The chip shortage that happened during COVID has taught us a lot about supply chains. It reminded manufacturers that sales and profits are impacted when a supply chain is affected. Nobody can argue that the United States has outsourced too much of its supply chain to overseas manufacturing. That’s why the new Texas Samsung chip plant being constructed in Taylor, Texas, is a positive for the U.S. supply chain.
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The Samsung chip plant is still underway, but according to Reuters, the new plant is substantially exceeding its initial projected construction cost by a substantial amount. Currently, the chip plant is at a cost of $25 billion, more than $8 billion over projected spending.
According to Reuters, “people familiar with the matter” have blamed the increase on inflation, adding that 80% of the cost increase is due to a rise in construction and materials pricing. Other sources say those numbers may go up even further should any delays be met.
The Samsung chip plant may get a bit of a break if they apply for billions in taxpayer dollars provided by President Biden’s CHIPS act, which is aimed at bringing chip manufacturing to the United States.
U.S. Commerce Department officials said early this month that most government grants will only cover up to 15% of the cost of new plants. Meanwhile, in the three years since lawmakers first floated the $52 billion figure for CHIPS Act grants, of which only $39 billion is now earmarked for direct investment in plant construction, the cost of labor has risen sharply, along with the price of construction materials like steel.
Reuters
It will be interesting to see what the final cost of the new Samsung chip plant in Texas ends up being.
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