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The Korea Herald
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THE INVESTOR
June 24, 2024

Samsung

Samsung Electronics set to expand chips supply chain after $6.4b US grants

  • PUBLISHED :April 16, 2024 - 10:46
  • UPDATED :April 16, 2024 - 10:46
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(Samsung Electronics)

Samsung Electronics is set to accelerate the expansion of its global semiconductor supply chain in the era of artificial intelligence (AI), following a subsidy of $6.4 billion from the US government and its extended investment plan.

Under the Biden Administration's announcement, the South Korean chipmaker was to receive up to $6.4 billion in grants under the 2022 CHIPS and Science Act, aimed at bolstering US semiconductor production to 20 percent of the world's leading-edge chips by the end of the decade.

The funding will support Samsung Electronics' chip production facilities in Taylor and Austin, Texas, alongside other research centers and packaging facilities.

This positions Samsung Electronics as the third-largest beneficiary of the US CHIPS Act program, following Intel with up to $8.5 billion in grants and $11 billion in loans, and Taiwan's TSMC with up to $6.6 billion in grants and about $5 billion in loans.

At the same time, Samsung Electronics will increase its investment in its semiconductor plants in Texas to more than $40 billion from $17 billion.

The additional investment will include the construction of one more semiconductor production facility in addition to the existing plant in Taylor, as well as advanced packaging and research and development (R&D) facilities.

Experts pointed out Samsung Electronics' production capabilities as a world-leading semiconductor producer and commitment to US investment have led to the third-biggest subsidy deal with Washington.

"Samsung Electronics seems to have been evaluated better than its competitors by the US government in terms of its future investment plans, scale and company value," Kim Yang-paeng, a researcher at the Korea Institute of Industrial Economics and Trade, said.

"The US grants will help the company reduce the amount of its own money used to invest directly in overseas expansion. It's good for Samsung Electronics," he added.

It will be also possible for the South Korean chipmaker to expand participation in the advanced semiconductor supply chain through local production in the United States, where global big tech companies are located.

Samsung Electronics, the world's biggest memory chip manufacturer, has participated in US chip production since the late 1990s, as it has invested a combined $18 billion in operating two fabs in Austin.

The company said it will do its best to strengthen the local semiconductor ecosystem in the US and deal with booming demand for new high-performance AI chips like high bandwidth memory (HBM) amid the rise of applications such as generative AI, exemplified by models like ChatGPT.

In an announcement in February, Samsung Electronics developed the fifth-generation HBM chips with 12 layers of DRAM chips and the industry's largest capacity of 36 gigabytes. Its mass production is slated for the first half of the year.

"We're not just expanding production facilities, we're strengthening the local semiconductor ecosystem and positioning the US as a global semiconductor manufacturing destination," Kyung Kye-hyun, CEO and head of semiconductor business at Samsung Electronics, said after the US government's announcement in Taylor.

"To meet the expected surge in demand from US customers, for future products like AI chips, our fabs will be equipped for cutting-edge process technologies and help bring security to the US semiconductor supply chain," he said.

While Samsung Electronics takes center stage in US semiconductor expansion, its South Korean rival SK hynix is also rolling up its sleeves to join the US government's plans to attract the chipmaking supply chain to home.

Earlier this month, SK hynix announced a $3.87 billion investment plan to build an advanced packaging fabrication and R&D facility in West Lafayette, Indiana. (Yonhap)

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