Canadian Manufacturing

Samsung plans to build a $17B semiconductor factory in Texas

The U.S. share of the worldwide chip manufacturing market has declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association.

November 24, 2021  by Associated Press

Samsung said it plans to build a $17 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 Gov. Greg Abbott said in announcing the project on Nov. 23.

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 U.S. 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 U.S. companies are dependent on chips produced overseas, particularly in Taiwan, which China has long claimed as its own territory.

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“It’s a concentration risk, a geopolitical risk” to be so reliant on Taiwan for much of the world’s chip production, said Nina Turner, a research analyst at IDC. 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.

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 Angelo Zino, an analyst at CFRA. “You’re clearly seeing some new foundry capacity plans being announced in the U.S. 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 U.S., in the hopes it will bring jobs, lessen future supply concerns and give the U.S. 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 U.S. chip plant. It has had a chip fabrication plant 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 make it the company’s largest investment in the U.S. 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 U.S. share of the worldwide chip manufacturing market has declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association, a trade group. The Biden administration has been pushing for Congress to pass the $52 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.