Samsung Electronics’ foundry in Austin, Texas, still remains suspended after having been shut down by a power outage on the afternoon of Feb. 16. Industry analysts forecast that the shutdown may continue for about two months until mid-April.
Electric power supply was resumed in three days as scheduled, but the restart is reportedly delayed due to water problems. Korean engineers flew to the United States last week to minimize the damage, but there is nothing that they can do about the matter.
The Austin plant posted around 3.9 trillion won in sales in 2020. Assuming that it will generate similar levels of sales in 2021, simple calculations suggest that it will lose 10 billion won in sales if it stops operations for one day.
According to this calculation, it is estimated that a sales loss of more than 100 billion won has occurred due to the recent shutdown. If the shutdown continues until the middle of April, the sales loss could reach hundreds of billions of won.
Considering that it takes a considerable amount of time to raise the yield (production efficiency) to the normal level, the sales loss may increase further even if the production line is restarted.
In the meantime, in February, Samsung Electronics submitted a proposal to the state of Texas and the city of Austin to reduce taxes by about US$805.47 million for 20 years for its additional investment in its semiconductor plant in Austin. Samsung Electronics said in the proposal that a total of US$17 billion will be invested in the expansion of the plant, including the costs of acquiring land, constructing the plant and mobilizing equipment.
For Samsung Electronics, reducing property tax really matters. Due to the nature of the semiconductor manufacturing process, initial investment is not the end of the story. To stabilize yields, huge investments must be made every year. If the newly built facilities in the Austin plant go live, an additional annual investment of US$150.6 million should be made over the first five years. Then after 15 years, the chipmaker will have to invest an average of US$295 million annually.
Samsung Electronics' investment will create a total of 19,873 jobs. The number of direct employment (1,800) and indirect employment (1,173) will reach 3,000. Austin is expected to enjoy US$8.643 billion in economic effects.
Samsung Electronics is expected to consider other candidate places such as Arizona, New York, and Korea if Austin City rejects its request for a property tax cut. More than 3,000 people are currently working at Samsung Electronics' Austin plant, which was completed in 1996. Its cumulative investment amounts to more than US$18 billion. Its major products are application processors (APs) for smartphones.