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Samsung announces a new semiconductor facility in Texas

Motor City pumps brakes amid chip shortage
Global shortage of semiconductors devastates U.S. auto industry and its workers 06:18

South Korean electronics giant Samsung said it plans to build a $17 billion semiconductor factory outside of Austin, Texas, amid a global shortage of chips used in cars, phones, tablets, video game consoles and other electronic devices.

"This is the largest foreign direct investment in the state of Texas, ever," Governor Greg Abbott said in announcing the project Tuesday.

Samsung said it will start building the plant next year and hopes to begin operations in the second half of 2024. The company chose the site based on government incentives and the "readiness and stability" of local infrastructure, Samsung Vice Chairman Kinam Kim said during a press conference with Abbott.

The new facility will boost production of high-tech chips used for 5G mobile communications, advanced computing and artificial intelligence, Samsung said.

The coronavirus pandemic is the main factor behind the global chip shortage, according to the Semiconductor Industry Association, a trade group. A surge in coronavirus cases in the Asian nations that produce most chips, combined with a series of disasters including a factory fire and a deep freeze in Texas, has led chipmakers to produce less than they would normally. Also last year, demand for electronics soared when many people started working from home and the nation's limited supply of chips went to those devices, the trade group has said.

It's a perfect storm that's left automakers, which also rely heavily on semiconductors, scrambling for chips. That's driving up the cost of new vehicles, with new-car prices hitting a record $43,355 in September, according to Kelley Blue Book, which is 10% higher than one year ago.

Aside from Samsung, many chipmakers are spreading out their manufacturing operations in response to the chip shortages. Taiwan Semiconductor said in April that it plans to build a $12 billion production factory in Arizona. Intel broke ground on two new chip factories in Arizona in September.

Last week, Ford Motor said it's partnering with GlobalFoundries to produce more chips for its vehicles. The chips from GlobalFoundries will be initially used in Ford's hands-free driver assist and car battery management systems, the companies said.

Several chipmakers have signaled an interest in expanding their American operations if the U.S. government is able to make it easier to build chip plants. Micron Technology, for example, said it will invest $150 billion globally over the next decade in developing its line of memory chips, with a potential U.S. manufacturing expansion if tax credits can help make up for the higher costs of American manufacturing. 

"It makes sense for the supply chain to be a bit more diversified geographically," Angelo Zino, an analyst at CFRA, told the Associated Press. "You're clearly seeing some new foundry capacity plans being announced in the U.S. as well as Europe."

Samsung is the dominant player in the market for the memory chips that are key to smartphones and other gadgetry, but Zino said the company is also expanding its role on the "foundry side," meaning the manufacture-for-hire of chips designed by other firms.

"Increasing domestic production of semiconductor chips is critical for our national and economic security," said U.S. Commerce Secretary Gina Raimondo in a statement Tuesday praising Samsung's announcement.

CBS News' Khristopher Brooks contributed to this report.

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