The Korean giant Samsung aims to invest up to 192 billion dollars over 20 years on two sites in Texas to build no less than 11 semiconductor factories – the “fabs”. An investment that would allow the United States to return to the race for domestic production
One hundred and ninety-two billion dollars: this is the 20-year investment plan that Samsung unveiled at the end of last week. At a rate of almost 10 billion dollars per year for twenty years, Samsung could thus build up to 11 semiconductor factories in Texas. This would make it one of the most important foreign investments in the territory.
Why does a South Korean company, which weighs a quarter of the GDP of its country of origin, have an interest in investing such sums in a foreign country? Why does the United States, which chases certain companies (especially Chinese) from their country, open its arms a priori without restriction to an Asian group? What are the stakes of such an investment not only for the United States and Samsung, but also for the world of semiconductors? Here are some elements of analysis.
A project, not a promise (but a factory is already in the making)
Taking advantage of the upcoming end of a ten-year local tax exemption for companies setting up in Texas, Samsung has presented a project that could, in its most optimistic form, represent 11 chip production factories (the “fabs”) for an amount of 192 billion dollars. Which is not delusional since the slightest factory using the latest generation “extreme ultraviolet” (EUV) engraving machines costs at least 10 billion.
In the documents entrusted by Samsung to the American administration, nothing commits the Korean to build anything for the moment. What supports Samsung’s proposal, however, is that it already operates two factories in Texas (including the one that produces SSD controllers, which we have already told you about), and that it is currently building a third for the whopping $17 billion. Samsung therefore already has a foothold, and unlike TSMC, does not need to create a supply chain from scratch. Beyond a decade without taxes, if Samsung is already installed in the United States and plans to spend such sums, it is for an obvious reason: there are many potential customers.
The risks of total dependence on TSMC (and the shadow of China)
Apple, AMD, Texas Instrument, IBM, Qualcomm, Nvidia, Micro, Google, Broadcom, Lattice, Marvell, Cirrus Logic, Ampere… Ok, that’s it! The list of US companies developing their own chips and needing production capacity is perhaps the largest in the world. And to produce their chips, these companies all call on two players: Samsung and TSMC. However, the latter clearly has the advantage at the moment, whether in terms of neutrality (Samsung producing smartphones, Apple tends to avoid its services) and in terms of performance and yield. But as strong as TSMC is, this actor represents a major risk: that of putting all the eggs in one basket. This dependence on a single player is also recognized by Asian companies: MediaTek has just announced a partnership with Intel’s IFS service for the production of its chips.
In addition to this risk of concentration of powers represented by the TSMC case, its geographical location poses a problem. One of the elements of the success of the world number one in semiconductors is its well-established supply chain with production sites very close to each other, all located in Taiwan. From a geological and climatic point of view, Taiwan suffers chronic typhoons and earthquakes, experiences more and more drought (water is an essential element for the production of chips). But it suffers above all from the Chinese shadow. If the country is sovereign, Xi Jingping’s China nevertheless aims for a “return to the motherland” of the island. By arms, if necessary. A whole section of the military doctrine and exercises of the People’s Liberation Army (the name of the Chinese army) revolves around the objective of “recovering” the island. And most of the training of its forces takes the form of operations against “a secessionist island and a powerful ally”. No need to be a diviner to recognize Taiwan and its protector, the United States.
The Taiwanese government knows this and part of its defense doctrine is based on the Silicon Shield, that is to say the assurance that its importance in the production of semiconductors assures it American protection. Even if the Americans bring, and in an increasingly vehement way, their support to Taiwan, it is not certain that the country of Uncle Sam is ready to return to open war with China on an Asian front. Having state-of-the-art factories on its territory is the assurance that in the event of a conflict, the American champions can continue to produce chips. As much for consumer products as for military equipment – TSMC notably engraves chips for the F35.
Intel does not (yet) know how to work with others
He is one of those American champions who also knows how to produce chips: Intel. And not only is the world number 1 in the sector investing tens of billions at all costs – even in Europe and particularly in France –, but in addition, it launched its foundry service, Intel Foundry Services, last year. While producing only for its own needs, the chip titan decided, under the impetus of its CEO, Pat Gelsinger, to compete with TSMC and Samsung.
If the first letters of intent – with Qualcomm and MediaTek – have been signed, it will take several years for Intel to continue to progress technically, but also learn to work with others. It is this ability to put itself at the service of its customers which is one of the great strengths of TSMC and Samsung (which for example engraves the GeForces, from Nvidia). However, these human, technical and organizational skills take time to develop. And materialize on projects of several years.
If Intel can become a major third-party foundry to tease TSMC, Samsung, UMC or GlobalFoundries, then it will take time. Samsung’s position is very strong here, because the Korean has, in this area as in EUV engraving, a few lengths ahead of the American.
Faced with China, the Americans want to regain their leadership
Weighing only 12% of the total volume of chips produced compared to 37% in 1990, the United States is losing momentum in a field that is nevertheless increasingly strategic. For players in the tech industry on the one hand, whether Apple, AMD or Nvidia, but also for increasingly electronic sectors, on the other hand. The shortage of semiconductors that has hit us for two years has brought the automotive industry to its knees in what the washington post qualified for “worst crisis for 50 years”. Forcing manufacturers to remove functions, remove components or let cars rot in storage lots while waiting for the precious chips to arrive… from Asia, for the overwhelming majority.
It is to reverse this balance and limit its dependence on Asian players – particularly China – that President Biden’s government launched the CHIP Act, a $52 billion aid plan for the sector. An operation which, like many political projects in the United States at the moment, is dragging on. The arrival on the table of a huge long-term investment plan is therefore, for the American authorities, a godsend. Because Samsung’s plans do not mention the CHIP Act, but simply rely on Texas aid.
Will Samsung’s plan take shape? If so, to what extent: half of the project? The almost 200 billion promised? Impossible to say. What is certain is that such an investment would further weld the ties between the two countries (with 23,000 American soldiers deployed on its soil, South Korea is the 3e largest American “base” after Japan and Germany) which form, with Taiwan and Japan, an “anti-China” axis, both in the field of semiconductors and in terms of defence.
Source :
CNBC
