$6bn Chips Act incentive to Grow Beyond Texas for Samsung?

There are some who suggest that Samsung Electronics may go on to receive more than 6 billion U.S. dollars in subsidies via the U.S. government’s Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022, which is also known as the CHIPS Act. This amount goes on to surpass the expected $5 billion subsidy for TSMC from Taiwan.

On March 7, Bloomberg News went on to site multiple sources and reported that the U.S. plans to award over 6 billion dollars to Samsung Electronics Co., hence helping the chipmaker to expand beyond a project in Texas. Apparently, the federal funding for Samsung, which happens to be South Korea’s leading chipmaker, would go on to come alongside prominent additional U.S. investment by the firm. It is, however, not yet clear where the additional investment would get located.” On March 8, Bloomberg went on to report that the U.S. government looks forward to offering over 5 billion dollars in subsidies to TSMC, which happens to be a Taiwanese semiconductor foundry company specializing in terms of consignment manufacturing.

It is well to be noted that in 2021, Samsung Electronics unveiled its intent so as to construct a new foundry factory in Taylor, Texas, a $17 billion investment. Because of the escalating local costs, it is projected that Samsung’s overall investment is likely to reach around 20 billion dollars by the new factory’s completion. Similarly, TSMC went ahead and disclosed its investment plan of 12 billion dollars in Phoenix, Arizona, in 2021. Thereafter, at a groundbreaking ceremony in Phoenix in December 2022, which was attended by U.S. President Joe Biden as well as other dignitaries, TSMC went on to announce a commitment to invest an overall $40 billion in Phoenix.

Before that, Gina Raimondo, U.S. Secretary of Commerce, announced that more than 600 semiconductor companies had gone on to apply for 70 billion dollars in subsidies. But as the semiconductor production subsidy is just about 39 billion dollars, intense competition in terms of subsidies is indeed unavoidable. At a discussion at the Center for Strategic and International Studies- CSIS on Feb. 26, Secretary Raimondo said that she had advised the CEOs of semiconductor companies, to consider themselves to be fortunate if they got to receive even half of the amount they had applied for, and this is indeed the reality.

In this aspect, analysis goes on to indicate that Samsung Electronics is expected to receive more subsidies as compared to TSMC because of the pace of investment progress as well as additional investment commitments. Samsung Electronics is speeding up its factory construction efforts with the intent of commencing operations by the end of 2024. Subsequently, TSMC has gone on to push back the start of its factory from the end of the year to the first half of 2025 and has, as a matter of fact, also delayed the beginning of construction when it comes to its second factory.
Minister Raimondo stated in February this year that they have opted to prioritize projects capable of starting operations by the end of this decade. It would thereby be imprudent to not to look towards projects that will go on to yield results in 2024 in favor of supporting projects with the outcomes visible a decade from now and not before that.

In the semiconductor landscape, one of the analysis goes on to suggest that Samsung’s subsidies were most likely determined considering not just the presently disclosed investments but at the same time future investment plans. Consequently, it is anticipated that Samsung Electronics, which has not gone on to unveil a clear additional investment plan as compared to its competitors since the 2021 announcement, will soon be disclosing a local investment strategy. But some observers go on to highlight that the Ministry of Commerce may as well have stipulated challenging scenarios for Samsung Electronics when it comes to exchange for the sufficient subsidies offered.

As per Reuters, the U.S. government looks forward to revealing the scale of subsidies for Intel in the weeks to come. This announcement happens to coincide with President Biden as well as Secretary Raimondo’s visit to an Intel plant in Arizona, which happens to be a state considered pretty critical in the U.S. presidential election this year. Intel, which has already announced its plans to fund 43.5 billion dollars in states such as Arizona and Ohio, is expected to get the largest subsidy, amounting to 10 billion dollars, among the three companies. Moreover, it is reported that the U.S. government is also looking to unveil plans so as to provide subsidies to Samsung Electronics as well as TSMC in the coming weeks.

As per an official from the Ministry of Trade, Industry, and Energy, this is an issue within the private discussion between the U.S. government as well as individual companies. They are engaged in discussions with the U.S. Department of Commerce by way of various channels so as to ensure that Korean companies happen to be not subject to discrimination under U.S. government policies.