Samsung Electronics had a rough 2023. Operating profit for the full year hovered just above $6.5 trillion won ($4.8 billion). That’s an 85% decline from 2022, the company’s poorest showing since the 2008 global financial crisis.
The South Korean technology giant hopes a $6.4 billion cash infusion from the US government will help turn things around.
The deal was made possible by the CHIPS and Science Act, which President Joe Biden signed into law in 2022 with the goal of bolstering the advanced computer chip business within the US—and specifically Texas, where Samsung will be constructing a new manufacturing facility.
The announcement came on the heels of another US-backed investment: $8.5 billion into Intel’s four-state semiconductor factory plan. The initiative is expected to boost domestic manufacturing morale as well as provide an economic shot in the arm to Arizona, Ohio, New Mexico, and Oregon.
The announcements aren’t election-year “optics” on the part of Biden, who’s currently campaigning for re-election, Wedbush tech analyst Matt Bryson says.
Rather, fabs—or a semiconductor fabrication plants—are considered expensive to build and to operate. Construction takes about three years and can cost up to $10 billion, according to Intel.
“Unlike other manufacturing, costs are largely equipment and utilities versus people,” Bryson notes.
The US isn’t the only nation subsidizing expenses, however. India, Taiwan, and South Korea are also offering tax breaks and other incentives to boost domestic chip production, Bryson says.
Europe has earmarked billions for semiconductor projects “to ensure supply chain continuity or because of political threats,” he adds. “Clearly, they’ve decided it’s important enough that they are willing to subsidize fab builds to ensure manufacturing expands in Europe, similar to what we’ve seen in the US.” “In a world where geopolitics can threaten supply chains, having domestic production also insulates the US if tensions escalate and disrupt semiconductor supply out of Asia,” Bryson says.
