Samsung says it will build $17B chip factory in Texas

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Samsung said it plans to build a $17 billion semiconductor factory in Texas amid a global shortage of chips used in phones, laptops, cars and other electronic devices.

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Samsung said it plans to build a $17 billion semiconductor factory outside Austin, Texas, amid a global shortage of chips used in phones, cars and other electronic devices.

Texas Gov. Greg Abbott announced the project on Tuesday, saying it “is the largest foreign direct investment ever made in the state of Texas.”

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Samsung said it will begin construction of 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 sustainability” of the local. infrastructure, Samsung Vice Chairman Kinnam Kim said while speaking with the Republican governor.

Chip shortages have emerged as both a commercial barrier and a serious US national-security concern. Short supply of semiconductors triggered by COVID-era shutdowns has hampered production of new vehicles and electronic components for more than a year. New questions of economic and national security are also at stake as many US companies rely on chips produced abroad, especially in Taiwan, which China has long claimed as its territory.

It’s a concentration risk, a geopolitical risk to rely on Taiwan for most of the world’s chip production, said Nina Turner, a research analyst at IDC. He said the current shortage is likely to ease, but there will be long-term demand for chips as more and more everyday products depend on them.

Many chip makers are expanding their manufacturing operations in response to the shortage, which has taken a toll on sectors ranging from automakers to the video game industry.

“It makes sense for the supply chain to be a little more diversified geographically,” said Angelo Zino, an analyst at CFRA. “You’re clearly seeing the announcement of some new foundry capacity plans in the US as well as Europe.”

Another factor, Zino said, is the expectation that Congress will approve federal subsidies for the semiconductor industry to build its factories in the US, in the hope that it will bring jobs, ease future supply concerns and overwhelm economic rivals such as China. America will benefit more.

Samsung previously indicated that it was exploring sites in Texas, Arizona and New York for a potential new US chip plant. 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 expected to spend $17 billion on the Texas project, which would make it the company’s largest investment in the US. Also improving supply chain resilience.

According to the Semiconductor Industry Association, a trade group, the US share of the worldwide chip manufacturing market has declined from 37% in 1990 to 12% today. The Biden administration is pushing Congress to pass the $52 billion CHIPS Act to increase computer chip manufacturing and research. The separate legislation under consideration would create a new tax credit for investments in semiconductor manufacturing facilities.

Administration officials highly praised the deal. Brian Deez, Director of the National Economic Council and National Security Advisor Jake Sullivan, said: “We welcome Samsung’s announcement today that it will build a new semiconductor facility in Texas to protect our supply chains, boost our manufacturing base, and expand our manufacturing base.” It will help to revive and create good jobs here.” said in a joint statement.

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

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

Several chip makers have indicated interest in expanding their US operations if the US government is able to ease the construction of chip plants. Micron Technology, based in Boise, Idaho, said it will invest $150 billion globally in developing its line of memory chips over the next decade, with potential US manufacturing expansion if tax credits help make up for the high cost of US manufacturing. could. Pat Gelsinger, CEO of California-based chipmaker Intel, has urged the US to focus its semiconductor subsidies on American companies.

Intel earlier this year announced plans to invest $20 billion in two new factories in Arizona. Taiwan Semiconductor Manufacturing Company, or TSMC, is building its plant in Arizona.

Samsung is the major player in the market for memory chips that are important for smartphones and other gadgetry, but Zino said it is expanding its role on the “foundry side” as well, meaning chips designed by other firms. Rent for construction.

“My expectation is that it’s going to be foundry-based in nature,” he said of the Texas plant. “This is in line with their intention to triple their foundry capacity.”

Other countries have made similar efforts to make chips closer to their place of use. The European Commission said earlier in November that it could approve aid for the production of semiconductors in the 27-nation bloc.

Williamson County officials have been working for several months on a package of incentives that will bring Samsung’s plant to a rural area between the cities of Taylor and Hato that will employ about 1,800 workers. Abbott said Tuesday it would bring more than 2,000 jobs.

“Now it’s mostly agricultural row crops and grazing,” said County Commissioner Ross Boles, whose campus encompasses the site. “The place they are looking at has very good infrastructure. It has big electricity, it has big water and it has good road system. Those nuts-and-bolts things are important to Samsung and the project. ,

The school board in Taylor held a meeting on November 15 to approve an arrangement that would enable Samsung to save on taxes when building a facility within the school district’s boundaries. This was followed by tax incentives and infrastructure improvements approval from government officials in Williamson County, where Taylor is located. The site is about a 40-minute drive northeast of Austin.

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Associated Press writers Kim Tong-hyung in Seoul, South Korea, and Terry Wallace in Dallas contributed to this report.

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