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Top Texas Republicans, Biden administration look to grow the state’s semiconductor industry

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Posted at 4:21 PM, Jul 26, 2022
and last updated 2022-07-26 17:21:27-04

WASHINGTON — The Biden administration and the state’s top Republicans don't publicly agree on much about what’s happening in Texas. But in the outskirts of Austin, there’s development they’re all eager to tout.

The technology giant Samsung announced plans last year to build a $17 billion semiconductor factory in Taylor. And last week, the South Korean technology giant filed paperwork with the state suggesting it could build 11 chip-making facilities in the Austin area over the next two decades.

The announcement comes as President Joe Biden and Congress are eager to grow the domestic semiconductor industry, with the backing of Texas leaders who see their state as a prime beneficiary. Semiconductors are computer chips that help power modern technologies, such as cellphones and cars. The manufacturing industry continues to grow. In addition to Samsung’s expansion plans, last year Dallas-based Texas Instruments announced a $30 billion investment to build new plants in Sherman.

This week, Congress is expected to pass a bill that allocates $52 billion in subsidies to domestic semiconductor manufacturers, hoping to stave off efforts from China and other countries that are increasingly seeking a competitive edge in the industry. It would also provide a 25% investment tax credit for investments in semiconductor manufacturing.

The measure cleared a key procedural hurdle on Tuesday, when the chamber voted 64-32 to limit debate on the bill and advance it toward a final vote. Once the Senate grants it final passage, it still needs approval of the House.

“The federal incentives in the CHIPS Act of 2022 will help Texas leverage our investments in the semiconductor industry, and the tax provisions will benefit the semiconductor-related companies already operating in the state, while attracting others that are looking to expand and grow,” Gov. Greg Abbott said in a statement last week.

The legislation is a rare alliance between Biden and leading Texas Republicans. Texans supporting the plan include Texas House Speaker Dade Phelan, U.S. Sen. John Cornyn, R-Texas, and U.S. Rep. Michael McCaul, R-Austin. Business groups such as the Austin Chamber of Commerce also support the legislation.

“If passed, the legislation would further improve our competitive advantage in an increasingly important semiconductor industry, spur additional investment in our manufacturing capability and allow Texas to add even more high-income, highly-skilled jobs to our workforce,” Phelan wrote in a letter last week to McCaul, who’s the highest-ranking Republican on the House Foreign Affairs Committee.

There’s one key dissenter, however, among Texas’ top elected brass: Sen. Ted Cruz, who voted against advancing the bill on Tuesday. His office didn’t immediately respond to a request for comment on the decision.

Texas has led the country in semiconductor exports for 11 straight years, and has shown a commitment to expanding the industry. Last year, Abbott formed a task force with the goal of luring the U.S. Department of Commerce into building its National Semiconductor Technology Center in the state. Samsung’s $17 billion expansion was also a recipient of an economic incentive program, known as Chapter 313, that offers property tax breaks to developments that bring new jobs. That program will stop accepting new applicants at the end of the year, but Samsung recently indicated to the state that it would seek it for its proposed future expansion.

But overall the country’s semiconductor industry has weakened over the past few decades, leaving politicians desperate to stave off China and other countries from dominating the industry. Biden has touted the Samsung investment in Taylor and has urged Congress for months to provide funding to the industry.

“A significant interruption to our supply of semiconductors could cause historic damage to the U.S. economy — damage far greater than the impact of chips shortages on the American auto industry right now — and would undercut our technological competitiveness and military advantages over adversaries globally,” a White House statement said earlier this year.

U.S. Commerce Secretary Gina Raimondo said the legislation is crucial to ensure semiconductor companies don’t leave states like Texas.

“We know that these companies that are in your states have offers right now from other countries to expand there. And we know that they'll take those offers if Congress doesn't pass this,” Raimondo told reporters last week.

There is not universal support for the investments. Central Texas Interfaith, a group representing 50 religious congregations, schools, unions and civil organizations, opposed the property tax breaks for Samsung, calling them “corporate welfare.”

“This shameful grab at nearly $5 billion in potential school funding comes at a time when districts are struggling to retain teachers and staff and when hardworking families are hurting yet receiving no such tax breaks,” the group said in a statement.

There is some opposition in Congress as well. In another rare political alignment, progressive Sen. Bernie Sanders, I-Vermont, and conservative lawmakers and think tanks have derided the federal semiconductors bill.

“The five biggest semiconductor companies that will likely receive the lion’s share of this taxpayer handout, Intel, Texas Instruments, Micron Technology, Global Foundries and Samsung, made $70 billion in profits last year. Does it sound like these companies really need corporate welfare?” Sanders said in a statement. “Let us rebuild the U.S. microchip industry, but let’s do it in a way that benefits all of our society, not just a handful of wealthy, profitable and powerful corporations.”

Disclosure: The Austin Chamber of Commerce and Texas Instruments have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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This article originally appeared in The Texas Tribune at https://www.texastribune.org/2022/07/26/texas-chips-act-semiconductors/.

The Texas Tribune is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.