Samsung Electronics has chosen to build a U.S.-based chip plant in Texas. This is a win for President Biden as it prioritizes supply chain security.
According to a source familiar with the matter, South Korea’s largest corporation has chosen Taylor as its headquarters. Taylor is about 30 miles from Austin, the company’s existing manufacturing hub. According to people familiar, Samsung and Texas officials will announce their decision Tuesday afternoon. They asked not to be identified as the news has not been made public. A Samsung representative declined to comment further as it had not made a final decision.
Samsung hopes to win more American customers and close the gap with Taiwan Semiconductor Manufacturing Co. This decision comes months after Jay Y. Lee, de facto leader, was released on parole. The industry trio is competing to meet the post-pandemic demand, which has stretched global capacity to its limits. They also anticipate that more connected devices, from cars to homes, will need chips in the future.
Samsung will add to its already substantial presence in Austin. The company has invested more than $17 million on a sprawling facility that houses over 3,000 workers and produces some of the most advanced chips in the country. According to documents submitted by Samsung to Taylor officials, the company plans to invest an additional $17 billion and create approximately 1,800 jobs in the first ten years.
Korea’s Yonhap reported Taylor’s selection earlier.
The U.S. government is trying to counter China’s economic rise and attract back some of the advanced manufacturing that has historically gravitated towards Asia. This ambition grew out of a global chip shortage that hit the auto and tech industries. It cost billions of dollars and caused plants to lay off workers. The U.S. was now vulnerable to diversifying supply chains. In June, President Joe Biden proposed a broad effort to secure critical supply chain, which included a $52 billion plan to boost domestic chipmaking.
His administration repeatedly emphasized the need for increased chip production in the U.S. as a way to compete with China, and to mitigate supply chain disruptions such as the one caused by Covid 19. The U.S. established an “early warning system” last month to alert it of Covid-related shocks. It also asked consumers and producers of semiconductors to complete surveys about their inventories, demand, delivery systems, and other issues to determine potential problems.
Recent problems with Intel’s technology expansion and potential reliance on TSMC or Samsung for some of its future chipmaking have highlighted the extent to which Asian giants are ahead in recent years. Intel was discouraged by the administration from moving forward with plans to build a factory in Chengdu to produce silicon wafers.
The White House also asked the House of Representatives Democrats to pass the $52 billion bill, known as the CHIPS Act. This bill would provide funding for domestic semiconductor research and manufacturing. When asked about security concerns in Taiwan (the world’s largest chip manufacturer), administration officials pointed to the bill. When Gina Raimondo, Commerce Secretary, was asked if the U.S. needed a more clear defense strategy for the island, Gina Raimondo stated that Congress should pass the legislation “quickly”.
Samsung joins a growing number of Texas-based companies that are expanding or moving to Texas. The electric car maker Tesla Inc. announced it would relocate its headquarters to Texas in the past year. Oracle Corp. and Hewlett Packard Enterprise Co also made similar announcements. Texas Republican Governor Greg Abbott would win the Samsung move. He has long praised Texas’ business-friendly tax policies. He is gearing up to run for re-election next year.
To snag Samsung the local government did everything possible, including waiving 90% property taxes for a decade and 85% for the next ten years. At 5 p.m., Abbott will make a statement on the state’s economy.
Since Lee’s release from prison, Samsung has been increasing investment activity. It revealed a commitment that South Korea would spend 240 trillion won ($205billion) to boost its economy and increase employment to 40,000 over the next three-years.
It is going head-tohead with TSMC in Intel’s backyard. TSMC is currently on track to open its $12 billion Arizona chip plant by 2024. Samsung wants to catch TSMC at the “foundry” business, making chips for corporations around the world. This is a crucial capability considering the growing shortage of semiconductors.
Samsung’s U.S.-based foundry will use ASML Holding NV extreme ultraviolet lithography equipment. The company has been working to improve and accelerate its domestic capacity expansion, despite having struggled for years with low yields in advanced chip processing. It plans to mass-produce 3-nanometer chip via Gate All Around technology in 2022. This technology, which some consider game-changing, can better control current flows across channels, reduce chip area, and use less power. Rival Intel has committed to retaking its industry leadership by 2025.
With assistance from Debby Wu and Matthew Miller.
