Samsung Electronics preps for chip race, completes subsidy application in U.S.

The construction site for Samsung Electronics’ chip plant in Taylor, Texas, U.S. [Courtesy of Samsung Electronics]

Samsung Electronics Co. has completed its application for support under new U.S. legislation, mitigating China-related risks and gearing up for the fierce global chip race.

According to industry sources on Tuesday, the South Korean chipmaker recently finalized the application for support under the U.S. CHIPS Act, following its submission of a preliminary expression of interest in April.

The application process for the U.S. chip support subsidy includes the submission of a preliminary expression of interest and a formal application, followed by corporate inspection.

Once the corporate inspection process by the U.S. Department of Commerce is completed, Samsung Electronics will become eligible for U.S. government subsidies for advanced chip production.

Direct subsidies for chip production support amount to 5 to 15 percent of the entire project capital expenditure. Assuming that Samsung Electronics has invested 25 billion in its chip plant in Taylor, Texas, it may receive up to $3.75 billion in subsidies. Subsidies are likely to become available as early as this year.

Samsung Electronics has been anticipating chip production support subsidies since the initiation of its Taylor factory construction, but it faced various challenges, mostly related to its business in China, triggered by the intensifying U.S.-China tension.

The chipmaker operates NAND flash factories and post-processing facilities in Xian and a post-processing factory in Suzhou, China.

With some of the uncertainties regarding the company’s business in China now resolved, the company expects there will be fewer challenges in receiving the U.S. government subsidy.

In October, the U.S. government announced semiconductor equipment export controls targeting China, although it is expected that the grace period is likely to be extended for Korean and Taiwanese chipmakers.

This means that Samsung Electronics can continue to import equipment for facility upgrades at its factories in China.

There is also an analysis suggesting that the guardrail clause in the U.S. CHIPS Act may not pose substantial constraints.

Under the guardrail regulation, chipmakers receiving subsidies are prohibited from expanding their chip production capacity in China by more than 5 percent for the next 10 years. The U.S. government is reportedly proceeding with the subsidy distribution process.

“Since Samsung Electronics meets most of the requirements and qualifications, a positive result is anticipated,” said one industry source.

Samsung Electronics plans to operate the Taylor factory as a foundry and aims to target major U.S. customers in the U.S. with chips produced using advanced processing techniques.