Samsung’s new semiconductor fab being built in Taylor, Texas is a site to behold. In this new era of industrial policy and the build-up of domestic semiconductor manufacturing, one often hears complaints about how expensive it is to build in the U.S. or the difficulty of getting things done. The Semiconductor Industry Association reported that the U.S. was not a cost competitive location based primarily on labor costs and the level of government incentives. But you don’t hear the complaints coming from this part of the country. And while the sheer scale of the site was impressive (they always do things bigger in Texas), I took away three messages around the significance of this project.
More than a factory, Samsung is building a cluster of capabilities
The Taylor site is a $17 billion investment, part of more than $47 billion the company has invested in the U.S. since arriving here in 1978. Over the planned project duration, the company could potentially build multiple fabs here as a secondary cluster to their Austin site. Construction was going on in parallel on an array of supporting buildings for chemical and gas supplies, a utility building, an office building, the manufacturing facility, and a parking garage. In addition, there is also a massive “back house” infrastructure going in, including bulk gas facilities, a water reclamation facility, and an electrical substation.
The soil type in Williamson County where Taylor is located is predominantly clay, hence the manufacturing facility and main buildings are suspended from shafts drilled into the ground so that vibration can be eliminated on the floors. That meant drilling 20,000 holes and setting piers 110 feet into the ground. That meant a huge amount of concrete, supplied by five on-site batch plants to make 650,000 cubic yards of concrete. A Union Pacific rail line adjacent to the site was used to bring in 2.7 billion pounds of aggregate.
The 1200-acre site is almost twice as large as Samsung’s flagship Pyeongtaek Campus in South Korea. And the vision for this site is to be vertically integrated and self-reliant as much as possible, much as they are in Korea. It’s easy to be awed by the scale of this construction project.
As we drove around the site, I saw giant 14-foot diameter specialized exhaust ducts. They are made in nearby Belton in a partnership Samsung helped set up between a Korean company and a local firm. I was told that “The best way to make sure our needs are met is to develop a local industry that would be able to support us. We’ve done that with a handful of key things where we can see a capability that exists significantly or to a greater extent in Korea.”
As a result, Samsung’s Taylor project is potentially bringing nearly a dozen companies to Texas with this U.S. expansion. The Williamson County Economic Development Partnership (WilCo EDP) recently opened an office in Korea to court other companies to establish operations in the county. The office is hosted by the Korea Trade-Investment Promotion Agency (KOTRA), the Korean equivalent of the U.S. Trade and Development Agency. WilCo EDP is looking beyond semiconductor suppliers though, also targeting life sciences, automotive and software companies. Interestingly, KOTRA recently opened an office of its own in Austin.
To speed construction, the facility design made extensive use of precast concrete, something that is typically used only for long-span bridge beams and parking garages. “We had to develop a local industry that was capable of supporting the volume we needed in the timeframe needed,” I was told. “For the first building phase, Samsung used thousands of precast members like columns, waffle slabs, and other components, soaking up the entire precast capacity of central Texas.
Driving further, we saw an air seperation plant that will produce liquid nitrogen and argon gas. The company will also install electrolyzers to supply hydrogen. Most of the company’s production materials for its existing fab in Austin are sourced domestically, because they want to be able to control the supply chain risk, and the company plans to continue that practice in Taylor. That has the benefit of growing a wide range of capabilities of local suppliers. Samsung’s existing fab in Austin spent $5.1 billion locally in 2022 (including payroll).
Partnering with local government is a two-way street
We have heard foreign companies complain about how long it takes to build new facilities in the U.S. Building something of the scale of the Taylor is an extraordinarily complex process. There were thousands of people working at the site, spread over Samsung’s own people, its tier one contractors, and numerous subcontractors. If materials arrive late or a building inspection approval is behind schedule, a lot of people end up waiting, costing hours or days before you can start making product and earning revenue. While I’m sure there were countless problems every day, you could feel the push to keep on schedule – it was palpable. The company maintains a significant buffer of production materials on site to insulate themselves from supply chain disruptions, and you could see it staged carefully.
Samsung clearly values having the city of Taylor as a partner. “We meet with them at least weekly. Most frequently, it’s every day on inspection planning; we didn’t have a single delay in any of our permits,” I was told. In comparing permitting and inspections being done on time, the team at Taylor has reached parity with Korea in preventing any delays. The city reviews tens of thousands of permitting drawings with a turnaround typically less than a month. As my guide explained, “It’s not just that the city needs to do their part, we need to make sure that we are structured so that we’re ready to respond to every request we get from the city … we want to make sure that those design packages or those permits aren’t sitting with us, we have to turn those as quickly as possible.”
The company received economic development incentives from the city, county and the State of Texas. It’s also partnering with local schools, workforce development agencies and veterans groups to supply and train the future workforce they will need. According to an analysis performed by a third-party firm, Samsung’s economic impact in the region from its Austin operations and Taylor construction sites combined was $13.6 billion in 2022 alone.
Samsung clearly plans to be successful with this U.S. fab
We have heard a lot about how the cost of running a semiconductor fab is higher in the U.S. than in Asia, let alone at the advanced node that Samsung has committed to. Taylor will make chips using Samsung’s new 4 nm designs. No doubt the investment tax credit (ITC) that is part of the CHIPS Act, and any potential CHIPS Act subsidies will help with the costs of such investments to get things started. But the company was very clear that they plan to be successful at this site, as they are at their existing Samsung Austin Semiconductor (SAS) site which has been in operation for 27 years. They said it was imperative that they did so as part of their commitment to their customers and the local community.
We tend not to hear much about the existing site in Austin, but by my estimate it is the largest foundry operation in the U.S. by perhaps a factor of three or even a little more. They manufacture chips there for “fabless” companies who focus exclusively on design. The site started manufacturing DRAM memory chips, and then added flash memory before shifting to logic. Today they make chips ranging from 65 nm all the way down to 14 nm. Jon Taylor, the Corporate VP of Fab Engineering at the Austin Fab site assured me that they were “solidly profitable.” It is one of the largest economic drivers in the region.
Samsung shows a lot of confidence that despite the challenges they are going to make Taylor work, and make a profit doing so. Granted they are being careful to phase construction to ensure that they track demand in the market. But talking with management there, they don’t have any doubt that they can do it.
I recently was talking to a senior executive at Toyota, who told me that when they first began manufacturing in the U.S., they were not sure whether they would make money. But they partnered with local suppliers, and worked to build an ecosystem, partnering with schools, governments, and local companies. They have been extraordinarily successful in the U.S. and really are a role model. Samsung has been working at it for nearly three decades as well, and has figured this out. We can learn a lot from them.