Samsung's Attraction in Texas: "Taylor's 370 Billion Won Tax Incentives Justified"

Exterior view of the Samsung Austin Semiconductor building

[Asia Economy Reporter Jeong Hyunjin] The state of Texas in the United States issued a legal interpretation in June stating that Samsung Electronics' semiconductor factory investment proposal qualifies for tax reduction benefits amounting to nearly 370 billion KRW. With the parole of Samsung Electronics Vice Chairman Lee Jae-yong, there is speculation that Samsung's decision on semiconductor investment in the U.S. will be made soon, and it is expected that the incentive negotiations between Samsung and the relevant local U.S. authorities will accelerate.

According to the Texas State Comptroller's Office on the 24th, the office judged that Samsung's application for tax reduction benefits related to its investment in the Taylor Independent School District (ISD) meets the requirements of the tax incentive program called 'Chapter 313' and communicated this to Samsung on the 20th. This follows Samsung Austin Semiconductor, Samsung Electronics' local subsidiary in Austin, submitting an application on June 29 to Taylor City in Williamson County, Texas, requesting tax benefits for a semiconductor factory construction investment worth $17 billion (approximately 20 trillion KRW).

Based on the documents submitted by Samsung, the Texas State Comptroller's Office analyzed the expected economic effects and judged that it could provide tax reduction benefits amounting to $314.11 million (approximately 367 billion KRW) over the next 15 years. Samsung stated that if the investment in this area is decided, construction will begin in the first quarter of next year, and full-scale mass production will start from the fourth quarter of 2024, so the actual tax reduction benefits are expected to take effect from 2024.

The reason the Texas State Comptroller's Office issued this legal interpretation appears to be because it judged that Samsung's semiconductor factory investment would have significant economic effects such as local job creation. The office evaluated that direct and indirect employment due to the investment would reach nearly 5,000 people by the 2029 tax year, and the resulting wage income would exceed $500 million.

This is not the first time Samsung has received such a legal interpretation from local U.S. authorities. Earlier in March, the Texas city of Austin's Manor Independent School District also issued a legal interpretation stating that a $17 billion investment would justify a tax reduction of $285 million. Samsung Electronics is reportedly negotiating with local authorities based on this, and the Taylor Independent School District is expected to undergo a similar process.

Samsung Electronics publicly announced in May, coinciding with the Korea-U.S. summit, that it would invest $17 billion in semiconductors in the United States. Samsung is currently negotiating incentives with state governments and others, considering locations such as Austin, Texas; Goodyear and Queen Creek near Arizona; and Genesee County in New York as candidate sites. Industry insiders evaluate that with major semiconductor companies like Taiwan's TSMC and the U.S.'s Intel announcing large-scale semiconductor investment plans, and with Vice Chairman Lee's parole on the 13th, the likelihood of a decision on the U.S. investment location has increased.