Samsung Completes Preparations to Expand Foundry Business... Focuses on Laying the Foundation for 'Lee Jae-yong's New Samsung' (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyewon and Jung Hyunjin] Samsung Electronics appears to have finalized Taylor City, Texas, as the site for its second foundry (semiconductor contract manufacturing) plant in the United States, with an investment of about $17 billion (approximately 20 trillion KRW). News that Samsung Electronics has confirmed the plant site after more than 20 years signals that the company has fully prepared to expand its foundry business. Following his parole, Vice Chairman Lee Jae-yong of Samsung Electronics, having completed the two major tasks of vaccines and semiconductors, is expected to focus on laying the foundation of the ‘New Samsung’ by reorganizing the company through executive appointments ahead of the year-end and concentrating on discovering future growth engines for Samsung.

WSJ: "Samsung Electronics Finalizes Taylor City as Site for Second U.S. Foundry Plant"

The Wall Street Journal (WSJ) reported on the 22nd (local time) that Samsung Electronics has decided to build a new foundry plant in Taylor City, Texas, and is expected to make an official announcement the following day. Citing sources, WSJ said Texas Governor Greg Abbott would officially announce this fact around 5 p.m. on the 23rd (8 a.m. on the 24th Korean time). Governor Abbott also hinted at a major ‘economic’ announcement.

When Vice Chairman Lee Jae-yong departed for a business trip to the U.S. last week, it was widely anticipated that negotiations with the U.S. side regarding the plant site selection had concluded and that an official announcement would soon follow. Lee reportedly met consecutively with key White House and congressional officials to review semiconductor supply chain issues and discuss federal government incentives for semiconductor companies.

Samsung Electronics’ strategy is to establish its second foundry production base in the U.S. and rapidly narrow the gap with TSMC, the market leader. Samsung built its first U.S. foundry plant in Austin, Texas, starting construction at the end of March 1996 and completing it in 1998, operating the plant for over 20 years. This marks the first time in over two decades that Samsung will build a second semiconductor plant in the U.S. This large-scale investment decision was made abruptly just six months after Samsung announced a $17 billion investment plan during President Moon Jae-in’s visit to the U.S. in May and three months after Lee’s parole.

WSJ estimated that Samsung’s foundry plant in Taylor City would create about 1,800 new jobs. The full-scale semiconductor mass production at this plant is expected by the end of 2024. However, a Samsung Electronics official told WSJ that "the final decision on the plant site has not yet been made."

Lee Jae-yong Completes Vaccine and Semiconductor Investment Tasks... Begins Broad Activities?

With the official local announcement by Texas Governor Greg Abbott and Samsung Electronics’ disclosure, the Taylor plant, Samsung’s second semiconductor production base in the U.S., is expected to operate advanced processes below 5nm (nanometers; 1nm is one-billionth of a meter). This is because the U.S. government has actively expressed its need for advanced processes, and Samsung is expected to attract many customers by collaborating with world-class U.S. fabless companies, preparing for increased cooperation in advanced processes.

Additionally, the Taylor plant is expected to serve as Samsung’s forward base in the U.S. semiconductor industry to respond to competitors. Taiwan’s TSMC, the industry leader, is expanding its advanced process technology and production competitiveness through its Arizona plant, and U.S. Intel, which has declared the resumption of its foundry business, is continuing investments in plants in Arizona and New Mexico with government support.

Samsung Electronics Vice Chairman Lee Jae-yong (left) is taking a commemorative photo with Sundar Pichai, CEO of Google, at Google's headquarters in Mountain View, California, USA, on the 22nd (local time). (Photo by Samsung Electronics)

After much deliberation, Vice Chairman Lee finalized the U.S. semiconductor investment and is expected to unveil his vision for the New Samsung through upcoming executive appointments. The regular personnel reshuffle is anticipated early next month, but opinions differ on the scale of the changes. While some expect a large-scale reshuffle due to organizational restructuring, others predict a smaller scale since three executives?Vice Chairman Kim Ki-nam, President Kim Hyun-suk of the Consumer Electronics (CE) division, and President Ko Dong-jin of the IT & Mobile (IM) division?were reappointed at the shareholders’ meeting in March.

Lee is expected to focus on discovering future growth engines after reorganizing the organization through personnel changes. During his recent U.S. visit, he held multiple meetings related to future strategic businesses such as bio, next-generation telecommunications, virtual reality (VR), augmented reality (AR), and the metaverse (extended virtual world). Amid global uncertainties, he is expected to maintain steady management next year and show interest in mergers and acquisitions (M&A) for Samsung’s long-term growth. As of the third quarter, Samsung Electronics holds cash reserves amounting to 120 trillion KRW, and Vice Chairman Kim stated at the March shareholders’ meeting that the company would actively pursue M&A.