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Samsung’s $17 billion chip factory is triggering a three-place competition in the United States

Posted by: Yoyokuo 2022-07-28 Comments Off on Samsung’s $17 billion chip factory is triggering a three-place competition in the United States

Samsung’s potential $17 billion chip fab would make for a historic investment in the tech giant’s city of choice.

When Samsung first announced plans for its factories in January, three regions, including Phoenix, Austin and Western New York, were identified as potential sites for its newest production facility. They also considered South Korea, where Samsung Electronics Co., Ltd. is based.

It was one of the largest foreign investments in U.S. history and could create at least 1,800 jobs, according to Samsung’s January filing in the Austin area. Samsung is expected to make a decision this summer, and the company could even buy land in Arizona at an auction scheduled for late April, possibly starting construction later this year and starting operations in mid-2023.

At its next factory, the company’s new product line, Samsung reportedly wants to make smaller three-nanometer chips that can be used in electronics, aerospace and defense applications. Bloomberg reported in January that the investment could win the company more U.S. customers and better compete with industry leader Taiwan semiconductor Manufacturing Co.

While the new Samsung factory won’t address the current global chip shortage, it fits in with President Joe Biden’s administration’s push to boost domestic semiconductor production.

Samsung has 20,000 employees in 46 U.S. states. It has built a large factory in Austin with two fabs, or fabs, that make semiconductors and employs about 3,000 people, plus thousands of contractors. The company does not have any existing plants in upstate New York, but has two Samsung Electronics U.S. operations in the New York City area. Samsung does not have any existing facilities in Arizona.

This is how the investment is broken down. About $11.4 billion will go to equipment and machinery, while building the 7 million-square-foot facility will cost about $5.6 billion, according to an incentive application in Texas.

Each of the three states has its own way of pursuing important economic development deals, and each has its pros and cons that could push Samsung into its market. Samsung identified the following important criteria for site selection: access to talent, existing semiconductor manufacturing ecosystem, accelerated time-to-market, and strong public-private partnerships.

New York Managing Director and Head of Venue Selection and Incentive Services Tom? “One of the most important things in venue selection is understanding the workforce,” said Tom Stringer, director of the site. “Others like buildings, real estate, taxes and incentives are all costs of acquiring that talent. It’s cost and availability. And how do you get the balancing act of the workforce. That doesn’t mean most incentives win, no doubt. In fact, that’s pretty rare.”

Samsung executives have been mum about the process.

“While we currently have no concrete plans to build a new fab, we are constantly exploring various business development opportunities to be prepared when such opportunities arise,” said Michele Glaze, director of communications at Samsung Austin Semiconductor.

Before making a multi-billion-dollar decision and awarding any big incentives, the Phoenix, Austin and Buffalo Business Journal looked at the pros and cons of sites seen as Samsung’s leaders and asked experts to search for balance in.


Arizona sources point to 1,100 acres in Goodyear, a suburb west of Phoenix, and 915 acres in Queen Creek, southeast of Phoenix, as possible options for Samsung in the area. The two sites, which are managed by the Arizona Department of Land, are scheduled to be auctioned on April 21. The lowest bid at the Goodyear site was $127.7 million and the lowest bid at the Queen Creek site was $86.13 million.

The two sites were recently rezoned to allow employment.

When courting Nike for a manufacturing plant that never opened but was projected to create 500 jobs, the City of Goodyear offered $3,923 in reimbursement per eligible employee. If the same formula were applied, Samsung’s workforce of 1,800 would be eligible for the $7.06 million in job incentives created by the city.

Goodyear is also proposing to waive Nike’s 75% unexpedited program review and licensing fee and 100% of its expedited program review fee.

The city has also designated the site as a foreign trade zone, which provides property tax benefits by reducing the assessment of real and personal property taxes from 18 percent to 5 percent.

The Queen Creek location is also designated as a foreign trade zone and has the same property tax benefits as the Goodyear location.

