The Biden administration will award up to $6.4 billion in grants to Samsung, one of the world's largest chipmakers, the latest in a series of awards intended to support domestic production of cutting-edge semiconductors.
The money will help Samsung, the South Korean company, finance its new chip manufacturing hub in Taylor, Texas, and expand an existing site in nearby Austin. Samsung will now build an additional manufacturing plant and upgrade a facility under construction in Taylor. It will increase its investments in Texas to about $45 billion, up from the $17 billion announced more than two years ago, administration officials said Sunday.
Federal officials said the grants would help create a U.S. hub for cutting-edge semiconductor development and manufacturing. In addition to producing chips, Samsung will now build a research and development facility in Taylor, as well as an advanced factory for their packaging, the final step before semiconductors can be used in electronic systems.
The announcement follows other awards that federal officials have given to semiconductor makers in recent weeks. The initiative is funded by the CHIPS Act, passed by a bipartisan group of lawmakers in 2022 to bolster the domestic supply of semiconductors, the vital components that power everything from phones and computers to cars and weapons systems. The legislation gave the Commerce Department $39 billion to distribute as grants as incentives to chipmakers to build and expand plants in the United States.
The effort is aimed at helping reverse the decades-long decline in the U.S. share of global chip production. Although semiconductors were invented in America, only about 10% of the world's chips are currently made in the United States.
The Samsung financing is the third major award aimed at increasing U.S. production of the most sophisticated semiconductors. Last week, federal officials said they would award up to $6.6 billion in grants to Taiwan Semiconductor Manufacturing Company, the main maker of the most advanced chips. The administration also announced last month that Intel, a Silicon Valley chipmaker, would receive up to $8.5 billion in grants, which officials said would be the largest grant under the new program.
Both Samsung and TSMC have committed to producing two-nanometer chips in the United States over the next few years, using what is currently the most advanced manufacturing technology in the world.
Samsung's investment also includes the construction of a new advanced packaging plant. Packaging typically involves placing chips in combinations of plastic and metal that allow them to connect to other devices in a system. New packaging technologies have become a focus for the industry as more companies have begun bundling multiple small chips – sometimes called chiplets – into a package to increase computing power rather than trying to cram more capacity into each semiconductor.
Additionally, Samsung will build a research and development facility that will study advances in manufacturing processes, which add computing power and storage capacity to chips. Among major chipmakers, only Intel currently conducts such research in the United States. Federal officials believe Samsung's new research and development facility is vital to ensuring the country's access to cutting-edge developments in the industry, senior Biden administration officials said.
As part of the award, Samsung will also directly supply chips to the Department of Defense. The expansion of the Austin plant is intended to support the production of chips used in industries critical to national security, including aerospace, defense and automotive.
In addition to receiving the grants, Samsung is expected to apply for federal tax credits that could cover 25% of the cost of building and equipping Texas factories with manufacturing equipment.
Samsung's award brings the total federal grants announced to more than $23 billion. GlobalFoundries, Microchip Technology and BAE Systems received the top three awards.
The pandemic triggered a global semiconductor shortage that crippled major industries and shed light on vulnerabilities in the nation's chip supply chain, motivating lawmakers to pass the CHIPS Act.
Federal officials view the lack of domestic manufacturing capacity as a major national security risk as components fuel missiles, satellites and fighter jets. Cutting-edge semiconductors are also critical to major technology industries such as artificial intelligence.
Gina Raimondo, the Commerce secretary, pointed out that much of the semiconductor supply chain – from research and development to packaging – is concentrated in a few Asian countries.
“This leaves the U.S. supply chain incredibly vulnerable to disruptions,” Raimondo said Sunday. “It is unsafe and weakens our national and economic security.”
Raimondo said the new investment would help create a “cutting-edge semiconductor ecosystem” in Texas and re-establish the United States as a leader in the production of the most advanced semiconductors. Raimondo said in February that the new investments would put the United States on track to produce about 20% of the world's most advanced logic chips by the end of the decade. The United States does not currently produce any.
In November 2021, Samsung first announced it would build a $17 billion semiconductor factory in Taylor, responding to a push by the Biden administration and U.S. customers to increase chip production in the United States. The company will now upgrade the facility's production capacity. In addition to four-nanometer chips, the first plant will now also produce two-nanometer chips. Samsung is expected to open the first facility in 2026, administration officials said.
The second plant also will produce two-nanometer chips and is expected to open in 2027, according to officials. The research and development facility is also expected to open in 2027, while the advanced packaging facility is expected to open in 2028.
Lael Brainard, director of the National Economic Council, said the Samsung award would be the “third and final stage” of the president's plan to bring cutting-edge chip manufacturing back to the United States. About $40 million in grants will be allocated to allow the company to develop and train its workers, Brainard said. Samsung's investment is expected to create more than 4,500 manufacturing jobs and at least 17,000 construction jobs, federal officials said.
Similar to other award recipients, Samsung will have to reach certain milestones before making payments.
Samsung holds an unusually influential position in the industry by providing two major varieties of semiconductors. It is the largest maker of memory chips, which store data in smartphones, computers and other products. But the company also makes and designs logic chips, a category that includes processors that handle calculations in electronic hardware. And the company offers a service that makes such chips to order for other companies.
Most of Samsung's factories are located in South Korea. But in 1996, the company built a plant in Austin, which initially made memory chips and later transitioned to logic chips for products like Apple's iPhone. Apple has often turned to TSMC to produce Apple-designed chips in recent years, although Samsung also boasts some of the most advanced manufacturing processes in the industry.