Samsung to secure $6 billion U.S. subsidy for Taylor plant and beyond

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Samsung to secure $6 billion U.S. subsidy for Taylor plant and beyond

Published: 15 Mar. 2024, 11:38 Updated: 17 Mar. 2024, 17:34

JIN EUN-SOO
jin.eunsoo@joongang.co.kr

Samsung Electronics' $17 billion chip plant in Taylor, Texas under construction. [SCREEN CAPTURE]

Samsung Electronics is poised to receive more than $6 billion in U.S. subsidies that will help the Korean chipmaker expand beyond its already announced project in Taylor, Texas, according to Bloomberg Friday, citing multiple unnamed sources.

As a non-American company, this represents the largest grant amount eligible for the U.S. CHIPS Act program.

In return, however, the Korean chipmaker is expected to make additional U.S. investments when the federal fund gets announced in the next couple of weeks along with grants for other chipmakers, the media outlet said.

The company has refrained from commenting on the issue.

Samsung faces the challenge of making a significant commitment to the United States, yet it is a necessary step to bridge the gap with market leader TSMC, according to industry experts.

"It would financially burden Samsung to make additional investments because the memory business, which used to be the cash cow, is struggling badly and the recovery expected this year might not be enough," said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.

"But it is also very important for Samsung at this point to expand its manufacturing capacity in the U.S. and attract more chip designing clients, which are mostly concentrated in the U.S."

The gap with TSMC in the contract manufacturing business widened in the fourth quarter of last year with the Taiwanese company grabbing 61.2 percent of the market share and Samsung taking 11.3 percent, according to market data.

Under the CHIPS Act, the U.S. government has set aside $39 billion as direct grants for chipmakers building their manufacturing lines on American soil, $28 billion of which is allocated for cutting-edge chips.

The Commerce Department said last month that chipmakers are requesting subsidies double the available fund, raising concerns that some applicants may not receive the full amount they seek.

"The fact that Samsung is getting the subsidies, perhaps even more than TSMC, shows that the U.S. has concluded that Samsung's technology and contributions are of help to the U.S.," Lee said.

Intel is reported to be receiving more than $10 billion, including grants and loans, for its accumulated $43.5 billion investment plan in new facilities and expansions in Arizona, Ohio and New Mexico.

TSMC has been reportedly allocated with $5 billion subsidy for its $40 billion investment for the construction of two fabrication plants in Arizona.

After commencing a $17 billion project in Taylor in 2021, Samsung Electronics submitted tax break applications for 11 additional chip plants in Texas, with a total investment of $192 billion over the next 20 years, which the Korean chipmaker described as part of a long-term plan that may never be realized.

"If Samsung should build more fabrication plants in the U.S., it should be in Texas due to the proximity with other plants which will be efficient in operations," an industry source said.

Samsung's Taylor plant, which was originally planned for the start of mass production by the end of this year, has been delayed to 2025, which observers say is partially due to stalled negotiations with the United States over subsidy distribution and the rise in construction costs.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]