The U.S. government announced on Monday that it plans to give South Korean electronics company Samsung a $6.4 billion subsidy to build new computer chip facilities in Texas.
The Department of Commerce said a preliminary agreement was reached with Samsung, in which the tech giant will invest $40 billion of its own money to upgrade a Taylor, Texas chip factory that is already under construction and build a second facility with a research and development center there by the end of the decade.
Part of the deal is also an “advanced packaging” facility that Samsung will build to combine chips and components to power cars, planes, phones, and other devices.
A press release from the Commerce Department said that the deal would create more than 20,000 new jobs.
The grant to Samsung is part of the $39 billion provided by the 2022 Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act to encourage more chip production inside the U.S. About $23 billion has been dispersed so far.
Another $6.6 billion was given last week to Taiwan Semiconductor Manufacturing Co. (TSMC) to expand its operations in Arizona.
“The whole chain, R&D to packaging, is concentrated in a couple of Asian locations and that leaves the U.S. supply chain incredibly vulnerable to disruption. That’s untenable,” Commerce Secretary Gina Raimondo said in a call with reporters before the announcement. “We are now making these investments which will allow the United States to once again lead the world.”
About 20 percent of the world’s leading-edge logic chips could be made in the U.S. by 2030 under deals like the ones with Samsung and TSMC.
“I signed the CHIPS and Science Act to restore U.S. leadership in semiconductor manufacturing and ensure America’s consumers, businesses, and military maintain access to the chips that underpin our modern technology,” President Joe Biden said of the deal. “This announcement will unleash over $40 billion in investment from Samsung, and cement central Texas’s role as a state-of-the-art semiconductor ecosystem, creating at least 21,500 jobs and leveraging up to $40 million in CHIPS funding to train and develop the local workforce.”
There has been concern in the U.S. that having most of the world’s advanced chip production in Taiwan could be a problem if China attempts to exert more control on the tiny island nation.
“Thanks to President Biden’s CHIPS Act, Samsung is expected to invest more than $40 billion to build a cluster of semiconductor factories here in the U.S. that will employ thousands of workers in good-paying jobs, support a robust supplier ecosystem, and fuel innovation through R&D,” Raimondo said. “Proposed CHIPS investments like the ones we are announcing today will be a catalyst for continued private sector investments to help secure the long-term stability we need to put America at the beginning of our semiconductor supply chain and to safeguard a strong resilient ecosystem here at home.”
“We’re not just expanding production facilities; we’re strengthening the local semiconductor ecosystem and positioning the U.S. as a global semiconductor manufacturing destination,” President and CEO of the Device Solutions (DS) Division at Samsung Electronics Kye Hyun Kyung said. “To meet the expected surge in demand from U.S. customers, for future products like AI chips, our fabs will be equipped for cutting-edge process technologies and help advance the security of the U.S. semiconductor supply chain.”
With the move of some tech companies out of California’s Silicon Valley due to the high cost of living and doing business there, Texas has become a secondary hub for tech company activity.
Texas does not have a state income tax, and state taxes on businesses are less than 1 percent of revenue. California has a graduated income tax that lands at 6 percent for most taxpayers, and businesses are taxed at almost 9 percent.