Taylor Tightens

Taylor Tightens

In November of 2021 Samsung Electronics and the city of Taylor, Texas signed an agreement  for a large semiconductor project, after Samsung received offers from a number of cities around the US as part of the country’s $6.4 b CHIPS ACT designed to bring semiconductor production back to the US.  The first of two plants and support buildings and infrastructure were originally slated to be completed during the 2nd half of last year.  In July of 2022 the government of Taylor expanded the tax incentive agreements, however by the end of 2023 Samsung announced that there would be a delay in the opening of the plant, moving it from 2H 2024 to 2025, although it was thought that Samsung was also upgrading the plant to 2nm production to compete with other foundries.
However, as it is rare that plans, especially for such a large project, meet early timelines, Samsung’s construction has been slower than expected and the plant 1 start up date was pushed back again to 2026 as construction has been on hold for the last few months a result of a weak semiconductor market.  This has caused the Taylor city government to amend its original tax incentive plans, which were a bit open ended, to push Samsung more intensely to move forward with the project.  Taylor made the following changes to the plan:

• Samsung will start bringing in process equipment by the end of 2026
• Taylor capped its reimbursements to Samsung for plan reviews and inspections at $9m, down from $25m previously.
• Samsung must complete 6m ft2 of permanent and temporary building space by the end of 2026 and another 1m ft2 by 2028.

While these are certainly not draconian measures, they do indicate considerable frustration with the pace of Samsung’s project development, especially given how aggressive other cities and regions were when wooing Samsung to a new US location (Genesee County, NY – Goodyear, AZ – Queen Creek, AZ – Austin, TX).  Samsung is facing a weak semiconductor market , a variable tariff situation, weak consumer demand, and an administration that looks to reduce previous administration semiconductor spending, making the large capital expenditures needed for this project problematic, but will have to meet at least these new goals if they are to receive the tax breaks they need to control costs.  That said, the bigger question is whether the current administration will rescind already promised CHIPS capital, which would be a far more onerous situation than the amended Taylor tax incentive plans.  Of course, Samsung can always decide to sell the plant and have someone make it into an AI data center…

Figure 1 Samsung Taylor, Texas Plant under construction - Source: Korea JoongAng Daily

video of plant under construction
https://www.instagram.com/reel/C_Y-eyWxYBd/?utm_source=ig_web_copy_link