A number of tech giants like Apple, Google Amazon, Microsoft and others have form the Semiconductors in America Coalition (SIAC) with the goal of promoting semiconductor manufacturing on U.S. soil. The coalitions primary focus is “to secure funding for the CHIPS for America Act,” as explained in its post announcing its formation.” While this effort to bring semiconductor manufacturing began under the last administration, President Biden has continued support with a recent call for $50 billion in funding to incentivize the effort as part of the CHIPS for America Act.
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.
The members of SIAC are Amazon Web Services, Apple, AT&T, Cisco Systems, General Electric, Google, HP Enterprise, Microsoft and Verizon are also members of SIA (Semiconductor Industry Association) with additional SIA members being AMD, Intel, Nvidia, Qualcomm and Samsung. In 2021, the U.S. account for only 12% of global manufacturing capacity, compare that with 37% in 1990 and the problem becomes quite clear. The SIAC cites subsidies companies get from other countries and they believe it puts the U.S. at a disadvantage. “It is 20-40% more expensive to build and operate a fab in the U.S. compared to overseas,” explains the letter.
Samsung and Austin Texas
Samsung recently proposed 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.