US grants Samsung up to US$6.4 billion in funding to produce advanced chips in Texas

The award is the latest from the Biden administration, as the US looks to cement its global lead in creating advanced semiconductors
Samsung will not only build a new facility to produce advanced chips, but also expand its existing plant in Texas

Semiconductors

Agence France-Presse

Published: 9:20pm, 15 Apr 2024

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The United States announced on Monday grants of up to US$6.4 billion to South Korean semiconductor giant Samsung Electronics to produce cutting-edge chips in Texas.

The award is the latest from the US government as it looks to cement its lead in the semiconductor industry – especially for chips needed for the development of artificial intelligence (AI) – both on national security grounds and also in the face of competition with China.

President Joe Biden’s administration has previously approved billions in grants to US titan Intel and Taiwan Semiconductor Manufacturing Co (TSMC), as the US tries to avoid the prospect of shortages of semiconductors.

“The US Department of Commerce and Samsung Electronics have signed a non-binding preliminary memorandum of terms to provide up to $6.4 billion in direct funding under the Chips and Science Act,” said a statement published by the Commerce Department.

A general view of Samsung Electronics’ semiconductor plant under construction in Taylor, Texas, on January 2, 2024. Photo: EPA-EFE

Samsung, which is the world’s largest maker of memory chips and smartphones, “is expected to invest more than US$40 billion in the region in the coming years, and the proposed investment would support the creation of over 20,000 jobs”, the agency said.

In the modern global economy, advanced semiconductors are crucial in powering everything from smartphones to fighter jets.

These integrated circuits are also increasingly in demand by the automotive industry, especially by electric vehicle makers, adding to the pressure to raise production.

The global chip industry is currently dominated by just a few companies, including TSMC and US-based Nvidia.

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That means the US is highly dependent on Asia for chips and is vulnerable to shocks to semiconductor supply chains, especially during geopolitical crises that affect places such as Taiwan.

This has fuelled a US push to strengthen production.

The Chips and Science Act, passed in 2022, calls for tens of billions of dollars in funding to overhaul the US semiconductor industry, with the idea that making public money available for this purpose will lure private investment.

The Samsung agreement will “cement central Texas’ role as a state-of-the-art semiconductor ecosystem”, Biden said in a statement.

“These facilities will support the production of some of the most powerful chips in the world, which are essential to advanced technologies like artificial intelligence and will bolster US national security.”

South Korean chip maker Samsung Electronics’ 1-terabyte solid state drive seen in Seoul, South Korea, on April 5, 2023. Photo: Bloomberg

Under the latest agreement, Samsung will not only build a new facility to produce advanced chips, but also expand its existing plant in Texas, according to the Commerce Department.

“We’re not just expanding production facilities; we’re strengthening the local semiconductor ecosystem and positioning the US as a global semiconductor manufacturing destination,” Samsung chief executive Kyung Kye-hyun said in the Commerce Department statement.

US officials revealed this month that a preliminary agreement with TSMC would see the company receive up to US$6.6 billion in direct funding and up to another US$5 billion in loans under the Chips and Science Act.

In March, Biden unveiled almost US$20 billion in grants and loans for Intel’s domestic chip-making plants, his administration’s biggest investment yet in the sector.

United States Commerce Secretary Gina Raimondo attends an event in Bangkok, Thailand, on March 13, 2024. Photo: AP

The US has also awarded funding to GlobalFoundries, BAE Systems Electronic Systems and Microchip Technology under the 2022 law.

In February, Commerce Secretary Gina Raimondo expressed confidence that the United States could house the entire silicon supply chain for making advanced chips.

“The brutal fact is, the United States cannot lead the world as a technology and innovation leader on such a shaky foundation,” she said during a speech in Washington.

“We need to make these chips in America.”