Biden Administration to Award $6 Billion Subsidy to Samsung for Chip Expansion

Next week, the Biden administration is set to announce the awarding of over $6 billion to South Korea's Samsung to expand its chip output in Taylor, Texas. As part of its efforts to boost chipmaking in the U.S., the subsidy will be unveiled by Commerce Department Secretary Gina Raimondo.

The substantial investment will go towards the construction of four facilities in Taylor, including a $17 billion chipmaking plant that Samsung had previously announced in 2021. Additionally, it will fund the development of another factory, an advanced packaging facility, and a research and development center. Moreover, the investment will also include an undisclosed location, effectively more than doubling Samsung's U.S. investment to over $44 billion as part of the deal.

Reaction and Impact

Both the Commerce Department and Samsung declined to comment on this development. Furthermore, Texas Governor Greg Abbott's office did not respond to requests for comment. It is anticipated that the announcement will cap off a series of major grants in quick succession as the U.S. aims to expand domestic chip production and attract capital that might otherwise have been used to build plants in China and the region.

Comparison to Other Awards

This award to Samsung will be the third largest program, closely following Taiwan's TSMC, which was granted $6.6 billion and agreed to expand its investment by $25 billion to $65 billion. TSMC also committed to adding a third Arizona factory by 2030.

In 2022, Congress approved the Chips and Science Act, providing $52.7 billion in research and manufacturing subsidies to boost domestic semiconductor output. Additionally, lawmakers sanctioned $75 billion in government loan authority, although Samsung reportedly plans to forgo taking any loans. The CHIPS Act aims to diminish reliance on China and Taiwan, as the share of global semiconductor manufacturing capacity in the U.S. has fallen from 37% in 1990 to 12% in 2020, according to the Semiconductor Industry Association.

Political Implications

It has been noted that U.S. President Joe Biden will not attend the event, as he is currently focused on seeking a second term in November against former President and Republican rival Donald Trump. Texas Governor Greg Abbott, a Republican, has been invited to attend.

While TSMC and Intel plan to expand production in the pivotal swing state of Arizona, Samsung's expansion in reliably Republican Texas is perceived as less likely to benefit President Biden electorally.