Samsung Electronics Co. plans to build a roughly $17 billion chip-making plant in Taylor, Texas, according to people familiar with the matter, a mega investment by the South Korean tech giant, as the Biden administration pushes for an expansion of U.S. semiconductor production.
An announcement could come as early as Tuesday, people familiar with the matter said. Gov. Greg Abbott is scheduled to make an "economic announcement" Tuesday at 5 p.m. local time.
The Taylor facility, located in central Texas, plans to create around 1,800 jobs, though chip production isn’t expected to start until the end of 2024, according to documents Samsung had previously filed with Texas authorities. To woo Samsung, Taylor had offered incentives that include the equivalent of property-tax breaks of up to 92.5% for the first 10 years, with the write-offs gradually declining over the next several decades.
"A final decision has not yet been made regarding the location," a Samsung spokeswoman said.
Samsung’s doubling down on Texas where it already has a footprint comes amid a year of historic spending for the semiconductor industry, spurred by government incentives seeking to attract local production. A global chip shortage has undercut many industries from smartphones and home appliances to cars.
Samsung, the world’s largest semiconductor maker by revenue, plans to invest more than $205 billion over the next three years, with chip-making a priority. Taiwan Semiconductor Manufacturing Co. has earmarked more than $100 billion over the next three years to build new chip factories. Intel Corp. has also unveiled more than $100 billion worth of semiconductor factory investments plans in the U.S. and Europe over the coming decade.
Bolstering American production of chips has been a priority for both the Biden administration and Congress, which have set in motion legislation to provide funding to stimulate investment in the U.S. In June, the Senate approved $52 billion in direct industry subsidies for new semiconductor-making factories, though the House has yet to take action.
The U.S. has fallen behind in semiconductor manufacturing, accounting for just 12% of world-wide production capacity in 2020—down from 37% in 1990, according to the Semiconductor Industry Association. China, Taiwan and South Korea have become larger production hubs for computer chips that lawmakers have come to see as a resource critical to national security and economic growth.
Before landing on Taylor, Samsung had previously scouted locations in Arizona, New York and Florida, according to people familiar with the process. The company had also considered Austin, Texas, where Samsung has operated its sole U.S.-based chip-making plant for decades, the people said.
Taylor, a town of about 16,000 people in Williamson County, is about 30 miles away from Austin. The planned site of roughly 1,200 acres is much larger than Samsung’s property in Austin.
The Taylor factory is expected to serve as an advanced chip-making facility for Samsung’s contract-manufacturing operations that make semiconductors designed by other firms. Such high-end manufacturing is attracting the bulk of semiconductor industry investment. The types of chips with the longest backlogs tend to be lower-priced and haven’t been the focus for massive expansion.
The Samsung investment also represents another victory for Texas’s ambitions as a tech hub. In October, Tesla Inc. said it was moving its headquarters to Austin, coming months after Chief Executive Elon Musk had moved to the Lone Star State. Intel has said it would hire about 1,700 people for a downtown Austin design campus.
Samsung’s decision on the location of its new U.S. chip plant comes months after the parole of the South Korean conglomerate’s de facto leader, Lee Jae-yong in August. Mr. Lee had been behind bars after being convicted of bribing South Korea’s former president in exchange for government backing for a 2015 merger between two Samsung affiliates that helped cement his ownership of the conglomerate. He was released about a year early.
The return of Mr. Lee, the 53-year-old grandson of Samsung’s founder, had come with expectations for bold moves after his supporters argued that South Korea’s largest business conglomerate had become indecisive in his absence. The Justice Ministry pointed to "economic factors" when granting Mr. Lee parole. Major decisions at Samsung require Mr. Lee’s signoff.
In recent days, Mr. Lee has been on a business trip in the U.S., with Samsung sharing photos of visits with the CEOs of Moderna Inc. and Verizon Communications Inc. Mr. Lee also met with White House officials and lawmakers as well as Microsoft Corp. Chief Executive Satya Nadella, the company said. Mr. Lee is unlikely to be in Texas for the Tuesday event, according to a person familiar with the situation.
South Korean foreign direct investment to the U.S. hit $62.4 billion in 2020, an increase of 14% from the prior year, according to U.S. Commerce Department data. In May, South Korean President Moon Jae-in met President Biden at the White House, where the two countries pledged deeper cooperation on supply-chain issues. South Korean firms at the time also outlined U.S. investment plans.