Samsung says it will build a $17 billion chip factory in Texas

Samsung says it will build a $17 billion chip factory in Texas

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

“This is the largest foreign direct investment in Texas ever,” Texas Governor Greg Abbott said in announcing the project on Tuesday. Samsung said pioneering work will be in the first half of 2022 with plans to work in the second half of 2024.

The chip shortage has emerged as a trade obstacle and a serious national security concern for the United States. A supply shortage of semiconductors that began due to COVID-era shutdowns has hampered production of new vehicles and electronic devices 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, particularly in Taiwan, which China has long claimed as its territory.

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

Many chip makers are deploying their manufacturing operations, now concentrated in Asia, in response to the shortages, which have affected sectors from automakers to the video game industry.

“It makes sense for the supply chain to be more geographically diverse,” said Angelo Zino, analyst at CFRA. “You’re obviously seeing some new foundry capacity plans being announced in the US as well as in Europe.”

Another factor, Zino said, is the expectation that Congress will approve federal subsidies for the semiconductor industry to build its plants in the United States, in the hope that it will bring jobs, reduce future supply concerns, and give the United States more leverage over economic competitors like China that it has. Supported production.

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Samsung had previously indicated that it was exploring locations in Texas, Arizona and New York for a potential new US chip factory. It has had a chip manufacturing plant in Austin, Texas, since the late 1990s. But most of the manufacturing centers are in Asia.

Samsung said it expects to spend $17 billion on the Texas project, which would make it the company’s largest investment in the United States. She said the new facility will boost production of high-tech chips used in 5G mobile communications, advanced computing and artificial intelligence, and also improve supply chain resilience.

The US share of the global chip manufacturing market has fallen from 37% in 1990 to 12% today, according to the Semiconductor Industry Association, a trade group. The administration of President Joe Biden has been pressing Congress to pass the $52 billion CHIPS Act to increase computer chip manufacturing and research. A separate legislation under consideration would also create a new tax credit for investment in semiconductor manufacturing facilities.

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Several chip makers have indicated an interest in expanding their US operations if the US government can facilitate the construction of chip factories. Micron Technology, based in Boise, Idaho, said it will invest $150 billion globally over the next decade in developing its line of memory chips, with potential expansion of US manufacturing if tax credits can help offset the higher costs of US manufacturing. . Pat Gelsinger, CEO of California-based chip maker Intel, urged the United States to focus its support for semiconductors on American companies.

Intel made waves earlier this year by announcing plans to invest $20 billion in two new plants in Arizona. More importantly, Intel said it has started a new division that will enter into contracts to make chips designed for other companies in addition to its own processors. This is a major turnaround for Intel, as it is closely aligned with a model popularized by Taiwan Semiconductor Manufacturing Co. , or TSMC, which was building its own plant in Arizona.

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Samsung is the dominant player in the market for memory chips that are central to smartphones and other gadgets, but Zino said it is also expanding its role in the “foundry side” — making chips designed for other companies.

“I expect it will be foundry-based in nature,” he said of the Texas plant. “It is in line with their intent to triple their foundry capabilities.”

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

Officials in Williamson County have been working for several months on a stimulus package that will bring the Samsung Electronics plant to a rural area between the cities of Taylor and Hue and that will employ about 1,800 workers. On Tuesday, Abbott said it would create more than 2,000 jobs.

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“Now it’s mostly an agricultural and grazing crop,” said Ross Bowles, the county commissioner that includes the site. “The place they are looking at has great infrastructure. It has great electricity, great water and a good road system. These are important things for Samsung and for the project.”

Taylor’s school board held a meeting on November 15 to approve an arrangement that would enable Samsung to save in taxes if it builds a facility within the school district’s boundaries. It followed earlier approval of tax incentives and infrastructure improvements from government officials in Williamson County, where Taylor is located. The site is located 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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