Samsung Electronics had a difficult 2023. Operating profit for the full year hovered just above 6.5 trillion won ($4.8 billion). That’s down 85% from 2022, the company’s worst performance since the 2008 global financial crisis.
The South Korean tech giant is hoping a $6.4 billion cash injection from the US government will help change the situation.
The deal was made possible by the Chips and Science Act, which President Joe Biden signed into law in 2022 to support advanced computer chip manufacturing businesses in the US, and specifically in Texas, where Samsung will build a new manufacturing facility.
The announcement comes on the heels of another U.S.-backed investment: $8.5 billion in Intel’s semiconductor manufacturing plan in four states. The initiative is expected to boost domestic manufacturing morale as well as provide an economic boost to Arizona, Ohio, New Mexico and Oregon.
The statements are not election-year “optics” from Biden, who is currently campaigning for re-election, says Wedbush tech analyst Matt Bryson.
Chances are, fabs—or semiconductor plants—are considered expensive to build and operate. Construction will take about three years and could cost up to $10 billion, according to Intel.
“Unlike other industries, costs are primarily related to equipment and utilities rather than people,” Bryson notes.
However, the US is not the only country subsidizing costs. India, Taiwan and South Korea are also offering tax breaks and other incentives to boost domestic chip production, Bryson said.
Europe has committed billions of dollars to semiconductor projects “to ensure supply chain continuity or because of political threats,” he adds. “Apparently they have decided that this is important enough that they are willing to subsidize the construction of factories to enable expansion of production in Europe, similar to what we have seen in the US.” “In a world where geopolitics can threaten supply chains, having domestic production will also insulate the US if tensions escalate and disrupt semiconductor supplies from Asia,” Bryson says.