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US awards Samsung $6.4 billion in grants to boost Texas chip output

FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul, South Korea, March 23, 2018. REUTERS/Kim Hong-Ji/

By Leah Douglas and Alexandra Alper

(Reuters) -The Biden administration will award up to $6.4 billion in grants to South Korea's Samsung to expand its chip production in central Texas as part of a broader effort to boost U.S. chipmaking, the Department of Commerce said on Monday.

The funding from the 2022 Chips and Science Act will support two chip production facilities, a research center and a packaging facility, in Taylor, Texas, the agency said, as previously reported by Reuters.

It will also enable Samsung to expand its Austin, Texas, semiconductor facility, Commerce Department Secretary Gina Raimondo added, while boosting chip output for the aerospace, defense and auto industries and bolstering national security, administration officials told reporters.

"(These investments) will allow the U.S. to once again lead the world, not just in semiconductor design, which is where we do now lead, but also in manufacturing, advanced packaging, and research and development," Raimondo said.

Samsung Electronics Co-CEO Kyung Kye Hyun said: "To meet the expected surge in demand from U.S. customers, for future products like AI chips, our fabs will be equipped for cutting-edge process technologies and help bring security to the U.S. semiconductor supply chain."

Samsung said it expects to begin production in 2026. Analysts have estimated Samsung is likely to begin making 4-nanometer chips at its pilot production line and eventually expand to 2-nanometer chips.

The announcement, which made Samsung the third-largest Chips Act award recipient, as first reported by Reuters, is the latest move by the Biden administration to build out the chipmaking industry in the United States.

The goal is to reduce reliance on China and Taiwan, as the U.S. share of global semiconductor manufacturing capacity has fallen from 37% in 1990 to 12% in 2020, according to the Semiconductor Industry Association (SIA).

Lawmakers have warned that U.S. dependence on chips manufactured in Taiwan by the world's top contract chip manufacturer, TSMC, is risky because China claims the self-governed island as its territory and has reserved the right to use force to retake it.

“By investing in leading-edge semiconductor manufacturing, we are helping secure this vulnerable supply chain, boosting our national security and global competitiveness, and creating new jobs for Texans,” said John Cornyn, a Republican U.S. senator from Texas who cosponsored the original legislation.

Samsung is expected to invest roughly $45 billion in building and expanding its Texas facilities through the end of the decade, said senior administration officials.

"We applaud Samsung for investing boldly in U.S.-based manufacturing and salute the U.S. Commerce Department for making significant headway in implementing the CHIPS Act’s manufacturing incentives and R&D programs," SIA said in a statement.

Intel won $8.5 billion in grants last month while Taiwan's TSMC clinched $6.6 billion in April to build out its American production.

(Reporting by Leah Douglas and Alexandra Alper in WashingtonAdditional reporting by Joyce Lee in SeoulEditing by Aurora Ellis, Jonathan Oatis and Matthew Lewis)