Samsung Electronics on Thursday, October 28, 2021 reported its highest quarterly profit in three years as it continued to see strong global demand for its computer memory chips.
Lee Jin-man / AP
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Lee Jin-man / AP
Samsung Electronics on Thursday, October 28, 2021 reported its highest quarterly profit in three years as it continued to see strong global demand for its computer memory chips.
Lee Jin-man / AP
Samsung said it plans to build a $17 billion semiconductor factory outside Austin, Texas, amid a global shortage of chips used in phones, cars and other electronic devices. .
“This is the largest foreign direct investment ever in the state of Texas,” Texas Governor Greg Abbott said when announcing the project Tuesday.
Samsung said it will begin construction of the plant in Texas next year and hopes to begin operations in the second half of 2024. The South Korean electronics giant chose the location based on a number of factors, including government incentives and local “readiness and stability”. Samsung Vice Chairman Kinam Kim said while speaking with the Republican governor.
Chip shortages have emerged as both a business obstacle and a serious national security concern for the United States. Shortages of semiconductor supplies due to the COVID era shutdown have hampered the production of new vehicles and electronics for more than a year. New economic and national security questions are also being raised as many American companies are reliant on chips made abroad, especially in Taiwan, where China has long claimed to be the its own territory.
“It’s a concentration risk, a geopolitical risk” of depending on Taiwan to make most of the world’s chips, said Nina Turner, a research analyst at IDC. She said the current shortage is likely to subside but there will be long-term demand for chips as more and more everyday products rely on them.
Many chipmakers are expanding their production operations in response to shortages, which have taken a toll on sectors from carmakers to the video game industry.
“It makes sense for the supply chain to be a little more geographically diverse,” said Angelo Zino, an analyst at CFRA. “You’re clearly seeing some new foundry capacity plans being announced in the US as well as Europe.”
Another factor, Zino said, is the expectation that Congress will pass federal subsidies for the semiconductor industry to build factories in the US, in the hope it will bring jobs, alleviating concerns. about future supply and gives the US more leverage against economic rivals like China.
Earlier, Samsung said it was exploring locations in Texas, Arizona and New York to find a new US chip factory. It has had a chip factory in Austin, Texas, since the late 1990s. But most of its manufacturing centers are in Asia.
Samsung said it expects to spend $17 billion on the Texas project, which will become 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.
According to the Semiconductor Industry Association, a trade group, the United States’ share of the worldwide chip manufacturing market has fallen from 37% in 1990 to 12% today. The Biden administration has pushed Congress to pass the $52 billion CHIPS Act to boost computer chip production and research. Separate legislation is also being considered that would create a new tax credit for investments in semiconductor manufacturing facilities.
Samsung’s Mr. Kim vented his frustrations about the Republican-led state of Texas in comments Tuesday but also noted the partnership with the Biden administration and congressional leaders of both parties. Abbott said the project would benefit from “multi-tiered” incentives at the federal, state and local levels.
“Increasing domestic semiconductor chip production is critical to our national security and our economy,” Commerce Secretary Gina Raimondo said in a statement. statement praising Samsung’s announcement.
Some chipmakers have signaled interest in expanding their operations in the US if the US government can make it easier to build chip factories. Micron Technology, based in Boise, Idaho, said it will invest $150 billion globally over the next decade in memory chip development, with the possibility of expanding production in the US if the tax credits are available. could help offset higher US production costs. Pat Gelsinger, CEO of California-based chipmaker Intel, has urged the US to focus semiconductor subsidies on American companies.
Earlier this year, Intel announced plans to invest $20 billion in two new plants in Arizona. Taiwan Semiconductor Manufacturing Company, or TSMC, has been building its own factory in Arizona.
Samsung is the dominant player in the market for memory chips vital to smartphones and other devices, but Zino said it is also expanding its role in “foundries,” meaning rental manufacturing. chips designed by other companies.
“My expectation was that it would be made from a foundry in the wild,” he said of the Texas factory. “It aligns with their intention to triple their foundry capacity.”
Other countries have also made similar efforts to bring manufactured chips closer to where they are used. In early November, the European Commission said it could approve aid to finance semiconductor production in the 27-nation bloc.
Williamson County officials have been working for several months on a package of incentives that would bring Samsung’s factory to the countryside between the cities of Taylor and Hutto, which would employ about 1,800 workers. Abbott said Tuesday that it will bring in more than 2,000 jobs.
“Now it’s mostly agricultural crops and livestock grazing,” said Russ Boles, the county commissioner whose area surrounds the site. “The place they’re looking at has great infrastructure. It has great electricity, it has great water, and it has a good road system. Those wonders are very important to Samsung and the project.”
The school board in Taylor had a meeting on November 15 to pass an agreement that would allow Samsung to save on taxes if it built a facility within the district’s boundaries. That follows earlier approval of tax incentives and infrastructure improvements from government officials in Williamson County, where Taylor is based. The site is about a 40-minute drive northeast of Austin.
