Samsung said it plans to build a $17 billion semiconductor factory outside Austin, Texas, amid a global shortage of chips used in phones, cars, and other electronic devices.

“This is the largest foreign direct investment in the state of Texas, ever,” Texas Gov. Greg Abbott said in announcing the project Tuesday.

Samsung said it will start building the Texas plant next year and hopes to begin operations in the second half of 2024. The South Korean electronics giant chose the site based on several factors, including government incentives and local infrastructure’s “readiness and stability,” said Samsung Vice Chairman Kinam Kim, speaking alongside the Republican governor.

The chip shortage has emerged as both a business obstacle and a serious US national-security concern. Short supplies of semiconductors kicked off by COVID-era shutdowns have hampered the production of new vehicles and electronic devices for more than a year. Further economic and national security questions are also at stake since many US companies are dependent on chips produced overseas, particularly in Taiwan, which China has long claimed as its territory.

“It’s a concentration risk, a geopolitical risk” to be so reliant on Taiwan for much of the world’s chip production, said Nina Turner, an analyst at IDC. She said the current shortages would likely subside, but there will be a long-term demand for chips as more everyday products rely on them.
Many chipmakers are spreading out their manufacturing operations, now concentrated in Asia, in response to the shortages, which have taken a toll on automakers and video game industry sectors.

“It makes sense for the supply chain to be a bit more diversified geographically,” said Angelo Zino, an analyst at CFRA. “You’re seeing some new foundry capacity plans being announced in the US as well as Europe.”

Zino said another factor is the expectation that Congress will approve federal subsidies for the semiconductor industry to build its factories in the US. It hopes it will bring jobs, lessen future supply concerns, and give the US more leverage over economic rivals like China has subsidized production.

In his comments Tuesday, Samsung’s Kim was effusive about Republican-led Texas and credited partnerships with President Joe Biden’s administration and congressional leaders from both parties. Abbott said the project would benefit from “multi-tiered” incentives at the federal, state, and local levels.

“Increasing domestic production of semiconductor chips is critical for our national and economic security,” said US Commerce Secretary Gina Raimondo in a written statement praising Samsung’s announcement.

Several chipmakers have signaled an interest in expanding their American operations if the US government can make it easier to build chip plants. Based in Boise, Idaho, Micron Technology said it would invest $150 billion globally over the next decade in developing its line of memory chips, with a potential US manufacturing expansion if tax credits can help make up for the higher costs of American manufacturing. Pat Gelsinger, the CEO of California-based chipmaker Intel, has urged the US to focus its semiconductor subsidies on American companies.

Intel earlier this year announced plans to invest $20 billion in two new factories in Arizona. Taiwan Semiconductor Manufacturing Co., or TSMC, has been building its plant in Arizona.

Samsung is the dominant player in the memory chips that are key to smartphones and other gadgets. Still, Zino said it’s also expanding its role on the “foundry side,” meaning the manufacture-for-hire of chips designed by other firms.

“My expectation is it’s going to be foundry-based in nature,” he said of the Texas plant. “It’s in line with their intent to triple their foundry capacity.”

Other countries have made similar pushes to get chips made closer to where they are used. The European Commission earlier in November said it could approve aid to fund the production of semiconductors in the 27-nation bloc.

Officials in Williamson County have been working for several months on a package of incentives that would bring Samsung’s plant to a rural track between the cities of Taylor and Hutto that would employ about 1,800 workers. Abbott said Tuesday it would get more than 2,000 jobs.

“Now it is mostly agricultural row crop and grazing,” said Russ Boles, the county commissioner whose precinct encompasses the site. “The place where they are looking at has great infrastructure. It has great electricity, it has ample water, and it has a good road system. Those nuts-and-bolts things are important to Samsung and the project.”

In Taylor, the school board had a meeting on 15 Nov. to approve an arrangement that would enable Samsung to save on taxes if it built a facility within the school district’s boundaries. That followed an earlier approval of tax incentives and infrastructure improvements from government officials in Williamson County, where Taylor is located. The site is about a 40-minute drive northeast of Austin.

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