Samsung’s U.S. semiconductor plant expansion, should Samsung take the third road?

As Samsung Electronics announced an additional expansion of a semiconductor plant worth about $17 billion (about 19 trillion won) in the United States, the possibility of last-minute changes over its final location is raised.

This is because the tax benefit negotiations with the city of Austin, Texas, where the existing factory was built, were not smooth. In addition, the fact that the existing Austin plant is in a shutdown (suspended) state due to the recent unusual cold wave is also a burden. Some observers say that they will expand semiconductor factories in Korea and Europe, not the United States.

According to the semiconductor industry and foreign media on the 14th, Samsung Electronics is having difficulties in negotiations with the city of Austin on tax benefits. Samsung Electronics recently requested a tax reduction of $85.47 million (approximately 900 billion won) over 25 years as a condition of investment for the expansion of a semiconductor factory worth $17 billion in Austin, Texas. This is the largest investment and incentive ever in Texas history.

If the city accepts the proposal, Samsung Electronics plans to build an additional plant near the foundry (semiconductor commissioned production) facility currently operating in Austin. Samsung Electronics estimates that the economic effect of additional plant expansion alone will reach $8.643 billion (approximately 1.3 trillion won). However, as the city of Austin is known to have rejected the tax benefit offer, Samsung Electronics’ distress has deepened.

Local foreign media said that if the negotiations with Austin City fail, Samsung Electronics will consider four candidate sites, including Genesis County, New York, Phoenix, Arizona, and Korea (Pyeongtaek). In particular, Arizona, Samsung’s largest foundry rival, Taiwan TSMC, invested 12 billion dollars (about 14.78 trillion won) in May last year to establish a 5-nanometer (nm) process, and it is considered a strong candidate because of the significant tax benefits. .

Pyeongtaek is also being mentioned again as a promising candidate. Pyeongtaek City, which has already become the cradle of Samsung Electronics’ foundry, has built a solid infrastructure. About 100 people who were put in to restart the Austin plant, which was shut down this time, were all dispatched from the Pyeongtaek plant, and if the facility is equipped, the plant expansion is a matter of time. In this regard, the unprecedented benefits of the Korean government for’reshoring’ are expected to be key.

European love calls are also expected. In Europe, which has a number of global automaker brands, is striving to domesticate semiconductor production due to a shortage of automotive semiconductors this year. Recently, the European Union (EU) Executive Committee aims to cover 20% of the world’s semiconductor production by investing 180 trillion won by 2030. It is planning to double the current level of about 10%.

Europe is particularly motivated to attract system semiconductor plants below 5 nanometers (nm). Only Samsung Electronics and TSMC can perform this process, but TSMC is currently working hard to secure local processes in the US and Japan. In the industry, there is also an analysis that Samsung’s entry into Europe is effective in reinforcing the electronics business in the future. In this regard, Samsung Electronics maintains the position that “no specific investment size and location has been decided.” Since Vice Chairman Lee Jae-yong was imprisoned, it is difficult for Samsung to profess its investment plan.

Meanwhile, as the possibility that Samsung may leave Austin is raised, public opinion is growing in the Texas business community that “Samsung Electronics should be attracted even if it is given an incentive.” In particular, more than 20 years ago, the Texas state legislature denied preferential treatment related to the establishment of Intel’s new semiconductor plant, and in the end, Intel should go to Arizona as a teacher.