(Bloomberg) -- Samsung Electronics Co. has decided to build an advanced U.S. chip plant in Texas, a win for the Biden administration as it prioritizes supply chain security and greater semiconductor capacity on American soil.
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South Korea’s largest company has decided on the city of Taylor, roughly 30 miles (48 kilometers) from its giant manufacturing hub in Austin, a person familiar with the matter said. Samsung and Texas officials will announce the decision Tuesday afternoon, according to people familiar with the matter, asking not to be identified because the news hasn’t been made public. A Samsung representative said it hadn’t made a final decision and declined further comment.
Samsung is hoping to win more American clients and narrow the gap with Taiwan Semiconductor Manufacturing Co. Its decision, which came months after de facto leader Jay Y. Lee was released from prison on parole, follows plans by TSMC and Intel Corp. to spend billions on cutting-edge facilities globally. The industry triumvirate is racing to meet a post-pandemic surge in demand that has stretched global capacity to the max, while anticipating more and more connected devices from cars to homes will require chips in future.
The new plant will augment Samsung’s already sizeable presence in Austin, where it’s invested about $17 billion to date on a sprawling complex that houses more than 3,000 employees and fabricates some of the country’s most sophisticated chips. Samsung is planning to invest another $17 billion and create about 1,800 jobs over the first 10 years, according to documents submitted to Taylor officials.
Korea’s Yonhap and the Wall Street Journal had reported earlier on Taylor’s selection.
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The Asian giant is taking advantage of a U.S. government effort to counter China’s rising economic prowess and lure home some of the advanced manufacturing that in past decades has gravitated toward Asia. That ambition crystallized after a global chip shortage hobbled the tech and auto industries, cost companies billions in lost revenue and forced plants to furlough workers, exposing U.S. vulnerability to diversified supply chains. In June, President Joe Biden laid out a sweeping effort to secure critical supply chains, including a proposed $52 billion to bolster domestic chipmaking.
His administration has repeatedly voiced the need to increase chip production in the U.S., saying that was the best way to compete with China and mitigate supply chain disruptions like the one stemming from Covid 19. Last month, the U.S. created an “early alert system” to detect Covid-related shocks. And it asked producers and consumers of semiconductors to complete a survey about inventories, demand, and delivery systems, to identify potential issues.
Recently, Intel’s troubles ramping up on technology and its potential reliance in the future on TSMC and Samsung for at least some of its chipmaking have underscored the extent to which Asian giants have pulled ahead in recent years. The administration discouraged Intel from pursuing plans to operate a factory in Chengdu, China to manufacture silicon wafers.
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The White House has also called on Democrats in the House of Representatives to pass a $52 billion bill known as the CHIPS Act, which would fund domestic semiconductor research and manufacturing. Administration officials have pointed to the bill when pressed about security concerns in Taiwan, the world’s foremost chip producer. Commerce Secretary Gina Raimondo said Congress should pass the legislation as “quickly as possible” when asked if the U.S needed a clearer defense strategy related to the island.
Samsung adds to a growing list of companies moving to or expanding in Texas. In the last year, electric carmaker Tesla Inc. said it would move headquarters to the state, as did Oracle Corp. and Hewlett Packard Enterprise Co. Samsung’s move would be a win for Texas Republican governor Greg Abbott, who has long touted the Lone Star state’s business-friendly tax policies and is gearing up for a re-election battle next year.
The local government pulled out the stops to snag Samsung, including waiving 90% of property taxes for a decade, and 85% for the following 10 years. Abbott is scheduled to make a statement about the state’s economy at 5 p.m. local time Tuesday.
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Samsung itself has been accelerating investment activity since Lee was released from jail, where he was serving time for corruption. It unveiled a commitment to bolster South Korea’s economy by spending 240 trillion won ($205 billion) and expand hiring to 40,000 people over the next three years.
It’s going head-to-head in Intel’s backyard with TSMC, which is on track to start production on its own $12 billion chip plant in Arizona by 2024. Samsung is trying to catch TSMC in the so-called foundry business of making chips for the world’s corporations -- a particularly pivotal capability given a deepening shortage of semiconductors in recent months.
Samsung’s envisioned U.S. foundry will adopt ASML Holding NV’s extreme ultraviolet lithography equipment. The company, which has struggled with poor yields on advanced chip processes for years, has been improving and accelerating its capacity expansion at home. It aims to mass-produce 3-nanometer chips via so-called Gate All Around technology around 2022, employing what some regard as game-changing technology that can more precisely control current flows across channels, shrink chip areas and lower power consumption. Rival Intel has pledged to retake its industry lead by 2025.
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