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The United States grants Samsung $6.4 billion to boost semiconductor production| GuyWhoKnowsThings

The Biden administration will provide up to $6.4 billion in subsidies to Samsung, one of the world's largest chipmakers, the latest in a series of subsidies aimed at shoring up domestic production of next-generation semiconductors.

The money will help Samsung, the South Korean company, finance its new chip manufacturing center in Taylor, Texas, and expand an existing site in nearby Austin. Samsung will now build an additional manufacturing plant and modernize a facility under construction in Taylor. It will increase its investment in Texas to about $45 billion, up from the $17 billion it announced more than two years ago, administration officials said Sunday.

Federal officials said the grants would help create a U.S. center for the development and production of cutting-edge semiconductors. In addition to making chips, Samsung will now build a research and development facility in Taylor, as well as an advanced factory to package them, the last step before the semiconductors can be used in electronic systems.

The announcement follows other awards that federal officials have awarded to semiconductor manufacturers in recent weeks. The initiative is funded by the CHIPS Act, which a bipartisan group of lawmakers approved 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 distribute in the form of subsidies and incentives to chipmakers to build and expand plants in the United States.

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

The Samsung grant is the third major award aimed at increasing U.S. production of the most sophisticated semiconductors. Last week, federal officials said that provide up to $6.6 billion in subsidies to Taiwan Semiconductor Manufacturing Company, the leading manufacturer 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 subsidieswhich officials said would be the 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 enclosing 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 chosen to bundle multiple small chips together. sometimes called chiplets – in a package to increase computing power rather than trying to cram more capacity into each semiconductor.

Additionally, Samsung will build a research and development facility that will study advances in manufacturing processes, which add computing power and storage capacity to chips. Among the largest chip manufacturers, only Intel currently conducts this type of research in the United States. Federal officials view Samsung's new research and development facilities as vital to 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 supply chips directly to the Department of Defense. The expansion of the Austin facility is intended to support the production of chips used in industries critical to 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 equipping Texas factories with production equipment.

Samsung's award brings the total announced federal grants to more than $23 billion. Global Foundries, microchip technology and BAE Systems received the first three prizes.

The pandemic sparked a global semiconductor shortage that crippled major industries and shed light on vulnerabilities in the domestic chip supply chain, prompting lawmakers to pass the CHIPS Act.

Federal officials view the lack of domestic manufacturing capacity as a major national security risk as the components power missiles, satellites and fighter jets. Next-generation semiconductors are also critical to important technology industries such as artificial intelligence.

Commerce Secretary Gina Raimondo emphasized that much of the semiconductor supply chain (from research and development to packaging) is concentrated in a few Asian countries.

“That leaves the U.S. supply chain incredibly vulnerable to disruptions,” Raimondo said Sunday. “It is unsafe and weakens our national and economic security.”

Raimondo said the new investment would help create a “next-generation semiconductor ecosystem” in Texas and reestablish the United States as a leader in the production of the most advanced semiconductors. In February, Raimondo said the new investments would put the United States on a path to produce approximately 20 percent of the world's most advanced logic chips by the end of the decade. Currently, the United States does not produce any.

In November 2021, Samsung first announced that it would build $17 billion semiconductor factory in Taylor, in response to a push by the Biden administration and American customers to increase chip production in the United States. The company will now enhance 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 make two-nanometer chips and is scheduled to open in 2027, according to officials. The research and development facility is also expected to open in 2027, and the advanced packaging facility will open in 2028.

Lael Brainard, director of the National Economic Council, said the award to Samsung would be the “third and final leg” of the president's plan to bring cutting-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, she 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.

Like other prize winners, Samsung will need to meet certain milestones before payments are made.

Samsung plays an unusually influential position in the industry by supplying two main 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 these 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 then moved on to logic chips for products such as Apple's iPhone. In recent years, Apple has frequently turned to TSMC to manufacture the chips that Apple designs, although Samsung also has some of the most advanced production processes in the industry.

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