South Korea’s Samsung Electronics is facing a significant increase in the cost for building its chip plant in Taylor, Texas, to $25 billion against the initial target of $17 billion, Reuters news report said.
The increase in cost is primarily due to inflation. The higher construction cost is about 80 percent of the cost increase. The materials have gotten more expensive.
The newly estimated cost could go up even more if the construction of the Taylor plant gets delayed.
Chipmakers are applying for billions in grants from the Joe Biden administration thanks to the CHIPS Act, aimed at enhancing chip production in the United States. Increasing costs raise questions about how far those dollars will go.
U.S. Commerce Department officials said early this month that most government grants will only cover up to 15 percent of the cost of new plants. Meanwhile, in the three years since lawmakers first floated the $52 billion figure for CHIPS Act grants, of which only $39 billion is earmarked for direct investment in plant construction, the cost of labor has risen sharply, along with the price of construction materials like steel.
That could push up the cost of what are already huge spending plans. Last year, Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chip manufacturer, announced it would more than tripling a planned investment in a new plant in Arizona to $40 billion.
Meanwhile, Intel announced a $20 billion chip factory in Ohio that it could expand to cost up to $100 billion. Last year, chipmaker Micron Technology said it planned to invest up to $100 billion over the next 20-plus years to build a computer chip factory complex in upstate New York.
Samsung, the world’s No.2 contract chip manufacturer, announced its Taylor, Texas, plant in 2021. It aims to make advanced chips for functions such as artificial intelligence, 5G and mobile phones, and promises to create 2,000 high-tech jobs. Samsung has already broken ground.
Samsung, the world’s biggest memory chipmaker, is rushing to finish the manufacturing plant by 2024 so that it is producing chips by 2025, which would put the company ahead of a 2026 deadline to secure investment tax credits on tools for the factory.
Samsung had already spent as much as half of the $17 billion initially projected for the Taylor site and noted that the company might eventually opt to build additional factories.