Samsung's 'US Austin Plant Expansion' Countdown?..."Tax Benefits Over 1 Trillion Won Required as Investment Condition"

Request for 50-100% Property Tax Reduction in Travis County and Austin City
Samsung "Investing $17 Billion to Create 1,800 Jobs"
If Confirmed in Austin, Construction Starts Q2 This Year, Operations Begin in 2024

[Asia Economy Reporter Jeong Hyunjin] Samsung Electronics, which is considering new and expanded semiconductor factories in the United States, is reportedly officially requesting tax incentives worth around $1 billion (approximately 1.12 trillion KRW) as a prerequisite for large-scale investment in the Austin, Texas area.

With Samsung Electronics’ semiconductor factory investment exceeding 10 trillion KRW, and ‘love calls’ pouring in from across the U.S. to attract the factory, Samsung is also presenting specific incentive plans while carefully weighing the pros and cons. Since the Biden administration took office, local governments have been fiercely competing to attract foreign investment, leaving Samsung Electronics with only the task of choosing the optimal investment location.

On the 4th (local time), Austin American-Statesman and other local Austin media cited documents from the Texas Comptroller’s Office, reporting that Samsung Electronics requested tax incentives worth about $1 billion from the Texas state government last month for the establishment of the Austin plant facilities.

According to these documents, Samsung Electronics first requested a 100% property tax exemption in Travis County for the next 20 years, which translates to a value of approximately $718.3 million. Samsung also requested a 50% tax benefit on fixed assets such as land, buildings, and equipment from the City of Austin for the next five years, which would result in a tax reduction effect of $87.2 million. The Austin Business Journal also reported, citing sources, that Samsung Electronics and the City of Austin are discussing a 10 to 20-year project. Samsung is also reportedly negotiating incentives related to the Texas business fund.

Samsung Electronics mentioned ‘Chapter 313,’ a Texas tax law that provides tax benefits for economic development projects in school districts, and proposed reaching a tax incentive agreement with the Manor Independent School District. The scale of this benefit is expected to be around $252.9 million. Foreign media explained that the local government had already decided to provide Samsung Electronics with such benefits twice, in 2005 and 2012, and Samsung has been receiving tax incentives worth $200 million until 2023.

The reason local U.S. governments offer various ‘carrots’ to attract investment from Samsung Electronics is due to the significant forward and backward economic effects that contribute to national economic revitalization. Local media estimate that the economic impact of Samsung Electronics’ expansion of the Austin plant will reach $8.6 billion over the next 20 years. Foreign media reported that Samsung Electronics plans to invest at least $17 billion to establish a factory of approximately 653,200 square meters, create about 1,800 jobs directly, and indirectly generate 1,173 jobs, resulting in a wage inducement effect exceeding $7.3 billion. If Samsung Electronics finalizes Austin as the investment location, the related procedures are expected to be completed by June, with construction possibly starting as early as the second quarter of this year, completing the new and expanded factory by 2023, and beginning full operation in January 2024.

Besides Texas, Samsung Electronics has also been approached by places such as New York and Arizona regarding investment intentions in the U.S. This is why Samsung is still deliberating its options. A spokesperson for Samsung Electronics’ Austin plant said, “We are reviewing the possibility of expanding semiconductor manufacturing facilities based on various factors and considering many locations worldwide, including several candidate regions in the U.S. We have not made a final decision at this point.” The spokesperson added, “Having spent 25 years in Texas and having relationships with the local community, Samsung Austin Semiconductor wants to continue investing in this area,” but also mentioned, “If there is no compensation for the high tax costs related to the project in Texas, there is a possibility of doing business in Arizona, New York, or Korea.”

Locally, the news of Samsung Electronics’ investment attraction has been welcomed. Amber Gunst, Chair of the Austin Technology Council, said, “Samsung Electronics’ factory expansion is good for the local economy.” Earlier, Chuck Schumer, the U.S. Senate Majority Leader from the Democratic Party representing New York, and Greg Abbott, Governor of Texas, also delivered positive messages supporting the attraction of Samsung Electronics’ factory.