US grants Samsung $6.4 billion to boost local chip production

The US has committed $6.4 billion in grants to help Samsung expand its semiconductor manufacturing facilities in Texas in a bid to strengthen America’s position in chip production.

The funding, under the CHIPS and Science Act, will construct a comprehensive semiconductor manufacturing ecosystem in Taylor and expand an existing facility in Austin, the Department of Commerce said in a statement.

Samsung is expected to invest more than $40 billion in the region in the coming years, which could create over 20,000 jobs.

“Because of investments like Samsung’s, the United States is projected to be on track to produce roughly 20 percent of the world’s leading-edge logic chips by 2030,” the statement said.

The announcement follows an $8.5 billion grant given to Intel and $6.6 billion to Taiwan’s TSMC earlier this year to boost local production. Adding Samsung to the cohort could help support the supply chains of local tech firms.

“Samsung’s expanded chip production in the US is set to bolster the supply chains of US tech firms, particularly in aerospace, defense, automotive, and other industries,” said Charlie Dai, VP and principal analyst at Forrester. “This move will enhance supply chain resilience against global disruptions, improve security through closer collaboration with defense contractors, and reduce costs and shipping times.”

Danish Faruqui, CEO of Fab Economics, pointed out that although the direct funding grant awarded to Samsung is lower than those awarded to Intel and TSMC, it is the largest relative to the size of the company’s promised investment. TSMC’s investment is expected to exceed $65 billion. Intel anticipates its investments will surpass $100 billion over the next five years.

Investing in two separate locations

The proposed investment to Samsung is planned for two separate locations in Central Texas.

In Taylor, the funds will help establish a comprehensive, advanced manufacturing ecosystem. This will include two advanced logic foundry fabs dedicated to the mass production of 4nm and 2nm process technologies, an R&D fab for the development of future technology generations, and an advanced packaging facility focused on 3D High Bandwidth Memory and 2.5D packaging, both critical for AI applications.

In Austin, the investment will expand existing facilities to enhance the production of fully depleted silicon-on-insulator (FD-SOI) process technologies. This expansion aims to support crucial US industries, including aerospace, defense, and automotive, by upgrading their technological capabilities and innovation potential.

Challenges to overcome

While analysts agree that this move could potentially stimulate the domestic tech industry, becoming a leader in chip manufacturing may not be easy for the US.

Faruqui said that a significant challenge is the non-competitive Fab/ATP site-level Total Cost of Ownership (TCO), which aggregates all Capex and Opex cost structures for each year of construction and high-volume operation.

This becomes a crucial point as US faces stiff competition from Asian countries who have, for long, held a monopoly in advanced chip manufacturing.

“Challenges may arise in competing with Asian manufacturers, who have established cost advantages and a mature ecosystem for semiconductor manufacturing,” Dai said. “The US will need to address these challenges by focusing on developing a skilled workforce and offering competitive incentives to ensure the sustainability and growth of its domestic tech sector.”