(April 15): The Biden administration plans to award Samsung Electronics Co as much as US$6.4 billion (RM30.59 billion) in grants to increase chip production in Texas, as part of US efforts to bolster domestic semiconductor manufacturing.

The South Korean company’s project will feature two foundry fabrication sites that will focus on mass production of four-nanometer (nm) and 2nm logic chips — one generation beyond the current state of the art. It will also include a research and development site, and an advanced chip packaging facility in Taylor, Texas, that will help produce high bandwidth memory chips, which are critical for artificial intelligence (AI) applications.

The award will also be used to expand Samsung’s existing chipmaking facility in Austin, Texas, which will support US aerospace, defence and automotive industries, the Commerce Department said in a statement. The city of Taylor is just outside Austin.

It’s the latest in a series of multibillion-dollar awards by the Biden administration, which is using the 2022 Chips and Science Act to revitalise American chipmaking after decades of production shifting to Asia. Another goal is to counter the technological rise of China, which is building up its own semiconductor industry.

Samsung opted not to tap loans or loan guarantees under the Chips Act, unlike Intel Corp and Taiwan Semiconductor Manufacturing Co (TSMC), both of which are also set to receive multibillion dollar grants. Samsung’s project is expected to benefit from an investment tax credit, which US officials said is likely to cover as much as 25% of qualified capital expenditures.

The Samsung award is part of President Joe Biden’s plans “to bring the manufacture of leading-edge semiconductors back to the US”, Commerce Secretary Gina Raimondo told reporters.

The Taylor project adds to a robust semiconductor ecosystem in Texas, including tens of billions of dollars of additional investment from Texas Instruments Inc in its home state and Samsung’s existing factory in Austin.

One of the fabs in Taylor is expected to start production in 2026 and the other will begin in 2027, according to a senior administration official. The company originally said the Taylor plant would begin production in the second half of 2024.

The investment is expected to create at least 17,000 construction jobs and more than 4,500 manufacturing jobs, according to Raimondo. It will contribute to local job creation as supply chains move closer to service the new facilities. US officials said US$40 million will be dedicated to workforce funding and development.

The Austin expansion will boost output of some of the world’s most advanced semiconductor technologies, powering a range of industries including defence, aerospace and autos, Raimondo said. Samsung is the leading producer of memory chips, which store data on smartphones and computers, and it’s expanding into the foundry business, or producing chips that are designed by customers.

The facility for packaging — the combining and connecting of semiconductors — will use an advanced technique known as 2.5D packaging, also important for AI.

The award will further Samsung’s competitive edge with rival chipmakers that have also received US investments. TSMC announced that it will manufacture 2nm technology at an expanded facility in Phoenix. Samsung’s hometown rival, SK Hynix Inc, also plans to build an advanced packaging facility in Indiana.

The Chips Act — which set aside US$39 billion in grants plus US$75 billion in loans and guarantees — has spurred more than US$200 billion in private semiconductor investments. Intel snagged almost US$20 billion in grants and loans. TSMC, the main chipmaker for Nvidia Corp and Apple Inc, got US$11.6 billion.

The announcement will set off a months-long due diligence period during which Samsung and the Commerce Department will hammer out final terms. The money will then be disbursed as the project hits key construction and production milestones, with the potential for clawbacks if the firm falls short of its promises.