"No customers!" After receiving a $4.7 billion subsidy, Samsung's chip factory in the United States postponed production

More MAGA misfires

Samsung’s Taylor, Texas plant

Guancha’s headline article today reports about this SNAFU or FUBAR depending on your interpretation. The geoeconomic plan to make the Outlaw US Empire the global chip monopoly has already hit big snags and continues. Here’s the report:

According to a report on the website of Japan's Nikkei Asia on July 3, a person familiar with the matter revealed that due to the difficulty of finding customers, South Korean chip giant Samsung Electronics had to postpone the completion of its semiconductor factory in Taylor, Texas, USA, and is delaying the purchase of factory equipment.

The schedule [of the Taylor chip factory] was delayed because there were no customers. Even if you ship the device now, [Samsung] can't do anything. The report quoted an unnamed source familiar with the matter as writing.

According to the report, a chip supply chain executive familiar with the inside story also said that because the local demand for chips is not strong, and Samsung already has a chip factory in Austin, Texas, it is not in a hurry to install chip manufacturing equipment in Taylor's new factory.

The executive added that the process nodes planned by Samsung a few years ago are no longer in line with the needs of current customers, "but it will be costly to completely renovate the factory", which is why Samsung is currently "taking a wait-and-see attitude". According to a third person familiar with the matter, Samsung initially planned to produce 4nm process chipsets in the U.S. factory but later changed plans to include more advanced 2nm process chipsets to meet customer demand.

Joanne Chiao, an analyst at TrendForce, said that for Samsung, the ability of its U.S. factory to be mass-produced depends largely on its customer expansion.

She pointed out that Samsung foundry had previously faced problems with unstable yields and lost orders, and although it has since improved, its capacity utilization rate in the United States has remained below the industry average due to chip export restrictions. "They're really trying to get more U.S. customers...... If subsidies and tax incentives are in place, the plant may be able to start production on a small scale, but whether it can be mass-produced will still depend on the progress of customer expansion.”

According to the report, the postponement highlights the challenges faced by chipmakers in investing and expanding in the United States. The CHIPS and Science Act (CHIPS Act) was introduced by the previous Biden administration in 2022, which planned to provide about $53 billion in subsidies to encourage the semiconductor industry to invest in the United States, but the release of the relevant funds has been delayed until September 2024, when the first subsidy was officially finalized.

In December last year, before the incumbent Republican President Trump took office, the U.S. Department of Commerce issued an announcement confirming the allocation of $4.745 billion in direct subsidies to Samsung Electronics under the CHIPS Act. According to the announcement, the funds will be used for Samsung's committed $37 billion investment plan in the United States, which includes two new "advanced logic chip factories and an R&D factory" in Taylor, as well as an expansion of the existing fab in Austin.

According to a May filing with South Korea's financial regulator, Samsung's Taylor factory campus was originally scheduled to be completed in April last year, but has been postponed to the end of October. In April this year, there were also rumors that Samsung's Taylor plant would further postpone production until February 2027. Previously, Samsung had postponed the commissioning of the Taylor plant from 2024 to 2026 due to yield problems.

In response to the concerns, Samsung Electronics insisted that the project was progressing smoothly and said that the Taylor plant still plans to start production in 2026, but declined to disclose a more precise timeline, comment on the prospects for future plant equipment installations, and did not respond to questions about whether it would be difficult to find customers.

It is worth mentioning that Korean media revealed earlier that TSMC's Arizona factory in the United States has suffered a cumulative loss of NT$39.4 billion (about 8.85 billion yuan) in the past four years, causing Samsung to worry about its Texas Taylor project.

South Korea's Chosun Ilbo reported on April 22 that although Samsung still insists that the factory will be put into operation in 2026 as originally planned, both internal and external sources believe that the actual revenue scale of the Taylor factory may be much lower than expected due to market conditions and the ability to receive orders.

The report pointed out that since Vice Chairman Chun Yong-hyun took over as the head of the semiconductor (DS) division, Samsung has become cautious about its overall investment in wafer foundry equipment. Considering that Samsung's domestic foundry business in South Korea has been losing money quarterly, and the installation of equipment for the new P4 production line at Pyeongtaek's main production base has been delayed, it may be difficult for the management to easily move forward with the next phase of investment at the U.S. plant, which has higher input costs and risks.

The Chosun Ilbo newspaper quoted industry insiders as saying that as of April 22, the construction progress of Samsung's Taylor factory had reached 99.6%, which is basically equivalent to completion. It is reported that according to the normal process, the installation of equipment should have begun at this stage, but Samsung is still hesitant to place an order for the purchase of lithography machines.

This could lead to a further increase in the cost of putting the plant into production. A person familiar with Samsung Electronics said that devices are usually introduced within three to six months of the completion of the factory, but Samsung has so far continued to delay the installation of equipment, which means that if a decision is made to introduce equipment, it may have to bear high tariffs. The person added that since it is difficult to deploy enough manpower to the United States, the human resource cost required for on-site recruitment will also be not small.

Previously, Trump had proposed the idea of imposing tariffs of up to 25% on imported semiconductors. According to the Chosun Ilbo, this means that semiconductor equipment is likely to be subject to high tariffs of more than 25%. The report pointed out that the price of a single extreme ultraviolet lithography (EUV) machine of the Dutch ASML company can reach up to 500 billion won (about 2.6 billion yuan), and its tariffs alone may reach tens of billions of won. [My Emphasis]

Again, we see all sorts of logistical, labor, and government red tape problems that make the Outlaw US Empire a very poor choice for locating any sort of factory. And in this case, the product to be produced is tied up in a geopolitical power struggle. Samsung needs domestic US customers for its products, but no one wants to manufacture within the US and thus the paucity of customers. Samsung also appears to have major problems at home too. The troubles TSMC and Samsung are experiencing are likely shared by others and send a signal to others musing about locating within the Empire to avoid tariffs. Samsung’s actions reflect the great amount of uncertainly Trump’s policies have injected into business planning, and the idle factory still costs money to maintain while not generating any revenue. Another implication emphasized is the lack of qualified personnel to operate the plant that will need to be trained by staff imported from South Korea if the plant opens in 2027 that illustrates the basic problem with US labor being high cost-low skill. Imagine sinking $37 Billion into an investment project and not making enough to break even.

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