Samsung Electronics plans to increase its semiconductor investment in Taylor, Texas, to US$44 billion, as reported by The Wall Street Journal (WSJ) on the April 5 (local time). Two years ago, Samsung announced a US$17 billion investment in the same area to build a state-of-the-art semiconductor manufacturing facility, or foundry, and the investment amount has been increased following negotiations with the U.S. government for subsidies. However, Samsung Electronics refused official confirmation on April 7, stating that “negotiations are still underway.”
According to the WSJ, Samsung Electronics has increased its semiconductor investment in the U.S. for three reasons. First, the cost of existing plans to build semiconductor manufacturing facilities has increased by billions of dollars in recent years due to steep rises in U.S. inflation and labor costs. Second, it is expected that building an additional manufacturing facility will cost over US$20 billion. Lastly, US$4 billion will be invested in advanced packaging processes that bundle main servers with Graphics Processing Units (GPUs) and DRAM.
According to the tax benefit application released by the Texas State Comptroller’s Office in 2022, Samsung Electronics is pursuing a medium to long-term plan to build 11 new semiconductor factories in Texas with an investment of US$200 billion over 20 years. WSJ cited sources saying that Samsung Electronics is scheduled to announce a US$44 billion investment plan in Taylor on April 15, which appears to be a confirmation of part of this medium to long-term investment plan.
Samsung Electronics’ decision is interpreted as a signal that it is entering into full competition with TSMC, Intel, and others in the artificial intelligence semiconductor market. The United States is the largest market with major AI semiconductor clients like Nvidia and ADM, but the U.S. share of the semiconductor market has dropped from 37% in 1990 to about 12% in 2020 due to high inflation, labor costs, and talent shortages. A 2020 report by Boston Consulting Group (BCG) stated that the cost of semiconductor production in the U.S. is 30% higher than in Taiwan and Korea. In this context, the U.S. government’s Semiconductor Act, which provides subsidies for semiconductor investment, has reduced the burden of production costs, and other companies have also made additional investments to increase contact with clients by competitively establishing manufacturing facilities in the U.S. mainland.
WSJ assessed Samsung Electronics’ massive investment as good news for the Biden administration ahead of the November presidential election. For this reason, foreign media anticipate that the U.S. government will respond with substantial support to Samsung Electronics. Bloomberg projected last month that Samsung Electronics would receive more than US$6 billion in subsidies from the Department of Commerce for semiconductor investments in the U.S. The WSJ also anticipated, “Though negotiations with the U.S. Department of Commerce are ongoing, Samsung Electronics is expected to be one of the companies receiving the largest subsidies as a single entity.”
