Samsung Electronics Co. plans to build a $17 billion semiconductor factory in Central Texas, a massive investment against the backdrop of a global chip shortage that has tripped up industries as varied as toy manufacturers and automakers.
Samsung is one of the world’s largest makers of electronic devices, as well as the tiny semiconductors that power them. The Texas plant would produce advanced chips for the company’s contract manufacturing, or foundry, operations.
It is the latest chipmaker to deepen its U.S. investments at a time when manufacturers are desperate to increase output and policymakers are eager to incentivize that growth. The White House and Congress have both attached new urgency to fostering domestic chip production.
In March, Intel announced it would spend an estimated $20 billion on a pair of new factories in Arizona. In June, Taiwan Semiconductor Manufacturing Co. broke ground on an Arizona facility with a projected $12 billion price tag. And Texas Instruments recently announced plans for new semiconductor plants in Sherman, Tex., part of an estimated $30 billion investment.
Samsung, which already has a sizable presence in nearby Austin, has been in discussions with local officials about a possible chip factory in Taylor, a small town in Williamson County. Documents made public by the county show that the company would expect to spend $6 billion on buildings and $11 billion on machinery and equipment for a 6-million-square-foot facility.
For Samsung, it aligns with broader efforts to build out its chipmaking capabilities. During a recent call with investors, one executive said the company expects to “set new records for results by maximizing supply” for several of its specialized chips in the fourth quarter.
The company also expects its chip production capacity — which already is 80 percent higher than it was in 2017 — to triple by 2026.
“Currently we are going through unprecedented investments in both infrastructure and equipment with the aim of securing a sufficient mass production capacity to satisfy the customers’ needs as much as possible,” the Samsung executive said.
According to Williamson County, the project will create about 1,800 positions at the plant and as many as 10,000 construction jobs. Meanwhile, 90 percent of Samsung’s property taxes will be waived for 10 years if it meets certain hiring and investment targets, according to the county’s website.
The rush of projects comes as numerous industries are clamoring for chips. Computer sales increased significantly as the pandemic sparked a significant increase in remote work and school, according to a September report by the Semiconductor Industry Association.
Automakers can’t get enough chips to meet their vehicle production goals. In recent months, both General Motors and Ford Motor Co. have scaled back their production targets because of the issue. Ford, taking matters into its own hands, just announced a collaboration with GlobalFoundries to research and develop new chips to power its electric vehicles, autonomous driving systems and other future technologies.
The chip shortage has come at a steep price for the world’s automakers, which will produce 7.7 million fewer vehicles this year and miss out on $210 billion in revenue, according to consulting firm AlixPartners.
The coronavirus pandemic continues to weigh on the industry. In recent months, rising infection rates in Malaysia, Vietnam and the Philippines have caused production delays at factories that cut and package semiconductors.
Meanwhile, the global chip supply is expected to remain tight in 2022, a Samsung executive told investors, as the world embraces 5G mobile technology.
U.S. policymakers want to remedy the issue with more domestic production. About 75 percent of the world’s semiconductor manufacturing capacity resides in Asia, according to the Semiconductor Industry Association.
President Biden has called for new subsidies and tax credits designed to expand chip production in the United States, and his administration has sought to boost the domestic industry through new domestic sourcing rules. The Senate has approved legislation that allocates more than $50 billion in funding for U.S. chipmakers, but the measure still has not cleared the House.
The recent investments by chipmakers won’t fix the shortage for quite some time, analysts say, because building out the complex manufacturing facilities used to produce semiconductors takes years. Samsung’s agreement with local officials in Texas, for example, says the company must complete production by January 2026.