South Korean giant Samsung is building a $17 billion semiconductor manufacturing plant on 1,200 acres in a small town 30 miles north of Austin, Texas.

A four-hour drive north to Sherman, Texas Instruments is in the early stages of a $30 billion project, the largest investment in new chips in Texas.

This is no accident.

As geopolitical tensions between China and Taiwan push chipmakers to turn to the U.S. for manufacturing, Texas has become the place to do business thanks to a combination of low taxes and new subsidies.

Since the first introduction of the $52 billion CHIPS and Science Act in 2020, more than 50 new semiconductor projects in the US A total of more than $210 billion has been announced. More than $61 billion of that is located in Texas, where six projects are expected to create more than 8,000 jobs.

“Because we have ports, because we can get materials, because we can do business cheaply, we are best placed to lead the way in the next generation of chip manufacturing,” Texas Republican Gov. Greg Abbott told CNBC in April.

In June, Abbott signed Texas Potato Chip Act enter the law. It allocated $1.4 billion for chip companies to manufacture in the Lone Star State and $1.4 billion for universities willing to build related R&D centers.

Samsung, Texas Instruments, Infineon, Universal Wafers, NXP, X-FAB and Applied Materials All of these companies have ramped up their Texas operations in recent months. apple and amazon Also designs some custom chips in Texas.

Arizona leads with $20 billion fab in new chip investment Intel and the $40 billion factory of TSMC, the world’s top advanced chipmaker. However, Texas has the largest total number of fabs, followed closely by new investment.

CNBC visited Texas for a rare tour of the cleanrooms of three large chip factories, and glimpsed the factories’ manufacturing centers, where workers wear special protective suits to protect the tiny microchips from skin particles and dust.

On June 14, 2023, Melissa Hebert, Infineon’s Senior Manager, Austin Field Projects, gave CNBC’s Katie Tarasov a tour inside Infineon’s chip manufacturing facility in Austin, Texas.

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We also toured two of the largest new projects under construction in the state.

Samsung’s new factory in Taylor Township is scheduled to start production next year. It will be home to Samsung’s first batch of advanced chips produced in the United States, but it’s not the company’s first foray into the state.

Samsung came to Texas in 1996 and broke ground on a massive fab in Austin that is now fully dedicated to foundries, producing logic chips for outside customers. The company opened a second factory there in 2007.

“Our customers love coming to Texas,” said Jon Taylor, vice president of Samsung Fab Engineering. “It’s about equal distance from both coasts, and we know that some of the most famous fabless companies in the world are actually in the US.”

With the new facility near Austin, it will “increase their ability to source chips domestically without having to travel to parts of the world where they might not feel comfortable,” Taylor said.

A bigger investment is Texas Instruments’ factory in Sherman, a town of 45,000 people 60 miles north of Dallas. It enriches the company’s history in Sherman, which dates back to 1966 as an independent factory.

“Texas Instruments has done a lot to make Sherman famous,” said the city’s mayor, David Plyler, adding that the new facility represents a “tremendous investment in our community.”

Sherman’s “entire tax base is about $4 billion,” Preller said.

Texas Instruments (TI) was founded in 1930 as Geophysical Service Inc. and adopted its current name in 1951. Seven years later, an engineer at the company named Jack Kilby filed for a patent on the integrated circuit. The invention opened up the possibility of chip miniaturization by using silicon to create entire circuits rather than just transistors.

Texas Instruments (TI) went on to design products such as the first handheld electronic calculator in 1967 and is still best known today as the graphing calculator used in classrooms around the world.

“For most of the world, it’s a calculator company, but we’re much more than that,” said Kyle Flessner, senior vice president of Texas Instruments’ technology and manufacturing group. “If you have an electronic device, it almost certainly has a TI semiconductor chip in it. So we have 80,000 products and ship to 100,000 different customers.”

The company’s technology involves “anything that can be plugged into a wall or has a wire,” Fleisner said.

CNBC caught up with Fresner at Texas Instruments’ (TI) RFAB2 facility in Richardson, Texas, a suburb north of Dallas. The plant, which opened in September, is the company’s second in Richardson, and Texas Instruments (TI) plans to produce a total of 100 million analog chips per day.

water and electricity

On June 15, 2023, Texas Instruments (TI) invested a $30 billion chip factory project in Sherman, Texas.

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Fresner also took us to Sherman’s construction site. The main draws there are water and electricity, he said. Local lawmakers have in the past bought water rights to nearby Lake Texoma, one of the largest reservoirs in the country, on the Texas-Oklahoma border.

