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Semiconductors

Samsung’s $17 billion new chip plant in Taylor aims to rein in TSMC

The bold move comes as Samsung faces an uphill battle in the increasingly competitive foundry market

By Nov 24, 2021 (Gmt+09:00)

Texas Governor Greg Abbott (left) and Samsung Vice Chairman Kim Ki-nam announce the  billion plant deal
Texas Governor Greg Abbott (left) and Samsung Vice Chairman Kim Ki-nam announce the $17 billion plant deal

Samsung Electronics Co. has officially announced its plan to build a $17 billion chipmaking plant in Taylor, Texas, as the tech giant aims to overtake bigger foundry rival TSMC in one of the world’s biggest semiconductor markets.

The South Korean company on Wednesday confirmed that the site of its much-touted next US chip plant will be Taylor, a town in Williamson County, about 25 km from Austin, where its current contract-manufacturing operations are located.

The $17 billion spending, including buildings, property improvements, machinery and equipment, marks the largest-ever investment by Samsung in the US and brings its total US investment to over $47 billion since it began operations there in 1978.

“As we add a new facility in Taylor, Samsung is laying the groundwork for another important chapter in our future,” said Kim Ki-nam, vice chairman and CEO of Samsung’s device solutions division.

“With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply chain.”

At a press conference held to announce the investment, Texas Gov. Greg Abbott said he expects to expand the Lone Star State's partnership with Samsung to keep the state a “leader in advanced technology and a dynamic economic powerhouse.”

Samsung's foundry plant in Austin, Texas
Samsung's foundry plant in Austin, Texas

MASS PRODUCTION IN 2024 WITH ADVANCED PROCESS NODE

Construction of the Taylor plant will begin in the first half of next year, with an aim to have the facility operational before the end of 2024, according to Samsung.

Samsung said the new factory is expected to create over 2,000 high-tech jobs, and thousands more once it is fully operational.

Before landing on Taylor, Samsung previously scouted several other locations in other states, including Arizona, New York and Florida, but chose Taylor because of its geographical proximity to its Austin plant and favorable tax benefits offered by the Texas city.

Taylor had offered Samsung incentives that include property tax breaks of up to 92.5% for the first 10 years.

The new contract-manufacturing, or foundry, plant will make advanced logic chips designed by other firms for use in 5G, high-performance computing and artificial intelligence applications.

Industry officials said its equipment at the new factory will adopt advanced 5-nanometer or below process node.

Samsung's Austin plant
Samsung's Austin plant

FIERCE RIVALRY WITH TSMC

The world’s two largest foundry chipmakers, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics, have been upping the ante in their quest for global leadership by aggressively expanding facilities in the US.

TSMC is building a new $12 billion chip plant in Arizona, which is expected to come online in 2024. It plans to spend more than $100 billion in the next three years on chip plants.

Samsung is the world’s largest memory chipmaker by revenue, but in the foundry sector, it lags far behind TSMC.

The Taiwanese company, which counts Apple Inc. and Advanced Micro Devices Inc. (AMD) among its major customers, controls 52.9% of the global foundry market as of the second quarter, according to market tracker TrendForce. Samsung is a distant second with a market share of 17.3%.

Samsung unveiled its Vision 2030 in 2019 with a plan to invest a total of 133 trillion won ($112 billion) to become the world’s top foundry player by that year.

The rivalry between TSMC and Samsung also comes as the US has been trying to boost its domestic chip production to counter China’s rising influence.

As part of such efforts, Intel Corp. in March announced a $20 billion investment plan to build two new chip manufacturing factories in Arizona and jump into the foundry business.

Samsung Vice Chairman Jay Y. Lee returns from his US trip
Samsung Vice Chairman Jay Y. Lee returns from his US trip

SAMSUNG’S DE FACTO LEADER

Samsung’s bold $17 billion investment decision came while the top South Korean conglomerate’s vice chairman and de facto leader was on a business trip to Canada and the US.

During his US stay, Lee Jae-yong, widely known in international business circles by his English name Jay Y. Lee, met with White House officials and lawmakers as well as business partners, including Microsoft CEO Satya Nadella and Moderna Chairman Noubar Afeyan.

Lee’s latest North American trip marks his first international trip since his release on parole in August. He was sentenced to two-and-a-half years in prison in January during a retrial of a bribery case involving former President Park Geun-hye.

Lee, who returned from his US trip on Wednesday, said at the Gimpo International Airport that he has a “heavy heart” to see the heated competition and harsh realities of the global chip market.

Write to Shin-Young Park at nyusos@hankyung.com

In-Soo Nam edited this article.

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