Samsung secured go ahead on incentive applications, potential expansion to Manor

Samsung Electronics Co. Ltd. has secured the go-ahead to seek incentives that would come with a massive investment at its current and future sites in the Austin area.

The South Korean tech giant — which last year pledged to build a $17 billion next-generation fabrication plant in the small town of Taylor, and has had a presence in North Austin for decades — on May 24 was approved by the school boards in Manor and Taylor to pursue 11 new incentives agreements designed to provide tax breaks for large manufacturing projects.

While the company did not reveal the scope and size of the potential projects, including capital investment and job totals, the type of incentives sought by the company signify major potential expansion — and additional fabs — both at the Taylor site and at their long-occupied location in North Austin, possibly bringing billions more dollars and hundreds more jobs to the region.

During separate school board meetings May 24, both boards voted to accept “multiple” Chapter 313 incentives applications from Samsung Austin Semiconductor LLC, the company’s local subsidiary. The total in Manor was two, while officials in Taylor noted there were nine new applications in the district. They’ll head to the Texas comptroller’s office for review before returning to the boards for further approval.

The boards also widened the tax increment reinvestment zones for both sites to include land already owned by Samsung — including at least 258 additional acres within the boundaries of the Manor school district off East Parmer Lane in North Austin and more than 1,200 acres in Taylor.

The moves do not guarantee Samsung will move forward with any of the projects, and subsidies are far from secured. Before picking Taylor last year, the company spent months looking at sites in Austin, upstate New York and the Phoenix area.

There has also been general speculation that businesses are rushing to meet a looming deadline in the soon-to-be-expiring Chapter 313 program, filing applications for projects that may be many years out. Samsung is among the companies thinking long-term with the program.

“While we do not have specific plans to build at this time, the Chapter 313 application process is part of our long-term planning to evaluate the viability of potentially building additional fabrication plants in the U.S.,” said Michele Glaze, director of communications at Samsung Austin Semiconductor LLC, in a May 21 statement.

The votes came on the same day that Samsung outlined a plan to expand its operations over the next five years, pledging to create 80,000 jobs and invest $356 billion, primarily in chipmaking and biopharmaceuticals. That would represent a 30% jump in spending over the last five years, according to CNN. The bulk of the investment, $285 billion, would be in South Korea, with no mention of its plans in the U.S.

Samsung had about 3,200 employees in the Austin area in the first quarter.

But if the applications are approved, and the company does move forward, it would mark a significant boost to the local semiconductor industry — possibly even more so than when Samsung in November pledged to create the 6 million-square-foot facility in Taylor. That announcement, held at the governor’s mansion and seen as a “generational investment” in the sector, promised at least 2,000 direct jobs and about 6,500 construction jobs but what sets it apart is the $17 billion price tag — far more than the Tesla factory — due to the next-generation equipment Samsung plans to install.

Such an investment would help ensure Central Texas’ status on the cutting edge of semiconductor manufacturing at a time when the world is facing a shortage of chips used in everything from cars to home appliances to computers — and amid calls, especially in Austin, to boost their production in the United States. Austin-area officials have been attempting to make the region a premiere destination for chip companies, and have been lobbying federal legislators for aid in funding U.S. chip projects.

Many semiconductor companies and suppliers already operate in Austin, and some are considering major expansions. That includes Applied Materials Inc. (Nasdaq: AMAT), Infineon Technologies AG and NXP Semiconductors NV (Nasdaq: NXPI), the former in Hutto and the latter two in Austin. Micron Technologies Inc. (Nasdaq: MU) is still rumored to be eyeing a massive project in Lockhart.

But there have been setbacks for the sector as well. Intel Corp. (Nasdaq: INTC) considered the Austin area for a factory before ultimately opting to build a $20 billion campus in Ohio. Toppan Photomasks Inc. recently had its incentives application denied for expansion in Round Rock.

Intel officials have said that the Columbus megasite can accommodate eight additional fabs, which would be less than the potential Intel site.

The announcements were championed by Ed Latson, executive director of the Austin Regional Manufacturers Association.

“The recent announcements by Samsung, NXP, Infineon, and Applied Materials are a fortuitous sign of the commitment and incredible investment the semiconductor industry is making in Central Texas. These companies are critically important to who we are and the products they make are critical to the success of our nation,” he said in an email to the ABJ. “Not only will these companies provide jobs that address our affordability issues, the technology and products they make will solidify Central Texas as the leader in the manufacturing and semiconductor industry.”

How do Chapter 313 incentives work?

Chapter 313 of the Texas tax code allows school districts to cap the taxable value of a property for a portion of school taxes at up to $100 million for up to 10 years. The cap only applies to school taxes for maintenance and operations, not debt payments. The incentives program was not reauthorized by the 2021 Texas Legislature, meaning it is set to expire at the end of this year. The Texas comptroller has asked for applications to be submitted by June 1, further upping the pressure on companies hoping to make use of the tax breaks.

Samsung has received approval from the Texas comptroller before as part of the program. Back in 2012, it secured Chapter 313 incentives from Manor ISD for the North Austin site. There, it has operated for more than 25 years.

Taylor ISD trustees last year approved a Chapter 313 agreement with Samsung. The company will save an estimated $292 million on property taxes over 10 years. The school district still expects to gain about $46 million during that period, which school administrators have said could be used for needs such as teacher pay raises and infrastructure funding.

The Chapter 313 program can also be a precursor to other types of incentives.

Samsung also secured a slew of incentives deals from the city of Taylor and Williamson County, mainly in the form of property tax abatements over the coming decades, and the state said the company is eligible for $27 million in grants from the Texas Enterprise Fund.

Federal officials in the U.S. are working to incentivize the creation of domestic fabrication facilities in light of the chip shortage. These types of incentives are crucial to Samsung’s $17 billion project as well, officials have previously said.

The company has already said that its Taylor plant will manufacture its most advanced computer chips ever. Last week President Joe Biden toured Samsung’s plant in Pyeongtaek, South Korea, the largest semiconductor factory in the world, which the White House said will be a model for the Taylor facility.

Courtesy of Austin Business Journal. See the full article here.