In a proposal to be included in a bill from the U.S. Senate, $30 billion would go to spurring American chip foundries in an effort to reduce our reliance on China with the dual benefit of also protecting American companies’ intellectual property. According to Reuters, this effort of course originated during the last administration where the position on China was an adversarial one. A position where we sought to reduce our reliance on China in every facet of the market, a position that Senator Chuck Schumer and Todd Young sought to bolster with a $100 million bill in 2020 to support research in key industries such as semiconductors that feed into industries like artificial intelligence and quantum computing.
Reuters went on to detail how the Schumer-led effort is likely to include provisions curbing China’s access to U.S. capital markets, which was “a focus of the Trump administration’s crackdown on Beijing.”
While some chips are manufactured on U.S. soil, like Samsung operating a chip factory in Texas already. The COVID-19 response in much of the world has reduced manufacturing output in China leading to a shortage of semiconductors. Another factor that has led to a semiconductor shortage is the COVID-19 lockdowns, which has led to a demand for cell phones and PCs for activities like remote work and leisure activities like gaming. With an ever-increasing demand for semiconductors in the auto industry, electric bicycles, smart appliances and smart devices, the demand doesn’t seem like it will slow anytime soon.
Samsung and Texas
Samsung currently is proposing a deal with Texas to build a $17 billion chip factory that will bring 1,800 jobs to Austin. This isn’t exactly a one-sided deal though, in return Samsung is asking a billion-dollar tax incentive to make it happen according to a report from Bloomberg. The tax incentives Samsung is asking for specifically is a 100% break on property taxes for up to 20 years to Travis County, which is estimated to calculate to $718 million, the company is also looking for a 50% break on taxes to the city of Austin for 5-years which in turn is to be estimated at $87 million.
If Austin is chosen, then it plans to expand the existing factory that was originally established in 1997. If Samsung does not choose Austin, it says it may choose Arizona, New York or its home country in South Korea. The current factory in Austin currently employs 10,000 people and Samsung recently purchased 257.7 acres of land near its existing factory according to a report from the Austin American-Statesman. It would seem that Samsung is already quite a bit more invested in Texas than it is letting on and the above proposal is just an opening offer.