In Austin, tech giants press Congress to boost chip industry

A global shortage of semiconductors – the computer chips that power everything from your laptop to your car – is an area of ​​growing concern for Austin’s tech sector, one of the mainstays of the region’s economy. .

As they gathered for a roundtable in Austin on Monday, tech giants and semiconductor manufacturers turned to Congress in hopes that the proposed federal investment in the semiconductor industry would boost industry and help consolidate supply chain issues.

Senator John Cornyn, R-Texas, is one of the authors of the CHIPS for America Act, a bipartisan technology and manufacturing bill designed to expand the manufacturing of domestic technologies. The bill provides $ 52 billion to support domestic semiconductor manufacturing, $ 16 billion for the Department of Energy for research and development of energy-related supply chains, and $ 81 billion dollars for the National Science Foundation.

Representatives from tech giants Samsung, Dell Technologies, Infineon, NXP Semiconductors, BAE Systems and AMD met with Cornyn at Samsung’s facilities in Austin to discuss the need for solutions to supply chain issues.

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US Senator John Cornyn, left, tours with Jon Taylor, Samsung's vice president of manufacturing engineering, after a press conference Monday at the Samsung semiconductor plant in Austin.

“As we have learned, we have become more and more reliant on technology, represented by the semiconductor industry. I cannot think of a part of our life that has not become better or more productive. because of the growth of semiconductors. Everything from your cell phone to your car, ”said Cornyn.

“We need to think differently about how we encourage the making of this vital component in our daily lives here in America. Not only will this produce good, well-paying jobs, but it will strengthen the vulnerable supply chains we have seen exposed during COVID-19. “

The bill was passed by the US Senate in January and is awaiting a vote in the House. Cornyn called on the House to pass the bill on Monday, saying it would help the United States maintain both the strongest economy and the most powerful military in the world.

Cornyn said the pandemic has taught many important lessons, including how crucial it is to sustain technology manufacturing and supply chains in the United States. He said the country cannot just import products from abroad because it is cheaper.

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“If for some reason your access to semiconductors were interrupted, as a result of a conflict or something like a pandemic or a natural disaster, it would have dramatic and harmful consequences for the United States”, Cornyn said. “This is a very, very important problem, but it is not the most important one on the minds of most people.”

Most semiconductors are manufactured abroad, mainly in Asia, a trend that has grown in recent years. The Semiconductor Industry Association, an advocacy group that represents the vast majority of semiconductor manufacturers in the United States, estimated that the $ 52 billion federal incentive program would strengthen the national semiconductor industrial infrastructure and would help create 10 new factories in the United States and add 42,000 semiconductor jobs.

In the United States, Texas manufactures a significant share of semiconductors, exporting billions of dollars of chips each year, and could play a key role in expanding semiconductor manufacturing.

Jerry Strickland, executive director of the FABSS Texas Coalition, a group of semiconductor manufacturing companies, said the CHIPS Act could boost manufacturing in the state. Texas accounts for about 16% of semiconductor employment in the United States, according to the Semiconductor Industry Association.

“One of the things that is important in Texas is that we would like to be first. At the moment, we are not; we are number 2 in terms of semiconductor jobs.” said Strickland. “With CHIPS, it’s something that I know a lot of companies around this table and look at in terms of Texas being part of this solution and being at the forefront of finding those solutions.”

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Semiconductors already account for about a quarter of manufacturing output in central Texas, according to the Austin Regional Manufacturers Association. Companies such as Samsung and NXP have major facilities in the central Texas area. Tech companies including Round Rock-based Dell and AMD also rely heavily on chips for their own products.

Harry Wolin, senior vice president of AMD, said the company was excited about the opportunities this act could bring. AMD is headquartered in California but has most of its operations in Austin and sources chips for its products from semiconductor manufacturers.

“To build state-of-the-art semiconductors, we also need state-of-the-art design and development,” said Wolin. “What is important for us is to be at the forefront of design. The CHIPS law does not only recognize manufacturing; it also has parts for the design. I think it will really help the United States to maintain their leadership in design and regain their leadership. in the making.”

Cornyn said companies like Samsung wouldn’t invest in the United States without a predictable flow of funds or tax credits, which only legislation like the CHIPS Act can help fuel.

Matthew Bryson, analyst for Wedbush Securities, told theAmerican-Stateman that subsidies and tax breaks like those the CHIPS Act could provide play an important role in where semiconductor companies decide to set up manufacturing facilities.

“When I look at Austin, its strengths are its human capital, infrastructure, and stability (despite recent storms). The reason, in my opinion, that companies have avoided building factories in the United States is primarily the incentives to build elsewhere The CHIPS Act would apparently put the United States on an equal footing with other geographies, assuming the United States increases its support for the development of fabulous, ”he said.

Samsung could invest in central Texas

CHIPS legislation is being debated as Samsung considers locations for a $ 17 billion state-of-the-art chip factory. In early February, the company confirmed that the central Texas area was one of many sites being considered. Other places include New York and Arizona.

Jon Taylor, Samsung’s vice president of engineering and public affairs, said the technology and chips currently produced in Austin are serving customers in the United States and around the world on a range of products that make life better. and more secure.

“The chip shortage is affecting our customers, and we have been working hard to increase production to meet the increased demand,” Taylor said. “We have optimized our capacity and the only way for us to meet demand in the future is through expansion. “

Taylor said the CHIPS Act was a key part of the company’s decision to expand into the United States.

“It’s a huge cost difference between building and operating a (manufacturing plant) in the United States and doing the same overseas,” Taylor said. “This is why the CHIPS law is so important to us, to fill this gap.”

Samsung spokeswoman Michele Glaze said on Monday that no decision had been made on the location of the facility. The company has had significant operations in Austin since 1997, including a manufacturing facility employing approximately 10,000 people – approximately 3,000 Samsung employees and 7,000 contractors. It also has a research and development facility project in Austin.

Bryson said the global semiconductor shortage had worsened in recent months as demand for products, including enterprise hardware and the cloud, accelerated and the supply chain was further stressed by issues outside of the pandemic, with a fire at a Japanese facility and closures in Texas.

Semiconductor factories typically operate around the clock for years. Each batch of wafers – a thin wafer of semiconductor used to make integrated circuits – can take 45 to 60 days to manufacture, so a downtime of any length can mean wasted weeks of work. Restoring a factory is also a complicated process and, even at the best of times, can take a week.

In central Texas, both Samsung and NXP factories were closed in February during the frost, resulting in product losses, compounding existing supply chain challenges.

Samsung, which was offline for more than a month, suffered a loss of wafers equivalent to $ 268 million to $ 357 million, and NXP estimated that the shutdown resulted in a loss of revenue of $ 100 million and one month of platelet production.

It remains to be seen whether the shutdown could affect Central Texas’ chances of gaining semiconductor expansion, including the Samsung installation.

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