Samsung Plans to Build $17 Billion Chip Plant in Texas by 2024
Samsung announced it would spend $17 billion over the next three years to build a semiconductor fab in Texas, in an effort to expand its manufacturing capacity in the U.S. at a time of a global shortage of chips.
The world's top memory chip vendor and second-largest contract chip manufacturer said the plant would be located in Taylor, Texas, outside of the state capital of Austin. The Samsung fab will manufacture logic chips based on "advanced process technologies" used in areas such as mobile phones, 5G networks, data centers, and artificial intelligence (A.I.).
The announcement comes as the U.S. government makes reviving domestic chip-making a major priority during a shortage that has lasted for around a year at this point. Snarled chip supply chains have ravaged industries ranging from cars to consumer devices, causing delays in shipping products and higher prices that have hit consumers. The imbalance has underlined how indispensable chips are to the U.S. economy.
The plant's construction is scheduled to start in the first half of 2022, while mass production is set to begin in late 2024, so it will not help solve the problems delaying the production of cars and consumer devices.
Samsung is one of the only semiconductor firms in the world willing to invest in the most advanced process technologies. It is also one of the world's top contract chip foundries, making chips based on blueprints designed by outsider firms such as Qualcomm and Nvidia. The company has previously said that it would start rolling out chips based on its 3-nm node by 2022 before upgrading to its 2-nm node by 2025.
The Texas plant, which will span more than 15 million square feet, will complement Samsung's only other American fab, which is located in Austin and predominately rolls out chips based on less advanced nodes.
The investment reflects how much advanced chips cost to produce. Samsung said the price tag includes the cost of building the cleanroom—necessary to protect against impurities in chips—and making property improvements. The price tag also covers purchases of the high-end machinery and equipment to go inside.
What Was It About Texas?
Kinam Kim, CEO of Samsung electronic device solutions division, said the new fab will help serve the needs of its customers and "contribute to the stability of the global semiconductor supply chain."
Since January, the chip-making giant has been planning a major U.S. expansion. It has been petitioning state and local governments for subsidies and tax incentives to reduce the soaring cost of building a fab. Samsung reportedly courted three states—Arizona, New York, and Texas—for incentives to build the plant. Failing to get financial assistance in the U.S. would have prompted it to build the new plant in South Korea.
Samsung said the decision to invest in Texas was based on a range of factors such as the presence of a robust semiconductor ecosystem, infrastructure stability, and local government support.
Texas came out ahead despite widespread power failures in Austin earlier this year, which halted operations at Samsung, NXP Semiconductors, and Infineon Technologies fabs in the region. The semiconductor firms lost hundreds of millions of dollars due to the power outages, aggravating the global chip shortage.
The proximity to Samsung's existing manufacturing plant in Austin, around 30 miles southwest of Taylor, offers other advantages. The company already has an established ecosystem of partners and suppliers in Texas, which will allow Samsung's new and existing fabs to share necessary infrastructure and resources.
Kim said that he was grateful to the Biden administration for "creating an environment that supports companies like Samsung as we work to expand leading-edge semiconductor manufacturing in the U.S."
Samsung said that the advanced chip plant would mark its largest-ever investment in the U.S.
U.S. Semiconductor Bug
The announcement from Samsung comes amid a major push in Washington to repatriate chip production.
President Biden has said that chips are a priority for his administration and promised billions of dollars in federal funding to boost U.S. production and innovation. He hopes to help fix the chip shortages affecting sectors such as cars and consumer devices. He is also trying to address concerns that outsourced chip-making makes the U.S. more vulnerable to the supply chain snarls that are dragging out the shortages.
Kim thanked the Biden administration and U.S. leaders for bipartisan support to enact federal incentives for U.S. manufacturing and research. However, Samsung did not share details on the incentives for its new fab.
Today, major semiconductor makers contract out the production of their most advanced chips. Moreover, the vast majority of chips they sell are imported from fabs located on the other side of the world, specifically in Taiwan, South Korea, and other parts of Asia.
The U.S. semiconductor industry has long warned that the soaring cost of operating in the U.S. has pushed chip factories abroad, lured away by a combination of factors such as cheaper labor and larger subsidies. As a result, the U.S. share of global chip production has been in decline for decades: more than 35% of the world's chips were American-made in 1990. But now it only accounts for slightly more than 10% of the total.
The U.S. wants to start making more chips domestically to make it less dependent on other countries. Political leaders from both parties have proposed federal funding to encourage U.S. expansion plans.
The Senate back in June approved a package of more than $50 billion to promote new investments in U.S. chip factories and research and development as part of the CHIPS for America Act. However, the law has been stalled out in the House of Representatives for months. The semiconductor industry is also lobbying for a new 25% investment tax credit for U.S. factories and chip-making machinery as part of the FABS Act.
Made-in-the-USA Chips
The new factory will also give Samsung's growing foundry business more geographic diversity, which has become a priority for its competitors due to a tightening of geopolitical tensions around the world. The fab, which is also located roughly 200 miles from its U.S. headquarters in Plano, Texas, is expected to serve as a key location for Samsung's global chip-making capacity along with its latest production fab in South Korea.
The technology giant is following in the footsteps of other chip giants with zealous U.S. expansion plans.
TSMC, the world's largest contract chip foundry, last year chose Phoenix as the site of a fab scheduled to start production in 2024. TSMC's total spending on the project will be about $12 billion from 2021 to 2029. Intel has announced that it is spending $20 billion to build a series of chip fabs outside of Phoenix, Arizona. Intel is also seeking a U.S. location for a proposed "mega-fab" that could cost approximately $15 billion.
Samsung began operations in the U.S. more than three decades ago and employs 20,000 workers across the country. The new investment would bring Samsung's total spending in the U.S. to around $47 billion, the company said.
Samsung said that the plant would create more than 2,000 jobs directly and thousands of related jobs in construction and other areas.
