U.S. Gives Samsung $6.4 Billion To Build Chip Factories in Texas

The U.S. government announced Monday a $6.4 billion subsidy for South Korean tech giant Samsung to build advanced computer chip manufacturing facilities in the Austin area, the latest wave of government funding meant to bring more chip-making production to the United States.

The money comes as part of a deal that will see Samsung invest $40 billion of its own money to upgrade a chip factory that’s already under construction in Taylor, Tex., in addition to building a second factory by the end of the decade and adding a new research and development center. Samsung will also build an “advanced packaging” facility - a specialized factory that puts together different chips and electronic components to make them ready to go into cars, planes, phones and thousands of other machines and devices.

The deal with Samsung comes a week after the government announced a $6.6 billion subsidy for Taiwan Semiconductor Manufacturing Co., or TSMC, to expand its operations in Arizona. The payments are part of the 2022 CHIPS Act, which includes a pot of $39 billion in subsidies to encourage U.S. and foreign companies to build in the United States. So far, the government has allotted around $23 billion of that money to a handful of companies.

“The whole chain, R&D to packaging, is concentrated in a couple of Asian locations and that leaves the U.S. supply chain incredibly vulnerable to disruption. That’s untenable,” said Commerce Secretary Gina Raimondo in a call with reporters ahead of the announcement. “We are now making these investments which will allow the United States to once again lead the world.”

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Although U.S. companies like Intel and Nvidia design many of the most advanced computer chips, they are overwhelmingly built in a small handful of facilities in Taiwan and South Korea. TSMC makes the vast majority of the world’s most advanced chips in Taiwan, raising concerns that if China invades or increases its influence over the island, the United States could be cut off from a technology that has become crucial for every industry, as well as the U.S. military.

The artificial intelligence boom, which demands the most advanced chips to train and run AI algorithms, has only added more urgency to calls from industry and national security leaders to expand U.S. chip-making capacity.

Building the most advanced computer chips, which are many times smaller than a human red blood cell, is a devilishly difficult task. A single chip factory, known as a “fab,” can take a decade and $20 billion to build. In Taiwan, they run 24 hours a day, monitored by highly specialized engineers in dust- and static-free “clean rooms.”

Related:Samsung Delays Production at New US Factory to 2025 – Reports

U.S. companies moved production overseas decades ago, seeking lower labor costs in an extremely competitive industry. But as Asian companies developed ever more advanced manufacturing techniques, the United States fell behind. TSMC executives have complained that U.S. workers and engineers aren’t up to the task of constructing and running such a difficult manufacturing process.

The Samsung deal includes around $40 million for job training, and the government expects the project to create over 17,000 construction jobs and 4,500 manufacturing positions in the next five years, according to a press release from the Commerce Department.