“We have an abundance of water, which is the golden currency of urban and economic development right now,” Preller said.

Making chips requires billions of gallons of water every year. Texas Instruments isn’t the only company taking advantage of this space.

Taiwan-based Universal Wafers is expanding in Sherman, plans to spend $5 billion to build Largest Silicon Wafer Factory In the U.S., the bare disks used to make chips are produced.

At the same time, about a quarter of the state remains in drought conditions, leaving businesses vulnerable to a rapidly changing climate.

“The Texas Water Department is looking at this issue, and we are developing legislation for this session to ensure that as the Texas population continues to grow, we can meet not only the water needs of businesses, but also the water needs of our growing population,” Abbott said.

Both Texas Instruments (TI) and Samsung (Samsung) have increased water reuse targets at their new factories.

Then there are the power requirements. Each of the advanced chip-etching extreme ultraviolet (EUV) lithography machines that Samsung will use at Taylor has a rated power consumption of about 1 megawatt, 10 percent more than the previous generation.

Texas has a unique independent power grid, which largely cuts off its interstate borrowing channels. In 2021, the grid failed during an extreme winter storm, causing Millions of Texans without power, at least 57 dead.

“I’ve signed 12 laws to make the grid more reliable, more resilient and safer,” Abbott said. “We can absolutely assure any business that moves here that they will be able to get the power they need at a lower cost.”

Samsung, Infineon and NXP Forced to temporarily close Austin plant during power outage in February 2021.Samsung, Infineon and other companies have since switched production fully renewable strength.

“Texas is spacious”

Samsung is building a $17 billion chip factory on 1,200 acres in Tyler, Texas (30 miles north of Austin). Shown here is the construction site as of April 21, 2023.

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Since the dawn of Silicon Valley, the cost of making smaller and smaller transistors has skyrocketed, along with the size of the machines and the amount of land required to make them. Texas has long been known for its land abundance and policies that favor new businesses.

“Texas is spacious, it’s big, and it has a lot of support for business convenience,” said Jinman Han, head of Samsung’s U.S. chip business. “At the same time, we’ve got a lot of support from local governments in Texas, and even from the governor of Texas himself.”

texas is one of them only a few states There is no income tax.combine it with sales tax exemption With regard to manufacturing machinery and various other tax breaks, it is understandable why Caterpillar, Charles SchwabHewlett-Packard and Oracle have all moved their headquarters to Texas in recent years.

Germany’s Infineon, one of the world’s largest suppliers of automotive chips, has been in the U.S. market for 25 years and produces many semiconductors in Austin.

“The number of chips in the car, the electric car, and the car in general is increasing dramatically,” said Melissa Hebert, senior project manager at Infineon’s Austin plant. “All the connectivity in and around the car, all the communication is increasing the amount of chips in each car.”

In 2020, Infineon expanded its production in Texas, acquiring Cypress Semiconductor for about $10 billion.

“With the support of the state legislature and the federal support for the industry, Texas continues to be the hub where we build manufacturing,” Herbert said before taking us inside the Infineon clean room.

Netherlands-based NXP Semiconductors also has two fabs in Austin and recently plans to build one $2.6 billion expansion This will add an additional four-story factory.

X-FAB, a chip company operating in Texas for more than two decades, recently announced a $200 million expansion Silicon carbide plant in North Texas.

Suppliers are not far behind.

“When you start bringing in fabs like this, you need to build the ecosystem,” Samsung’s Taylor said. “There’s a lot of talk now about local supply chains.”

Samsung’s $17 billion factory in Taylor, $11 billion for machinery and equipment. TI said such tools would account for at least 65% of the cost of its new Sherman plant, including a $200 million EUV lithography machine made by ASML, which has offices in Dallas and Austin.

The world’s second largest supplier of semiconductor equipment, Applied Materials, has been based in Austin since 1992.

The boom in U.S. fab development comes at a time when some major chip companies are facing a slowdown amid economic uncertainty. IntelThe third-largest maker of advanced chips aims to cut costs by up to $10 billion over the next three years, and 61-acre Austin research center for sale.

Samsung reported dismal first-quarter earnings in April and cut production of memory chips as prices fell. But the company is pouring more money into the foundry side of its business, making logic chips in Texas and planning to expand with a new factory near Austin.

“We have 1,200 acres of land, and the first plant is about 250 acres,” Taylor said. “So we have room to expand.”

Likewise, Texas Instruments reported earlier this year that its fab Sales drop for first time since 2020.

“We’re at a relatively early stage, but we’re making tremendous progress towards having production at the plant in 2025,” Flessner said.

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