Push for microchips could reshape Indiana’s economy
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Indiana’s economic development conversations are becoming increasingly centered on a high-tech manufacturing industry in which few current Hoosier workers have experience: semiconductors, also called computer chips or microchips.
As the federal government hustles to bring the industry back to the United States from foreign shores, Indiana is attempting to snag multibillion-dollar private-sector investments and millions in federal funding in what has been described as a once-in-a-generation opportunity.
If successful, the state’s workforce, economy and manufacturing landscape could change dramatically.
Microelectronics companies typically desire to locate near one another, meaning anchors—such as Korea-based semiconductor chipmaker SK Hynix Inc.’s planned West Lafayette facility—could spur compounding investments that fill out and expand tech parks around the state.
In addition to SK Hynix, Indiana has attracted at least seven semiconductor-related companies since 2022, including NHanced Semiconductors and Everspin Technologies at WestGate@Crane Technology Park.
The hope is to draw even more now that the state has secured a tech hub designation for microelectronics from the federal government. Also, the Indiana Economic Development Corp. is preparing the LEAP Research and Innovation District in Lebanon to attract more companies with 10,000 acres of shovel-ready lots. (LEAP stands for Limitless Exploration Advanced Pace.)
Microelectronics require a special kind of high-tech workforce that hasn’t had a significant presence in Indiana or the rest of the country since the 1990s, when the migration of computer chip manufacturing to Asia accelerated.
Thirty-seven percent of the world’s semiconductors were manufactured in the United States in 1990, according to McKinsey & Co. Today, only 12% are. Much of the industry is now clustered in Taiwan, which produces more than 60% of all semiconductors and 90% of the most advanced chips.
Offshoring decimated many electronics companies in Indiana, including Delco, P.R. Mallory and RCA, which employed as many as 130,000 Hoosiers in the late 1960s. Today, the sector employs about 20,000 here.
Several economic development experts have said broadening understanding of the industry and its potential growth in the United States is a high priority as they work to build a new domestic workforce.
State leaders and the IEDC, Indiana’s job creation agency, point to the industry’s potential volume of high-paying jobs as a game-changer for Hoosier workers, who now have an average yearly income of around $50,000 a year.
Staffing the industry requires a mix of workers, some with master’s or bachelor’s degrees and others with on-the-job training.
Process and design engineers, who need a college degree, tend to make north of $70,000 a year, with the former especially poised for six figures. Process and maintenance technicians, who sometimes need an associate’s degree or can be trained on the job, typically make around $50,000 a year.
A July 2023 industry estimate cited by the White House said the country will need at least 25,000 college-educated engineers and an equal number of new technicians without four-year degrees by 2030.
The state’s largest colleges—Indiana University, Purdue University and Ivy Tech Community College—are racing to scale up their programming to match projected needs. The Applied Research Institute, the not-for-profit leading the state’s federal tech hub, is using its initial $33 million of federal funding solely on workforce development programs and equipment purchases.
The Midwest and other interior parts of the country are becoming more attractive to companies because the 2022 CHIPS and Science Act supplies financial support to enable expansion away from the coasts, said Valeria Bertacco, a professor of electrical engineering and computer science at the University of Michigan. The federal legislation allocates $2 billion to the U.S. Department of Defense to fund microelectronics research, fabrication and workforce training.
The race is on among states to attract such investment because the global microchip industry is expected to be worth $1 trillion by the end of the decade.
Making a microchip
A microchip plant looks much different from the industrial, smoke-spewing factories of old and even from many of the advanced manufacturing plants in Indiana today.
Chip production starts in a clean room—a space devoid of contaminants, including dust and bacteria.
While other industries—such as biotechnology and electronic auto components—require clean rooms, the ones designed for microchips are even more pristine and require constant monitoring for temperature, humidity, static and pressure levels. Workers in these rooms wear head-to-toe personal protective equipment, often called “bunny suits.”
These specialized environments typically exist in a microelectronics fabrication plant, or fab, which is designed to limit structural movement to protect the sensitive manufacturing process, Bertacco said.
Chips start as a wafer made of silicon. They are polished to be perfectly flat and sliced very thinly, usually 0.2 to 1.5 millimeters, or about the thickness of a bread bag. A wafer can hold several dozen identical chips.
Bob Patti, CEO of Batavia, Illinois-based NHanced Semiconductors, said his chip-assembly company uses what’s called a slurry, or a chemical mixture diluted with water, to polish and soften the wafer.
The wafer then needs an imprint of the electrical code, created elsewhere in a design house, that will give the chip its function. Imprinting that design, which requires a long sequence of steps, is called etching.
In etching, engineers use special machines to draw electrical patterns on the wafer by applying a mask containing the design (similar to a temporary tattoo, Bertacco said), then layering chemicals and washing off what isn’t needed.
Patti ballparked that a wafer might go through that process 50 times over, which makes the semiconductor industry water-intensive.
Semiconductor production is rarely, if ever, completed in one facility. Chips often require handoffs among several companies for software, upgrades and product implementation.
After production, chips are sent to testing facilities to ensure they work. Most chips end up traveling across the world to be sewn onto a circuit board and plugged into products. Each of those steps includes dozens of companies.
Companies are also needed to construct clean rooms, build machines and tools, and conduct maintenance on all of the above. Specialized plumbers are even needed to manage water, gases and other chemicals piped into a fab.
Utility needs
Semiconductor plants require not only large amounts of water but also large amounts of electricity, as well as large wastewater treatment facilities.
For example, Intel’s 700-acre campus in Arizona has four labs. Each uses enough electricity annually to power 200,000 Hoosier homes and consumes 10.2 million gallons of water a day, according to a Citizens Action Coalition report.
Intel’s entire campus uses 47 million to 56 million gallons a day, which could service 737,000 Hoosiers residents, the report says.
Concerns about the industry’s water needs has fueled a contentious debate over the Indiana Economic Development Corp.’s exploration of a proposal to pump up to 100 million gallons of water a day from the Wabash River in the Lafayette area to the 10,000-acre LEAP district in Boone County for potential future industrial development.
The proposal has since spurred a state water study and a policy debate over local control on water.
At the 750-acre WestGate@Crane Technology Park in southern Indiana, park and local government leaders have been gradually building the area’s infrastructure as the park has grown over the past 20 years.
Still, it will need major infrastructure investments for its next level of growth, said Bryant Niehoff, CEO of the Uplands Science and Technology Foundation that supports the Crane tech park.
While the LEAP district is designed to be 13 times larger than the Crane tech park, even its potential significant water needs are not a “showstopper,” said Patti, the NHanced Semiconductors CEO.
He noted that West Coast states such as California and Arizona have managed to support the semiconductor industry despite being dry areas with serious water constraints.
Patti said he’s not minimizing the water concerns some have about Indiana’s ability to support this industry but predicted that the issue won’t be significant in the end.