Chuck Schumer, a Democrat of New York and then the Senate minority leader. The bill was the precursor to the CHIPS Act.

As the bill wound through Congress, Mr. Young was in regular contact with Eric Holcomb, Indiana’s governor, and Mitch Daniels, then Purdue’s president, on details of the proposal. Mr. Young said Indiana’s manufacturing roots would be its asset, if the state’s factory sector could transition to making advanced chips.

“I realized that Indiana and, more broadly, the heartland stood to disproportionately benefit from the investments that we would be making,” he said in an interview last month.

Mr. Holcomb and Mr. Chambers then created a plan for a tech manufacturing park. Within months, they began buying corn and bean farms in Lebanon for what became the LEAP Innovation District.

In May 2022, Mr. Holcomb unveiled LEAP and began installing new water and power lines and a new road there. Mr. Holcomb, Mr. Chambers, and Mr. Young also traveled to more than a dozen countries to meet with the executives of chip companies like SK Hynix and TSMC. They offered cheap rent in the LEAP district, tax incentives, access to labs and researchers at Purdue, and training programs at the local Ivy Tech Community College.

Some of the work paid off. When Indiana beat out four other states for SkyWater’s $1.8 billion chip facility, the company said it was impressed by the coordination between state leaders and Purdue’s new president, Mung Chiang, who launched the nation’s first semiconductor degree programs to nurture workers for chip makers.

In September, Mr. Chiang invited Ms. Raimondo and Secretary of State Antony J. Blinken to tour Purdue’s clean rooms for chip research and to see plans for a $100 million expansion of semiconductor research and development, including 50 new faculty to work on advanced chip science.

“I think you have all the ingredients,” Ms. Raimondo said in a discussion with Mr. Holcomb and Mr. Chiang during the visit.

Indiana officials now await word on how much CHIPS Act funding they may get. Some early results from the LEAP district initiative offer a mixed picture of where things might go.

In May 2022, the park landed its first tenant — Eli Lilly, the pharmaceutical company, not a chip maker.

Share this article
Shareable URL
Prev Post

Weekly Market Review: July 31 – August 4

Next Post

IT & Business Services M&A Experiences “Super Growth” Due to Skilled Staff Shortage and Cybersecurity Concerns, Reports Hampleton Partners

Leave a Reply

Your email address will not be published. Required fields are marked *

Read next
After struggling a setback at two Mercedes-Benz crops in Alabama on Friday, the United Vehicle Employees union’s…
Starbucks and the union that represents workers in roughly 400 of its U.S. shops introduced Tuesday that they…