This place is becoming a chip center in the United States

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

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

This is no accident. As geopolitical tensions between China and Taiwan prompt chipmakers to turn to the United States for manufacturing, Texas has become the place to do business thanks to a combination of low taxes and new subsidies.

Since the initial introduction of the $52 billion Chip and Science Act in 2020, the United States has announced more than 50 new semiconductor projects totaling more than $210 billion. More than $61 billion of that is located in Texas, with six projects expected to create more than 8,000 jobs.

“Because we have the ports, because we have access to materials, because it’s cheap for us to do business, we’re in the best position to do that,” Texas Republican Gov. Greg Abbott told CNBC in April. capabilities to lead the next generation of chip manufacturing.”

In June, Abbott signed the Texas CHIPS Act into law. It earmarks $1.4 billion for chip companies to build in the Lone Star State and $1.4 billion for universities willing to build related research and development centers.

All of these companies, including Samsung, Texas Instruments, Infineon, Global Wafer, NXP, X-FAB and Applied Materials, have increased their presence in Texas in recent months. Apple and Amazon also design some custom chips in Texas.

When it comes to investment in new chips, Arizona leads the way with Intel's $20 billion wafer fab and is home to a $40 billion factory at TSMC, the world's top advanced chipmaker. However, Texas has the largest total number of fabs, with new investment not far behind.

CNBC visited Texas for a rare tour of the clean rooms of three massive chip plants, giving a glimpse into the plant's manufacturing heart, where workers wear special hazmat suits to protect tiny microchips from skin particles and dust. infringement.

We also visited 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. This will be home to Samsung's first advanced chips produced in the United States, but it won't be the company's first foray into the state.

Samsung came to Texas in 1996, breaking ground on a massive wafer fab in Austin that is now used entirely as a foundry to produce 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 equidistant from both coasts, and we know that some of the most prominent fabless companies in the world are actually in the United States."

Taylor said that with the new factory near Austin, it will "increase their ability to source chips domestically without having to travel to parts of the world that they might not feel comfortable doing."

A larger investment is Texas Instruments' plant in Sherman, a town of 45,000 people 60 miles north of Dallas. It adds to the company's history in Sherman, which dates back to 1966 as a stand-alone factory.

“Texas Instruments has done a lot to put Sherman on the map,” said the city’s mayor, David Plyler, adding that the new facility represents “a great addition to our community.” huge investment."

Plyler said Sherman's "whole tax base is about $4 billion."

Texas Instruments (TI) was founded in 1930 as Geophysical Service Inc. and adopted its current name in 1951. Seven years later, an engineer from the company named Jack Kilby applied for an integrated circuit patent. This invention opens up the possibility of chip miniaturization by creating entire circuits out of silicon rather than just transistors.

Texas Instruments went on to design products such as the first handheld electronic calculator in 1967 and is still known for its graphing calculators used in classrooms around the world.

"To much 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, there's almost certainly a TI semiconductor chip in it. So we have 80,000 products shipped to 100,000 different customers."

The company's technology involves "anything that plugs into a wall or has a wire," Flessner said.

CNBC spoke with Flessner at Texas Instruments' RFAB2 facility in Richardson, Texas, a suburb north of Dallas. The plant, which opened in September and is the company's second in Richardson, is where Texas Instruments plans to produce a total of 100 million analog chips per day.

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

"We have plenty of water, which is the golden currency of urban and economic development right now," Plyler said.

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

Taiwan-based Global Wafer Corp. is expanding in Sherman, planning to spend $5 billion to build the largest silicon wafer plant in the United States to produce bare disks used to make chips.

Meanwhile, about a quarter of the state remains in drought, leaving businesses vulnerable to the effects of a rapidly changing climate.

"The Texas Water Authority is looking at this issue and we're working on legislation this session to make sure that as Texas' population continues to grow, we're not only meeting the water needs of businesses," Abbott said. It also meets the water needs of our growing population.”

Texas Instruments and Samsung have both increased water reuse goals in their new factories.

Then there are the power requirements. Each of the advanced chip-etching extreme ultraviolet (EUV) lithography machines Samsung will use in Tyler is rated to consume about 1 megawatt of energy, 10 percent more than the previous generation.

Texas has a unique independent power grid, largely cutting off its ability to borrow electricity across state lines. In 2021, the grid failed during an extreme winter storm, leaving millions of Texans without power and killing at least 57 people.

"I have signed 12 laws to make the electric grid more reliable, more resilient and more secure," Abbott said. "We can absolutely guarantee any business moving here that they will be able to get the power they need at a lower cost."

Samsung, Infineon, and NXP were forced to temporarily close their Austin plants during the February 2021 power outage. Samsung, Infineon and other companies have since switched entirely to renewable energy.

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

"Texas is spacious, has a large area, and has great support for business convenience," said Jinman Han, head of Samsung's U.S. chip business. "At the same time, we have received support from local governments in Texas. Strong support, and even strong support from the governor of Texas himself.”

Texas is one of the few states that does not impose an income tax. Add in sales tax exemptions for manufacturing machinery and various other tax breaks, and it's understandable that Caterpillar, Charles Schwab, Hewlett-Packard and Oracle have all moved their headquarters to Texas in recent years.

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

“The number of chips in cars, electric cars, and cars in general is increasing dramatically,” said Melissa Hebert, senior project manager at Infineon’s Austin site. “All the connectivity, all the communications in the car, around the car is increasing the number of chips in every car. content."

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

“With support from the state Legislature and federal support for the industry, Texas continues to be a hub for us to build manufacturing,” Herbert said before taking us inside an Infineon clean room.

Netherlands-based NXP Semiconductors also owns two fabs in Austin and recently planned a $2.6 billion expansion to add a four-story fab.

X-FAB, a chip company that has been operating in Texas for more than two decades, recently announced a $200 million expansion of its silicon carbide factory in North Texas.

Suppliers are not far behind.

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

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

Applied Materials, the world's second largest semiconductor equipment supplier, has been based in Austin since 1992.

The boom in U.S. fab development comes as some major chip companies face a slowdown due to economic uncertainty. Intel

The third-largest advanced chipmaker aims to cut costs by up to $10 billion over the next three years and is selling its 61-acre Austin research center.

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

"We own 1,200 acres, and the first plant was about 250 acres," Taylor said. "So we have room to expand."

Likewise, Texas Instruments is still aggressively building fabs after reporting its first sales decline since 2020 earlier this year.

"We are in the relatively early stages, but we are making great progress toward starting production at the plant in 2025," Flessner said.

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