Samsung says it will build USD17B chip factory in Texas

AP – Samsung said it plans to build a USD17 billion semiconductor factory outside of Austin, Texas, amid a global shortage of chips used in phones, cars and other electronic devices.

“This is the largest foreign direct investment in the state of Texas, ever,” Texas Governor Greg Abbott said in announcing the project on Tuesday.

Samsung said it will start building the Texas plant next year and hopes 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 stability” of local infrastructure, said Samsung Vice Chairman Kinam Kim, speaking alongside the Republican governor.

The chip shortage has emerged as both a business obstacle and a serious United States (US) national-security concern. Short supplies of semiconductors kicked off by COVID-era shutdowns have hampered production of new vehicles and electronic devices for more than a year.

New questions of economic and national security are also at stake since many US companies are dependent on chips produced overseas, particularly in Taiwan, which China has long claimed as its own territory.

“It’s a concentration risk, a geopolitical risk” to be so reliant on Taiwan for much of the world’s chip production, said a research analyst at IDC Nina Turner. She said the current shortages will likely subside but there will be a long-term demand for chips as more and more everyday products rely on them.

The logo of Samsung Electronics outside the Samsung Electronics Seocho building in Seoul. PHOTO: AP

Many chipmakers are spreading out their manufacturing operations in response to the shortages, which have taken a toll on sectors from automakers to the video game industry.

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

Zino said another factor is the expectation that Congress will approve federal subsidies for the semiconductor industry to build its factories in the US, in the hopes it will bring jobs, lessen future supply concerns and give the US more leverage over economic rivals like China.

Samsung had previously indicated it was exploring sites in Texas, Arizona and New York for a possible new US chip plant. It has had a chip fabrication plant in Austin, Texas, since the late 1990s. But most of its manufacturing centres are in Asia.

Samsung said it expects to spend USD17 billion on the Texas project, which will make it the company’s largest investment in the US. It said the new facility will boost production of high-tech chips used for 5G mobile communications, advanced computing and artificial intelligence, and also improve supply chain resilience.

The US share of the worldwide chip manufacturing market has declined from 37 per cent in 1990 to 12 per cent today, according to the Semiconductor Industry Association, a trade group. The Biden administration has been pushing for Congress to pass the USD52 billion CHIPS Act to increase computer chip manufacturing and research. Separate legislation also under consideration would create a new tax credit for investment in semiconductor manufacturing facilities.