Samsung Electronics in Texas, USA, Sparks 'Overspending' Controversy Amid Large Incentive Promises

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] When the small city of Taylor in Texas promised large-scale incentives to attract Samsung Electronics' second semiconductor foundry plant in the United States, controversy arose domestically over 'excessive giveaways.'

According to Bloomberg on the 24th (local time), Taylor agreed to cut property taxes by 90% for the next 10 years and then reduce them by 85% for the following 10 years for Samsung Electronics. Additionally, it decided to exempt education taxes amounting to $314 million (about 374 billion KRW).

Moreover, Texas is expected to provide a $27 million (about 3.2 billion KRW) subsidy for job creation through the Texas Enterprise Fund (TEF). Tax benefits such as exemption from sales tax on materials needed for factory construction will also be provided.

Kasia Tachinska, a researcher at the U.S. civic group Good Jobs First, said, "These are among the many benefits Samsung Electronics can enjoy."

However, Bloomberg reported doubts about whether the investment attraction effect can be properly realized despite attracting Samsung Electronics through such large-scale investment.

The biggest risk is whether Samsung Electronics can create new jobs as promised. Samsung plans to invest $17 billion (about 20 trillion KRW) to establish a new semiconductor plant and create 2,000 new jobs.

Samsung Electronics has already created more than 3,000 jobs through its semiconductor plant in Austin, Texas.

However, since the recent COVID-19 pandemic, the U.S. has been experiencing a large-scale labor shortage.

▲Lee Jae-yong, Vice Chairman of Samsung Electronics [Image source=Reuters Yonhap News]

Even if new jobs are created, the influx of thousands of new residents accordingly is also a risk factor. Housing prices may rise, and issues such as traffic congestion and infrastructure shortages may occur.

To prepare for these problems, Taylor plans to issue local bonds worth about $18 million (about 21.4 billion KRW) in the first quarter of next year.

Questions have also been raised about how the small city of Taylor was able to attract Samsung Electronics' semiconductor plant.

According to major foreign media, the most important concern for Taylor in attracting Samsung's plant was to assure that power outages like those last winter would never happen again.

Earlier in February, due to heavy snowfall and record cold in Texas, power demand surged, causing blackouts in more than 3 million households and offices.

According to Samsung Electronics, this incident halted operations at Samsung's first foundry plant in Austin, causing damage estimated between 300 billion and 400 billion KRW, and full normalization was achieved around April.

To prevent recurrence of such incidents, Taylor arranged meetings earlier this year between Samsung Electronics and Oncor, Texas' largest transmission and distribution company, and received assurances that power outages like last winter would not happen again.

They also assisted in connecting a water pipeline from Aloca, about 40 km east of Taylor, to ensure stable supply of industrial water.

Officials in Taylor reportedly read books about Asian culture to prepare for negotiations with the Asian company Samsung Electronics, according to major foreign media.

This content was produced with the assistance of AI translation services.