U.S. Awards Samsung $6.4 Billion to Bolster Semiconductor Production

The Biden administration will give up to $6.4 billion in grants to Samsung, one of the world’s largest chipmakers, the latest in a slew of awards intended to shore up domestic production of cutting-edge semiconductors.

The money will help Samsung, the South Korean company, fund 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 investment in Texas to roughly $45 billion, up from the $17 billion it announced more than two years ago, administration officials said on Sunday.

Federal officials said the grants would help create a U.S. hub for the development and production of leading-edge semiconductors. Aside from manufacturing chips, Samsung will now construct a research and development facility in Taylor as well as an advanced factory for packaging them, the final step before semiconductors can be used in electronic systems.

The announcement follows other awards that federal officials have made to semiconductor manufacturers in recent weeks. The initiative is funded by the CHIPS Act, which a bipartisan group of lawmakers passed in 2022 to strengthen 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 dole out as grants as incentives to chipmakers to construct and expand plants in the United States.

The effort is intended to help reverse a decades-long decline in the U.S. share of global chip manufacturing. Although semiconductors were invented in America, only about 10 percent of the world’s chips are currently made in the United States.

The Samsung grant is the third big 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 leading 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 single largest grant under the new program.

Both Samsung and TSMC have committed to producing two-nanometer chips, using what is currently the world’s most advanced production technology, in the United States in the coming years.

Samsung’s investment also includes the construction of a new advanced packaging facility. Packaging typically involves encasing chips in combinations of plastic and metal that allow them to connect to other devices in a system. New packaging technologies have become a focal point for the industry as more companies have taken to bundling multiple small chips — sometimes called chiplets — in a package to boost computing power rather than trying to pack more capability into each semiconductor.

In addition, Samsung will build a research and development facility that will study advances in manufacturing processes, which add computing power and storage capability to chips. Among the largest chip manufacturers, only Intel currently conducts such research in the United States. Federal officials view Samsung’s new research and development facility as vital for ensuring the country’s access to cutting-edge developments in the field, senior Biden administration officials said.

As part of the award, Samsung will also directly supply chips to the Defense Department. The Austin facility’s expansion is intended to support the production of chips used in industries that are critical for national security, including aerospace, defense and automotive.

In addition to receiving the grants, Samsung is expected to claim federal tax credits that could cover 25 percent of the cost of building and outfitting the Texas factories with production equipment.

Samsung’s award brings the total announced federal grants to more than $23 billion. GlobalFoundries, Microchip Technology and BAE Systems received the first three awards.

The pandemic set off a global shortage of semiconductors that crippled major industries and shed light on the vulnerabilities in the domestic supply chain for chips, motivating lawmakers to pass the CHIPS Act.

Federal officials view the lack of domestic manufacturing capacity as a major national security risk, given that the components power missiles, satellites and fighter jets. Cutting-edge semiconductors are also critical for major technological industries like artificial intelligence.

Gina Raimondo, the commerce secretary, emphasized that much of the semiconductor supply chain — from research and development to packaging — was concentrated in a few Asian countries.

“That leaves the U.S. supply chain incredibly vulnerable to disruption,” Ms. Raimondo said on Sunday. “It’s unsafe and it weakens our national and economic security.”

Ms. Raimondo said the new investment would help create a “state-of-the-art semiconductor ecosystem” in Texas and re-establish the United States as a leader in the production of the most advanced semiconductors. In February, Ms. Raimondo said new investments would put the United States on track to produce roughly 20 percent of the world’s most advanced logic chips by the end of the decade. Currently, the United States produces none.

In November 2021, Samsung first announced that it would build a $17 billion semiconductor factory in Taylor, responding to a push by the Biden administration and U.S. customers to ramp up chip production in the United States. The company will now upgrade the facility’s manufacturing capacity. In addition to four-nanometer chips, the first plant will now produce two-nanometer chips. Samsung is expected to open the first facility in 2026, administration officials said.

The second plant will also manufacture two-nanometer chips and is slated to begin production in 2027, according to the officials. The research and development facility is expected to open in 2027, too, and the advanced packaging facility is set to open in 2028.

Lael Brainard, the director of the National Economic Council, said the Samsung award would be the “third and final leg” of the president’s plan to bring leading-edge chip manufacturing back to the United States. About $40 million in grants will be set aside for the company to develop and train its workers, Ms. 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 the other award recipients, Samsung will have to meet certain milestones before payments are made.

Samsung plays an unusually influential position in the industry by supplying 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 manufactures such chips to order for other companies.

Most of Samsung’s factories are in South Korea. But in 1996, the company built a facility in Austin, which initially produced memory chips and later shifted to logic chips for products such as Apple’s iPhone. In recent years Apple has frequently turned to TSMC to manufacture chips that Apple designs, though Samsung also boasts some of the industry’s most advanced production processes.