Municipal incentives will be offered in addition to Arizona incentives. The Arizona Commerce Authority, which oversees the state’s business incentives, offers a variety of credits and funds to help close the deal.

The Arizona Quality Jobs Tax Credit provides up to $9,000 in income or premium tax credits for each new quality job created over three years. In Samsung’s case, the company will create 1,800 jobs to qualify for $16.2 million in revenue. The Arizona qualifying facility tax credit is generally the lesser of 10% of the facility’s qualifying capital investment or $20,000 net of each new full-time job. The smaller of the two, which is $20,000 per full-time job Samsung will create, will generate $36 million.

ACA’s discretionary completion-traded fund, the Arizona Competes Fund, is more flexible in size. The largest grant to date from the Arizona Competitive Fund is $5 million, but Samsung’s capital investment will be multiplied by any previous grant recipient. Information on a grant from TSMC’s planned $35 billion Arizona Competes Fund in Phoenix has not been released.

“The business climate is very good across Arizona,” said Jay Garner, president and founder of Garner Economics and founding member of the Site Selector Association, who was not involved in the Samsung deal.

Semiconductor manufacturing in the Phoenix area has grown exponentially over the past year. TSMC bought 1,128 acres in North Phoenix in December and plans to build a factory that sources confirmed to be worth about $35 billion. Intel Corp., which already has an extensive presence in the region, announced plans to invest $20 billion to increase production capacity at its campus in Chandler, a suburb east of Phoenix.

The concentration of semiconductor manufacturing in Phoenix can be both a benefit and a deterrent to Samsung, depending on how close it wants to be with its competitors, Garner said.

“I’ve worked with companies saying ‘I don’t want to work in the same community as a competitor’ because they might be competing for labor, or they’d be concerned about trade secrets if an employee leaves, but someone said where there’s already an industry cluster, It’s good for them,” Garner said, noting why tech companies like Silicon Valley are choosing clusters…

Texas and Arizona will be the two biggest competitors in terms of labor availability and cost, Garner said. He said companies such as Samsung will closely investigate the aftermath of a recent winter storm that powered power outages across much of Texas, but could also conclude that such a storm is unlikely to recur.

“At the end of the day, Arizona and Phoenix are in a competitive and strong position,” he said.


Earlier this year, discussions about a possible visit to a Samsung factory in Austin have turned silent in recent months.

Samsung’s name or any known projects at the chip factory — codenamed Silicon Silver, Project Spring and Project Ajax — have not been on the agenda of any local government.

Manufacturing experts speculate that a winter storm in February that will shut Samsung’s Austin Semiconductor LLC factory for more than a month could weigh heavily on Samsung executives. Austin Energy’s decision to shut down Samsung’s power during the storm could cost the company hundreds of millions of dollars, experts say.

The Wall Street Journal reported in January that Samsung may also be looking for a place to land in the city of Taylor, a quiet suburb of Williamson County northeast of Austin, with Taylor city council documents citing “Project Spring” (codenamed “Project Spring”). Also used in Phoenix).

Officials with the City of Taylor, the Taylor Chamber of Commerce and the Taylor Economic Development Corporation declined to comment or did not respond to requests for comment.

Taylor Independent School District officials said in an April 8 email that they had not had any conversations with Samsung about potential incentives and did not respond to inquiries about whether the company was looking in the district. If Samsung did choose the Taylor Country area, the company would have a lot of land.

In Austin, Samsung Austin Semiconductor last year purchased more than 250 acres around its existing campus, which company officials said was for strategic planning purposes.

Samsung has been producing semiconductors in Austin since 1997 and has expanded its factory several times since. Over the years, it has secured or approved about $380 million in economic incentives between local tax breaks and state governments, more than any other company in the Austin area, according to research in the Austin Business Journal. need more.

“Austin has given Samsung nearly 25 years of success. They have an economic development agreement with New York City, grown their business, partnered with local schools, and have been a good partner to the community,” said President and President of the Greater Austin Chamber of Commerce. CEO Laura Huffman said. “It’s a long time to build successful working relationships in the community when you consider an investment of the scale they’re considering.”

