Will US Semiconductor Law Discussions Accelerate... '69 Trillion Support' Eases Samsung Uncertainty

Chuck Schumer, U.S. Senate Majority Leader of the Democratic Party. (Photo by AFP Yonhap News)

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[Asia Economy Reporter Moon Chaeseok] As the U.S. Congress accelerates the passage of a bill to support domestic semiconductor manufacturing facilities with $52 billion (approximately 69 trillion KRW), attention is focused on the potential impact on Samsung's $17 billion (approximately 22.5 trillion KRW) foundry (semiconductor contract manufacturing) plant construction in Taylor, Texas. While the consensus is that there is little correlation between Texas state tax incentives and the federal government bill, some opinions suggest that the U.S. government's strong intention to attract foreign direct investment (FDI) in key regional manufacturing facilities could positively influence the resolution of uncertainties.

According to industry sources and foreign media on the 17th, Chuck Schumer, the U.S. Senate Majority Leader from the Democratic Party, recently stated that the first vote on the semiconductor industry promotion bill could take place as early as the 19th (local time). The Democratic Party proposed to exclude contentious issues such as stringent China sanctions and quickly pass the principle of "$52 billion support." The U.S. political sphere needs to pass the bill before the August summer recess, as it will be difficult to handle pending issues during the midterm elections in November.

So far, the U.S. Congress's semiconductor industry promotion bills have been adjusted to increase pressure on China. The "U.S. Innovation and Competition Act (USICA)" passed by the Senate in June last year was less stringent than the "America COMPETES Act (ACA)" passed by the House in February this year. The ACA includes ▲ mechanisms for overseas investment review ▲ provisions limiting the maximum duty-free threshold targeting China. Jeong Min, a research fellow at Hyundai Research Institute, explained, "The ACA also includes changes to trade regulations such as strengthening China's anti-dumping rules." The Democrats tried to pass the ACA, but when the Republicans did not accept it, they reportedly shifted focus back to the USICA.

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Global chip manufacturers identified as beneficiaries of the bill are closely monitoring the voting situation. In particular, Samsung Electronics, which plans to invest over 20 trillion KRW to build a foundry plant in Taylor, Texas, is also observing the situation. If the bill is passed, the principle of "69 trillion KRW support" will be upheld, so many believe it will not significantly affect investments by non-U.S. companies such as South Korea's Samsung and Taiwan's TSMC. Even if the bill shifts from ACA to USICA, it is said that the investment will not be greatly affected. The prevailing opinion is that it will not impact Texas state and Taylor city tax incentives and subsidy support.

There is also a forecast that the U.S. political sphere will consider the government's desire for swift bill passage and threats from regional companies like Intel to halt investments if the bill fails. The purpose of the bill is to prevent global semiconductor manufacturers from moving to China, but if domestic companies express dissatisfaction, the justification weakens. Intel had planned to build a $20 billion (approximately 26.5 trillion KRW) semiconductor plant in Ohio but indefinitely postponed the groundbreaking ceremony. CEO Pat Gelsinger has stated that they would shift focus to building a plant in Magdeburg, Germany, where €6.8 billion (approximately 9 trillion KRW) in subsidies are provided.

The site of the foundry (semiconductor contract manufacturing) plant that Samsung Electronics plans to build in Taylor, Texas, USA, with an investment of $17 billion (approximately 22.5 trillion KRW). (Image source=Yonhap News)

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However, some argue that the federal government's bill has little impact on state governments, making Texas state tax incentives more important. The industry unanimously agrees that for Samsung Electronics, Texas state tax incentives are a more critical issue. The saying "Samsung is Texas, TSMC is Arizona" implies there is no need to be overly concerned about the federal government bill.

So far, it is known that Samsung Electronics has received promises of tax incentives and subsidy support from the Texas state government and Taylor city authorities. The specific support details have not been finalized. Samsung has not officially announced the groundbreaking ceremony schedule. However, speculation suggests that the policy support from the state and city authorities may be based on Texas state incentive programs such as "property tax reductions by the state government for 10 years if high-wage, regular jobs are created." An industry official said, "Since the federal and state government systems differ, even if a merged version of USICA and ACA passes in Congress, it will not significantly affect policies in Texas and other states."

Samsung Electronics postponed the groundbreaking ceremony for the Taylor foundry plant, originally scheduled for last month, to the second half of the year. Although it was said to be due to scheduling conflicts of attendees including Vice Chairman Lee Jae-yong, the industry's view is that the passage of the U.S. semiconductor support bill also influenced the decision.

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