Larger US chip subsidy to help Samsung compete in foundry business

Samsung Electronics, which is building a chip foundry plant in the U.S. state of Texas, will likely receive over $6 billion in subsidies from Washington, allowing the Korean chipmaker to better compete with TSMC, the world’s leader in the contract-based chip-making business, according to media reports and industry experts Friday.

The U.S. Department of Commerce is expected to soon announce that it will provide Samsung with sizable subsidies, as part of Washington’s chip subsidy program known as the CHIPS and Science Act, according to Bloomberg. The act was enacted in 2022 to support semiconductor companies with federal subsidies for constructing factories and producing chips on American soil.

Samsung plans to invest $17 billion to build a foundry plant in Taylor, Texas, which is currently under construction. This news is encouraging for Samsung if confirmed, as it was widely expected that the company would receive a lower-than-expected subsidy.

Given TSMC is expected to receive $5 billion in subsidies, if Samsung receives a greater amount, this will help the Korean company to better compete with the Taiwanese chip giant. TSMC has a market share of more than 60 percent in the foundry business, much larger than Samsung which is in second place, with just a 10 percent share in the sector.

The U.S. has been working on bringing chip manufacturing back to its shores with the act, amid its ongoing technological rivalry with China, but the subsidy payments have been slower than planned, delaying Samsung’s plans and other companies to start up their new plants.

Samsung’s Taylor foundry plant was initially scheduled to start mass production by the end of this year, but due to a sharp increase in construction costs and the delayed subsidy payment, it had to postpone the commencement of operations until after next year.

Experts said that Samsung receiving more subsidies from the U.S. than TSMC is a positive signal for its foundry business.

“There were concerns that foreign companies might be discriminated against as predictions emerged that Samsung Electronics would receive less in subsidies. This report could dispel such concerns,” Kyung Hee-kwon, an associate research fellow at the Korea Institute for Industrial Economics and Trade (KIET), said. “If Samsung receives a larger subsidy than TSMC, it could be interpreted as Washington’s high expectations for Samsung to increase advanced chip production within the country.”

The researcher further commented about Samsung’s potential opportunity in the U.S. foundry business and forecast AI chip demand there.

“Since most chip design companies are in the U.S., and demand for AI chips is expected to increase, Samsung Electronics should focus on strengthening its foundry business there,” Kyung added.

When contacted by The Korea Times, a Samsung spokesperson declined to confirm any details.