Incentives play a big role in Samsung’s analysis, as evident from the Chapter 313 petition filed with the Manor Independent School District in January, especially since Texas has higher property taxes.

Overall, the company may be looking at incentives worth more than $1 billion, including property tax breaks for the city of Austin, Travis County and Manor ISD.

Taylor and Williamson County officials could make the same request if Samsung goes after the area. Funding from the state’s pending deal, the Texas Enterprise Fund, could also play a role.

There have been no public talks with any of these government agencies. The details of any potential incentives can easily be changed.

Stringer said Samsung’s long history in central Texas is good for the market.

“Having market experience with existing facilities gives companies making these kinds of investments some certainty,” he said. “So to speak, they know where they’re going and have a lot of certainty in their investment decisions. important.”

But the same goes for Arizona, Stringer said: “If you look at how Arizona has grown over the past five-plus years, in terms of attracting new industries and making strategic investments … they’ve proven it, and if you will, Can attest to their recent achievements. The success over the past six-plus years has been truly astounding.”

Ed Latson, executive director of the Austin Area Manufacturers Association, previously told the ABJ that Samsung’s potential investment is critical to Austin’s semiconductor industry, which it has shaped for more than two decades.

“This reinvestment will put us at the forefront of chip-making technology for the next 25 years,” Ratson said. “And, if they don’t invest, then we’ll gradually become obsolete.”

New York

In Genesee County, east of Buffalo, they are currently working on one of the largest state and local stimulus packages to woo Samsung’s proposed $17 billion factory.

The program is expected to provide subsidies that include tax breaks, job-creation grants, hydropower construction, and long-term fixed discount rates for projects such as low-cost hydropower and water, amounting to about $900 million.

A 1,250-acre science and technology advanced manufacturing campus on Route 63 in town, Alabama, is one location Samsung is considering.

“New York is doing its best,” said former Lieutenant Governor Robert Duffy, president and CEO of the Rochester Chamber of Commerce. “It’s clear that they have won this race.”

The stimulus package is 20 percent higher than the price New York offered Tesla for the $750 million it offered for its South Buffalo solar panel production plant. The proposed Samsung factory will be 7 million square feet, seven times larger than the Tesla factory.

Regional incentives, including approximately $100 million in grants and loans from Empire State Development Corporation, and pledged contributions for job creation, will be negotiated to ensure minimum requirements are met. A big part of the plan is to lock in electricity and water rates for a long time. A chip factory can consume up to 10 million gallons of water a day, depending on its production schedule.

Greg? “In terms of incentives, there are very few states that offer something like New York,” said Gregg Wassmansdorf.

Samsung’s selection of Genesee County “would be one of the greatest economic development wins in Western New York’s history,” Duffy said. “It’s going to be a good option for morale in the region.”

In addition to the incentives, Senate Majority Leader Sen. Charles Schumer is lobbying Samsung executives on behalf of STAMP. Schumer’s role should not be underestimated, Duffy said.

“When you’re lobbying on behalf of the most powerful people in Washington, that can be a real trump card that Austin and Phoenix don’t have,” Duffy said.

Schumer has been discussing the STAMP website with Samsung officials since last summer. These negotiations are continuing.

“The STAMP campus is designed for large (chip) factories, providing maximum flexibility in layout and infrastructure connectivity,” Schumer said.

While both Austin and Phoenix already have well-established ecosystems of semiconductor and chip fabs, the Genesee County facility will be the first major investment in these industries in Western New York. The Albany area has established a well-established semiconductor ecosystem.

“Sometimes companies like to be pioneers, and they can chart their own course,” Wassmansdorf said.

Stringer said the main selling point for Genesse County is the cost of utilities and infrastructure.

“New York’s advantage will be extremely low cost, which is probably the cheapest in the group, and New York will offer the biggest incentives to date,” Stringer said.

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