Samsung announces it will start building $ 17 billion Texas chip factory next year



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Samsung on Tuesday confirmed plans to build a $ 17 billion semiconductor plant outside of Austin, Texas, amid a global shortage of chips used in phones, cars and other electronics.

“This is the largest foreign direct investment ever made in the state of Texas,” Texas Governor Greg Abbott said Tuesday. Samsung’s plans had been widely anticipated and reported in advance by the Wall Street Journal and Bloomberg.

Samsung has announced that it will begin construction on the Texas plant next year and expects to begin operations in the second half of 2024. The South Korean electronics giant chose the site based on a number of factors, including government incentives and the “readiness and stability” of local infrastructure. Samsung Vice President Kinam Kim said, speaking alongside the Republican governor.

Semiconductor production is one of Oregon’s largest industries, and the state has one of the largest concentrations of chipmakers in the world. But Samsung, Intel, and Taiwan Semiconductor Manufacturing Co. – all of which are building new factories in the United States – don’t appear to have considered Oregon for any of these projects.

While Oregon offers property tax exemptions comparable to those Samsung would have received in Texas, Oregon does not have large plots of readily available industrial land comparable to Samsung’s new 1,200-acre site in Texas.

The chip shortage has become both a trade barrier and a serious national security concern in the United States. The semiconductor shortage triggered by COVID-era shutdowns has hampered production of new vehicles and electronics for more than a year. New economic and national security issues are also at stake as many American companies depend on chips produced abroad, notably in Taiwan, which China has long claimed as its own home.

“It’s a concentration risk, a geopolitical risk” to be so dependent on Taiwan for much of the world’s chip production, said Nina Turner, analyst at IDC. She said current shortages are likely to ease, but there will be long-term demand for crisps as more and more everyday products depend on it.

Many chipmakers are expanding their manufacturing operations, now concentrated in Asia, in response to shortages, which have wreaked havoc in industries ranging from automakers to the video game industry.

“It makes sense that the supply chain is a little more geographically diverse,” said Angelo Zino, analyst at CFRA. “You clearly see new foundry capacity plans announced in the United States as well as in Europe. “

Zino said another factor is the expectation that Congress approves federal subsidies for the semiconductor industry to build its plants in the United States, in the hopes that it will create jobs, reduce costs. future supply problems and will give the United States more leverage over economic rivals like China which have subsidized production.

Samsung’s Kim was enthusiastic about Republican-led Texas in his comments on Tuesday, but also credited the partnerships with President Joe Biden’s administration and congressional leaders on both sides. Abbott said the project will benefit from “tiered” incentives at the federal, state and local levels.

“Increasing domestic production of semiconductor chips is essential for our national and economic security,” US Secretary of Commerce Gina Raimondo said in a written statement praising Samsung’s announcement.

Samsung previously said it was exploring sites in Texas, Arizona and New York for a possible new chip factory in the United States. It has had a chip manufacturing plant in Austin, Texas, since the late 1990s. But most of its manufacturing centers are in Asia.

Samsung said it plans to spend $ 17 billion on the project in Texas, making it the company’s biggest investment in the United States. also improve the resilience of the supply chain.

The United States’ share of the global chip manufacturing market has grown from 37 percent in 1990 to 12 percent today, according to the Semiconductor Industry Association, a trade group. President Joe Biden’s administration lobbied for Congress to pass the $ 52 billion CHIPS Act to increase the manufacturing and research of computer chips. Separate legislation also under consideration would create a new tax credit for investment in semiconductor manufacturing facilities.

Several chipmakers have expressed interest in expanding their U.S. operations if the U.S. government is able to facilitate the construction of chip factories. Micron Technology, based in Boise, Idaho, said it will invest $ 150 billion globally over the next decade to develop its line of memory chips, with potential manufacturing expansion in the States. -United if tax credits can help offset the higher costs of American manufacturing. Pat Gelsinger, CEO of California chipmaker Intel, has urged the United States to focus its semiconductor subsidies on American companies.

Intel made waves earlier this year when it announced plans to invest $ 20 billion in two new plants in Arizona. More importantly, Intel said it is starting a new division that will contract to manufacture custom chips for other companies in addition to its own processors. It’s a major change for Intel, aligning it more closely with a model popularized by Taiwan Semiconductor Manufacturing Co., or TSMC, which had previously built its own plant in Arizona.

Samsung is the dominant player in the market for memory chips that are essential for smartphones and other gadgets, but Zino said it is also expanding its role on the foundry side – making chips designed for other companies.

“I expect it to be foundry-based in nature,” he said of the Texas plant. “This matches their intention to triple the capacity of their foundry. “

Other countries have made similar efforts to have chips manufactured closer to where they are used. The European Commission said earlier in November that it could approve aid to fund semiconductor production in the 27-country bloc amid a global chip shortage and intense global competition to fill the need.

Williamson County officials have been working for several months on a package of incentives that would take a Samsung factory to a rural area between the towns of Taylor and Hutto that would employ around 1,800 workers. Abbott said Tuesday it would bring more than 2,000 jobs.

“Now it’s mostly row crops and pasture,” said Russ Boles, the county commissioner whose enclosure encompasses the site. “The place they are looking at has great infrastructure. It has a lot of electricity, it has a lot of water, and it has a good road network. These building blocks are important to Samsung and to the project. “

Taylor’s school board met on Nov. 15 to approve a deal that would save Samsung on taxes if it builds a facility within the school district boundaries. This followed earlier approval of tax incentives and infrastructure improvements by government officials in Williamson County, where Taylor is located. The site is about a 40-minute drive northeast of Austin.

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