Samsung Reportedly Picks Texas for $17 Billion U.S. Semiconductor Plant
Samsung Electronics is building a U.S.-based chip plant in Texas. This win will be a boon for the Biden administration, which prioritizes U.S. supply chain security as well as greater U.S. semiconductor production.
South Korea’s largest company has decided on the city of Taylor, roughly 30 miles from its existing giant manufacturing hub in Austin, a person familiar with the matter said. Samsung and Texas officials will announce the decision Tuesday afternoon, according to people familiar with the matter, asking not to be identified because the news hasn’t been made public. A Samsung representative said it hadn’t made a final decision and declined further comment.
Samsung wants to increase American clientele and reduce the gap between Taiwan Semiconductor Manufacturing Co. and Jay Y. Lee. The decision follows Intel Corp. and TSMC plans to invest billions in cutting-edge facilities worldwide. The industry triumvirate is racing to meet a post-pandemic surge in demand that’s stretched global capacity to the max, while anticipating more and more connected devices from cars to homes will require chips in future.
The new plant will augment Samsung’s already sizable presence in Austin, where it’s invested about $17 billion to date on a sprawling complex that houses more than 3,000 employees and fabricates some of the country’s most sophisticated chips. Samsung’s planning to invest another $17 billion and create about 1,800 jobs over the first 10 years, according to documents the company submitted to Taylor officials.
Korea’s Yonhap and the Wall Street Journal had reported earlier on Taylor’s selection.
The Asian giant is taking advantage of a U.S. government effort to counter China’s rising economic prowess and lure home some of the advanced manufacturing that in past decades has gravitated toward Asia. This ambition grew out of a worldwide chip shortage that hit the auto and tech industries. It cost billions to companies and caused them to lose revenue. The crisis also forced many plants to lay off workers. This made America vulnerable to diversifying supply chains. Joe Biden, the President, announced a broad effort to ensure critical supply chains. He proposed a $52 billion increase in domestic chipmaking.
The administration of President Obama has repeated its call for increased chip production in America, arguing that this was the only way to be competitive with China and to mitigate disruptions to supply chains like those caused by Covid 19. Last month, the U.S. created an “early alert system” to detect Covid-related shocks. To identify possible issues, the U.S. asked both consumers and producers to fill out a survey on their semiconductors’ demand and inventories.
Recently, Intel’s troubles ramping up on technology and its potential reliance in the future on TSMC and Samsung for at least some of its chipmaking have underscored the extent to which Asian giants have pulled ahead in recent years. Intel’s plans to open a plant in Chengdu (China) to produce silicon wafers was stopped by the government.
White House has called for Democrats in Congress to approve the CHIPS Act (a bill worth $52billion) which will fund domestic semiconductor manufacturing and research. Administration officials have pointed to the bill when pressed about security concerns in Taiwan, the world’s foremost chip producer. Commerce Secretary Gina Raimondo said Congress should pass the legislation as “quickly as possible” when asked if the U.S needed a clearer defense strategy related to the island.
Samsung is the latest company to join the growing list of Texas companies expanding and moving. In the last year, electric carmaker Tesla Inc. said it would move headquarters to the state, as did Oracle Corp. and Hewlett Packard Enterprise Co. Samsung’s move would be a win for Texas Republican governor Greg Abbott, who has long touted the Lone Star state’s business-friendly tax policies and is gearing up for a re-election battle next year.
Samsung was successfully nabbed by the local government. They waived 90% of the property tax for a decade as well as 85% over the next ten years. Abbott is scheduled to make a statement about the state’s economy at 5 p.m. local time Tuesday.
Samsung, which was previously serving time in jail for corruption charges, has been increasing investment activity ever since Lee was freed. It unveiled a commitment to bolster South Korea’s economy by spending 240 trillion won ($205 billion) and expand hiring to 40,000 people over the next three years.
It’s going head-to-head in Intel’s backyard with TSMC, which is on track to start production on its own $12 billion chip plant in Arizona by 2024. Samsung is trying to catch TSMC in the so-called foundry business of making chips for the world’s corporations — a particularly pivotal capability given a deepening shortage of semiconductors in recent months.
Samsung’s envisioned U.S. foundry will adopt ASML Holding NV’s extreme ultraviolet lithography equipment. Samsung, which had struggled for many years with low yields in advanced chip process, is now improving its home capacity and increasing it. In 2022 it plans to mass produce 3nanometer chips by using Gate All Around technology. It employs what many consider to be a revolutionary technology which allows for more precise control of current flows, shrinks chip areas, and reduces power consumption. Rival Intel pledges to take over the industry’s lead by 2025.
—With assistance from Justin Sink, Debby Wu, Peter Elstrom, Tom Giles and Matthew Miller.