Samsung awarded $4.8bn incentive to help boost US production under Chips Act

The financial boost will help create 'tens of thousands' of jobs in Texas

The Samsung booth at the 2024 CES event in Las Vegas, Nevada, US, on Wednesday, Jan. 10, 2024. The event typically doubles as a preview of how tech giants and startups will market their wares in theShow more

Samsung Electronics has been awarded a $4.745 billion incentive by the US government to help boost operations and create "tens of thousands" of jobs at its production hubs in America, as the world's biggest economy positions itself to be a leader in the microchip industry amid the artificial intelligence boom.

The incentive, which was made under the key Chips Act, will underpin Samsung's investment commitment of more than $37 billion in the coming years and help transform its existing presence into a "comprehensive ecosystem for the development and production of leading-edge chips" in the US, the Commerce Department said on Friday.

These will include two new logic fabrication plants and a research and development unit in Taylor, Texas, in addition to expanding an existing facility in Austin, according to the department, which will distribute the funds based on Samsung’s completion of project milestones.

“With this investment in Samsung, the US is now officially the only country on the planet that is home to all five leading-edge semiconductor manufacturers," Commerce Secretary Gina Raimondo said in the statement.

Based on market capitalisation, that list would include AI leader Nvidia, Broadcom, Taiwan Semiconductor Manufacturing, Samsung and Advanced Micro Devices, according to data from CompaniesMarketCap.

"This is an extraordinary achievement, which will ensure we have a steady, domestic supply of the most advanced semiconductors that are essential to AI and national security, while also creating tens of thousands of good-paying jobs and transforming communities across the country,” Ms Raimondo said.

US companies Texas Instruments, the seventh-biggest by market cap, and Amkor Technology were also awarded incentives, being granted with $1.61 billion and $407 million, respectively. They will also be disbursed according to milestones, the department said in separate statements.

The incentive for Texas Instruments will support more than $18 billion worth of investments through the end of the decade that includes the construction of three new plants. Amkor's, on the other hand, will aid a $2 billion greenfield facility, in addition to the creation of up to 4,000 jobs.

“The manufacture of leading-edge semiconductors is a critical part of the supply chain for advanced AI and other leading technologies,” National Economic Advisor Lael Brainard said.

The race for semiconductor manufacturing continues to heat up as companies try to keep up with the heightened demand for chips, particularly to power AI applications amid the explosion of generative AI. The US is positioning itself to take a leading role in the industry and fend off challenges particularly from China.

The Chips Act – officially the Creating Helpful Incentives to Produce Semiconductors and Science Act – was enforced in 2022 to boost and incentivise US chip production.

It also aims to help revitalise the US semiconductor sector, once a major force but has since lost market share to other manufacturers including those based in South Korea and Taiwan.

The share of modern semiconductor manufacturing capacity located in the US has eroded from 37 per cent in 1990 to 10 per cent in 2022, mostly because other countries’ governments have invested "ambitiously in chip manufacturing incentives and the US government has not", according to the Semiconductor Industry Association.

"Federal investments in chip research have held flat as a share of GDP, while other countries have significantly ramped up research investments," the Washington, DC-based trade body said.

The Chips Act has so far awarded approximately $32 billion of the more than $36 billion earmarked for incentives across 21 states that are expected to create over 125,000 jobs, according to the Commerce Department.

In addition, semiconductor and electronics companies have announced almost $450 billion in private investments since the beginning of the Biden administration in 2021, enabling to "stimulate private sector investment, create good-paying jobs [and] make more in the US", it added.