Samsung plans $23 billion Texas chip plant, creating 2,000 jobs

SEOUL (BLOOMBERG) – Samsung Electronics has unveiled plans to invest US$17 billion(S$23 billion) in a new advanced chip plant in Texas, a marquee project that will fortify the US semiconductor industry.

“Increasing domestic production of semiconductor chips is critical for our national and economic security,” US Commerce Secretary Gina Raimondo said in a statement on Tuesday (Nov 23).

The project will result in the creation of more than 2,000 jobs, Texas Governor Greg Abbott said at a press conference announcing the plans. “The implications of this facility extend far beyond the boundaries of Texas,” Mr Abbott said. “It’s going to impact the entire world.”

South Korea’s largest company will build the facility in Taylor, Texas, about 30 miles from Austin, where Samsung has invested billions in a sprawling complex that already houses more than 3,000 employees and fabricates some of the country’s most sophisticated chips. Construction is slated to start in the first half of 2022, and the plant will begin production in the second half of 2024.

Samsung joins Taiwan Semiconductor Manufacturing Co in making substantial investments in the US. The new facilities further the Biden administration’s goal of safeguarding the production of cutting-edge chips vital to defense as well as technologies like autonomous cars. It’s part of Washington’s broader effort to counter China’s rising economic power, as well as lure home some of the advanced manufacturing that in past decades has gravitated toward Asia.

“Samsung’s new plant will help narrow the gap with TSMC’s production capability by making chips at the clients’ home,” said Kim Sunwoo, an analyst at Meritz Securities. “As the US prioritises domestic chip manufacturing, the company will be able to receive various benefits with its production base in the country.”

The global chip crunch exposed imbalances in the industry and prompted governments from Brussels to Tokyo to court TSMC and Samsung – the two companies that make most of the world’s most advanced chips for clients like Apple and Nvidia.

Neither the Texas project nor TSMC’s US$12 billion Arizona expansion are likely to alleviate the shortages immediately. But their construction could lay the groundwork for a future American-centered chip ecosystem by attracting and training the component suppliers that typically spring up around such operations.

In June, President Joe Biden laid out a sweeping effort to secure critical supply chains, including a proposed US$52 billion to bolster domestic chipmaking. His administration has repeatedly voiced the need to increase semiconductor production in the US, saying that was the best way to compete with China and mitigate disruptions like those stemming from Covid-19.

Samsung spent months reviewing different sites and incentive packages before landing on Taylor. Samsung’s de facto leader Jay Y. Lee, who walked free just months ago after serving time for corruption, green-lit the project after a recent trip in the US where he met with prospective clients and partners from Alphabet’s Sundar Pichai to and Microsoft. The local government pulled out the stops, including waiving 90 per cent of property taxes for a decade, and 85 per cent for the following 10 years. The project could potentially receive additional tax breaks because it’s in a federal opportunity zone, a program designed to spur investment in poor areas.

“Samsung is targeting American customers aggressively,” said Jeff Pu, an analyst with Haitong International Securities Group.