On April 15, local time, Samsung Electronics reached an agreement with the U.S. Department of Commerce that it will receive a $6.4 billion subsidy from the U.S. CHIPS and Science Act.
The funds will be used to build Samsung's new plant in Taylor, Texas, and expand its existing plant in Austin. This will support the production of leading chips such as AI, high-performance computing, and 5G communications for key industries in the U.S. (aerospace, defense, and automotive, among others).
It is understood that Samsung's new factory in the United States will include two wafer fabs, a research and development center and an advanced packaging facility. The first fab was originally planned to open in the second half of this year, but has been postponed to an uncertain date, and the second fab could be by 2030.
Figure | Samsung Taylor factory (source: Samsung's official website)
Samsung expects to invest more than $40 billion in Taylor City over the next few years. In the announcement, Samsung further mentioned that to ensure the success of its semiconductor ecosystem, it must receive strong support from the public sector, including more inclusive education to develop relevant skilled talent, as well as more tax incentives and incentives.
It is worth mentioning that a week before the agreement with Samsung, the United States announced $6.6 billion in subsidies and $5 billion in loans to TSMC to expand TSMC's operations in Arizona. And in March, Intel received $8.5 billion in subsidies and $11 billion in loans from the CHIPS and Science Act.
The U.S. CHIPS and Science Act became law in August 2022. The bill would provide $39 billion in subsidies and a 25% investment tax credit for manufacturing equipment costs for chip manufacturing in the U.S., as well as $13 billion for semiconductor research and workforce training, and $174 billion in the overall system of science and technology research in the public sector (NASA, National Science Foundation, U.S. Department of Energy, etc.).
It is reported that since the introduction of the bill, companies in the semiconductor ecosystem have announced dozens of new projects in 25 states in the United States, with a total private investment of hundreds of billions of dollars.
However, due to the difficulty of chip manufacturing, the construction of new factories such as Samsung and TSMC may not be as smooth as expected. Samsung announced in November 2021 that it would invest $17 billion in its first fab in Taylor, but the cost of the fab is understood to have increased by billions of dollars due to inflation and other factors. The investment in the second fab is also more than $20 billion, and the exact amount may change depending on the situation.
The cost of high-end chip manufacturing is higher, and customers (such as NVIDIA) have strict requirements for price and performance. Samsung and TSMC's investment and expansion in the U.S. may face competition from U.S. domestic companies such as Intel, and will need to find a balance between meeting customer demand and maintaining profits.
A TSMC engineer commented on the Glassdoor website that TSMC's factories operate 24 hours a day, with a standard working time of 12 hours, and often have to work on weekends. This management style and culture can face challenges in the U.S. labor market. TSMC initially hoped to start producing chips in Arizona in 2024, which has now been pushed back to 2025.
In addition, high-end chip manufacturing requires highly specialized technical personnel, and although the United States has certain advantages in scientific research and technical education, the number of experienced engineers in the actual field of chip manufacturing, especially in complex manufacturing processes, is relatively insufficient.
TSMC executives have complained that U.S. workers and engineers are not up to the task of building and running such a difficult manufacturing process. To do this, in addition to training skilled workers locally, U.S. engineers may also need to undergo up to 18 months of training in Taiwan.
Although Samsung mentioned that it will work with elementary schools, high schools, and universities to ensure the operation of the fab, and use up to $40 million in funding to train and develop the local workforce, semiconductor manufacturing involves extremely complex technical processes, and continuous technological advancements require continuous upgrading of semiconductor manufacturing facilities. As semiconductor technology advances to the nanoscale, small deviations in each step of the production process can lead to the failure of an entire batch of product.
For example, TSMC is expected to use the 2nm process in Arizona in 2028, which will be at least two years later than TSMC's Taiwan factory. It is understood that TSMC will deploy 2nm-related equipment at the Kaohsiung plant at the end of this year.
Therefore, building an efficient and reliable production environment is a huge challenge with a long time and a large investment. Given the length and complexity of the time it takes to build semiconductor manufacturing capabilities, businesses, governments, and stakeholders need to have the patience and ongoing support to ensure that the implementation of investment plans can go smoothly. Companies also need to constantly adjust between staying ahead of the curve and controlling costs to remain competitive in the global semiconductor market.
In the context of the current increase in investment in the chip field in all countries, despite a series of measures taken by the United States, it may not be easy to regain the leading position in semiconductors.
Reference:
https://news.samsung.com/us/samsung-electronics-to-receive-up-to-6-4-billion-in-direct-funding-under-the-chips-and-science-act/
https://www.washingtonpost.com/technology/2024/04/15/samsung-chips-act-taylor-texas/
https://finance.yahoo.com/news/tsmc-complains-t-enough-skilled-100125351.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAANDL_WqgMsL_z-oWhUvh4HbFk9bxaFVys-EgK0ashZQ7a10TRcedTgEBwZAV4DCI_TAe9Nja5HA0LEHOQpV_scSN_lem6m1RYe8hhJhzgOF-B3Zd6x5bbttfpsTLkVDpqJ4jgqiH0idCi_jLB_owpO6aagXIMR8fOwjP5j96f8RP