Samsung’s $17 billion Chipmaking Plant | Austin, the southernmost US capital city, is making headlines in the business industry, with more companies relocating to Texas than anywhere else in the company. The city continues its surge as the country’s fastest-growing tech hub, with many claiming it may soon overtake Silicon Valley as the epicenter of innovation and commercialization in the United States. The latest company to board the flight to Austin is none other than Samsung, one of the world’s leading smartphone and consumer electronic brands.
In May 2021, the Lone Star State’s capital city became the frontrunner for landing Samsung’s new $17 billion chipmaking factory, beating Phoenix and upstate New York for the massive project. The company aims to start the plant’s construction by the beginning of Q4 2021 and has already submitted the paperwork to Texas officials, requesting over $1 billion in tax incentives in return for bringing 1,800 permanent jobs to the factory by the next decade with average pay up to $66,000 a year.
In this post, we’ll talk about Austin’s emergence as the new technology hub in the country and how Samsung’s $17 billion chipmaking plant will help improve the state’s employment rate.
Why Austin Is Emerging as the Nation’s New Technology Hub
Since the last decade, hundreds of companies have relocated to Texas from other states, including 94 companies from California alone. Some of these companies include tech giants like Hewlett-Packard, Oracle, Amazon, and 8VC. To these companies, Texas offers much more flexibility for businesses compared to California and other states. Austin offers several advantages for tech companies over many other places in the country, including a significantly lower cost of living than other tech cities like San Francisco or New York. According to Nerdwallet, housing costs are 242% higher in San Francisco than in Austin, and transportation is nearly 52$% higher. Food, entertainment, and healthcare costs are also 20-30% higher in other states than Texas.
Apart from living costs, tech companies don’t have to deal with state income taxes and strict regulations from the State bodies. As far as work-life balance goes, Austin has a lively social life with sports, music, food, and other activities for workers to indulge in. Even those workers who can’t move to Austin are saving money by working remotely from other parts of the country.
As far as Austin’s urban economics is concerned, the city has already regained 96% of the pandemic-related job losses, according to the Austin Chamber of Commerce. Even Silicon Valley, the land known as the epicenter of digital transformation, doesn’t have numbers as good as this. According to WalletHub, Texas ranked first for best places to start and run a business, with Austin ranking eighth for cities. This is mainly due to the state’s culture that prioritizes a good work-life balance. Therefore, companies have to maintain a good work environment to recruit and retain top talent. The Lone Star State is also among the most digitized states in the country, meaning it has a more technical workforce on average compared to other states.
Samsung’s $17 billion Chipmaking Plant to Create 1,800 Jobs in Texas
Samsung already maintains a significant local presence in Austin, Texas, employing close to 3,500 people working in its factories and outlets. In 1997, the company opened its first semiconductor plant in the US and opened another plant in the same location in 2007, following the inception of Android and the smartphone era.
In 2016, the company decided to expand its manufacturing and invest $1 billion to upgrade its 300-acre manufacturing complex. Finally, in January 2021, Samsung filed the documents to purchase a 7-million-square-foot chip factory to create up to 1,800 jobs for Texas residents. However, after establishing its presence in the country for nearly three decades, the company is asking for a break on property taxes for 20 years in return for creating those jobs and supporting the state’s growth. This way, it will save close to $718 million in property tax payments.
Samsung’s $17 billion chipmaking plant will undoubtedly increase the brand’s products in Texas with a total workforce of close to 15,000 employees. However, it seems like Samsung is asking for too much in return to create employment in the city and invest $14 billion in Austin. Tesla only got around $60 million in tax rebates from the school district and county even with the higher salaries, the number of employees, and investment. This is probably why the deal is yet to be public as the state continuously negotiates more reasonable tax rebates.
If Samsung does finalize the deal to secure Austin as its investment site, it could become the largest international conglomerate in the state. Moreover, the company owns nearly 12% of the global semiconductor market, meaning it has some valuable bargaining chips in its hands. On the other hand, Texas is becoming an intensely competitive hub for technology companies meaning the state has no shortage of lucrative offers from other tech giants wanting to relocate to Austin.
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