Samsung picks Taylor, Texas for the new $17B Chip making factory amidst the global semiconductor shortage, the factory will be the largest US investment by the company. The construction is to begin next year, and chips should be manufactured by the plant around 2024.
“With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply chain,” said Kim Ki-nam, vice chairman and chief executive of Samsung Electronics Device Solutions Division.
Demand for chips have skyrocketed – Refer to this thread for more context: Semiconductors - the supply chain and current situation - Deep-dives - Vested Community. To know more about semiconductor stocks (Note that Samsung isn’t listed in the US but will have a significant impact on other manufacturers) – hop onto this page: Semiconductor Stocks - Investing & Markets - Vested Community.
Samsung is the world’s largest semiconductor maker by revenue and uses the chips for its own devices apart from its contract manufacturing business whereas TSMC boasts of a huge market share of around 53% while Samsung is quite distant at 17%. TSMC’s main customers are Apple and Nvidia. The plant is Austin and the new proposed plant at Taylor is almost 30 miles away both in Central Texas.
The Texas investment also shows why scaling up chip production is hard. Factories are expensive, using advanced tools that can cost more than $150 million apiece, and take years to build.
But why Taylor, Texas
Samsung examined areas in Arizona, New York, and Florida before settling on Taylor, a town of around 16,000 people. The business had also examined Austin, Texas, where it has had its lone U.S. chip-making operation for decades.
Taylor was more appealing than Austin due to the state’s experience during a February frost that damaged the Texas electric infrastructure for roughly a week and harmed Samsung. Taylor is part of a bigger utility that has the capacity to execute rolling blackouts and offer idle power to select facilities, whereas three factories in Austin lost power completely, resulting in hundreds of millions of dollars in equipment damage.
The move comes after the Biden administration is pushing for local manufacturing of chips while the relations between the US and China heat. Biden administration is planning to stimulate more investment in the US. Senate had approved $52B in-direct industry subsidies for new semiconductor-making factories in June.
Local governments offered Samsung financial incentives providing around 90% tax breaks for the first 10 years, the state of Texas offered incentives of $27million. Here’s what Williamson County Judge Bill Gravell said, the county was aggressive in its incentive packages because of the importance of manufacturing chips. “We beat out every location in the world…because we wanted it,” Gravell is an elected executive akin to the mayor.
Texas Republican U.S. Sen. John Cornyn termed the Samsung agreement a triumph in the fight to enhance American semiconductor production and lessen dependency on Asian suppliers. Supply-chain difficulties because of Covid-19 “woke a lot of us up.” Mr Cornyn has co-sponsored federal legislation to provide grant funding for semiconductors.
“We’re focused not just on the economics, but on the national security implications.”
Other players who have committed to significant investments are: