Samsung seeking over $1B in tax credits for potential semiconductor plant in Austin, Texas

Samsung is seeking more than $1 billion in tax credits to potentially build a new 7 million-square-foot chip fabrication plant in Austin, Texas.

The proposed facility, which is estimated to be valued at more than $17 billion, would produce advanced logic devices for Samsung’s Foundry business, according to a filing with the state comptroller.

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The filing shows that Samsung is seeking tax abatements from Travis County and the city of Austin and tax incentive deals with Manor Independent School District and the Texas Enterprise Fund.

Samsung plans to request a 100% tax abatement over 20 years from Travis County worth over $718.2 million and a 50% tax abatement over five years from the city of Austin worth over $87.1 million. The company projects the net benefits for Travis County and Austin would be $4 million and $1.18 billion, respectively, over the next 20 years.

A Travis County spokesperson said that the county has not received a formal application from Samsung and has "nothing to consider" until the application is received. A spokesperson for the city of Austin declined to comment.

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Samsung is also seeking a Chapter 313 incentive agreement with the Manor Independent School District. Chapter 313 of Texas Tax Code allows school districts to grant property tax breaks for economic development projects, known as appraised value limitations. The school districts are then reimbursed by the state for the amount of property tax given up in the agreement. The proposed agreement would allow Samsung to save $252.9 million in taxes to the school district and is projected to bring the school district $1.8 billion in revenue over 20 years.

In addition, the company is seeking assistance through the Texas Enterprise Fund. The fund awards “deal-closing” grants to companies considering a new project for which one Texas site is competing with other out-of-state sites and is a financial incentive for companies whose projects would contribute significant capital investment and new employment opportunities to the state's economy.

The proposed facility is estimated to have a local economic impact of $8.6 billion over its first 20 years of operation, creating an estimated 1,800 direct jobs and 1,173 indirect jobs over 10 years. The company projects that the initial average annual wage for employees at the facility would be $66,254.

A spokesperson for Manor Independent School District declined to comment. The Texas Economic Development Office did not immediately return FOX Business' request for comment.

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Austin is already home to Samsung’s largest operation outside of its South Korea headquarters.

"This proposed investment and new construction will increase capacity on the existing 640-acre site and is not intended to replace or improve any of the existing facility or manufacturing operations at the site," Samsung wrote. "The current manufacturing operations at the existing 640-acre site will continue indefinitely. Construction would involve building cleanroom facilities, utility additions, and support structures for the installation of the new production equipment and the new tool sets."

However, a Samsung spokesperson told FOX Business that "no decision has been made at this time," noting "a number of global locations, including multiple candidates within the U.S., are under consideration."

The filing notes that alternative sites Samsung is looking into include Arizona and New York, as well as abroad in Korea. The locations are being evaluated based on access to talent, their existing semiconductor manufacturing ecosystem, speed to market, and strong public-private partnership.

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While Samsung said it would like to continue to invest in Austin and Texas due to its "strong ties to the local community" and "the successful past 25 years of manufacturing" in the state, the company noted that the determining factor in whether it ultimately makes the move to the Lone Star State will depend on whether it is given an appraised value limitation award due to Texas' higher tax cost of operating.

"Without the appraised value limitation award, the company would likely locate the project in Arizona, New York, or Korea," Samsung said.

If the expansion were to take place in Austin, the proposed facility would break ground by the second quarter of 2021 with the expectation that production would be up and running by the fourth quarter of 2023.