We've got well over 400 acres here, and we are, in
fact, in ballroom number one.
There will be three other factories, one to the
north and two of them that are to the west of
this.
There's a boom happening in Texas.
And we're not talking about oil.
America's second biggest state has become the hub
for manufacturing the country's tiniest
microchips.
Now, because we have ports, because we have
access to materials, because of our low cost of
doing business, we are best situated to lead this
next generation of chip manufacturing.
The integrated circuit was invented at Texas
Instruments more than 60 years ago, but it's
Silicon Valley in California that's long
held the title for, well, advancing technology on
silicon. But as the cost of making smaller and
smaller transistors has skyrocketed, so has the
size of the machines and the amount of land needed
to do it.
Texas is spacious.
It's huge.
And then it has great support for ease of
business.
Now manufacturing chips on U.S.
soil is a growing priority amid mounting
geopolitical tensions between China and Taiwan.
The Chips Act set aside more than 52 billion for
reshoring production.
Samsung, Texas Instruments, Infineon,
GlobalWafers, NXP, Applied Materials, all
these chip giants have ramped up operations in
the Lone Star State.
Apple and Amazon chose Texas for designing their
custom chips, too.
Tell me why we are wearing these things
called bunny suits.
These beautiful bunny suits are to keep the
product clean. So this is a class one clean room.
We change out all of the air every eight seconds.
So if you ever see an eyelash on a chip, it
looks like a space monster.
We got a rare look inside the clean rooms of three
huge chip fabrication plants, or fabs, around
Texas and took a tour of two more being built for a
total of $47 billion in new investment coming to
the state.
While chip companies have made a flurry of big Texas
expansions in the last couple of years, the
states actually had ties to the semi industry for
more than 90 years since the founding of
Geophysical Service Inc., which for Dallas engineers
reimagined in 1951, renaming it Texas
Instruments. The transistor, the most basic
building block of semiconductors, was
invented three years earlier by a team led by
William Shockley, a founding father of Silicon
Valley. But it was Jack Kilby at Texas Instruments
that first filed for a patent of the integrated
circuit in 1958.
This invention opened up the possibility of
miniaturizing chips by creating the entire
circuit, not just the transistors, out of
silicon. TI went on to build the first handheld
calculator in 1967, and it's still well known
today for graphing calculators used in
classrooms around the world.
It is very much so the calculator company to much
of the world. But we are so much more than that.
Obviously, you have an electronic device, you
almost certainly have a TI Semiconductor chip
inside of it. So we have 80,000 products that ship
out to 100,000 different customers.
So whether it's analog, but maybe more
importantly, think about anything that you can plug
into a wall or that has a cord in it very likely has
a power management IC in it.
Kyle Flessner has been with TI for 30 years.
He showed us around TI's RFAB2 in Richardson, just
north of Dallas.
With this second bigger fab that came online in
September, TI plans to output a combined 100
million analog chips per day at its two fabs in
Richardson.
So this is our overhead delivery system.
We've got about 15 miles of track between these two
factories, and those cars can move as fast as seven
and a half miles an hour.
And Flessner took us to the construction site of
TI's $30 billion fab coming to the 45,000
person city of Sherman, 60 miles north of Dallas.
We're standing under the waffle table.
That's what it's commonly called.
So it's a clean room up top.
The air comes through, the utilities come through
that support all of that tool infrastructure.
Our fab uses only 300 millimeter or 12 inch and
is fully automated.
Samsung is the state's other huge chip maker.
The South Korean giant came to Texas in 1996,
breaking ground on a big fab in Austin that's now
fully devoted to foundry making logic chips for
outside customers.
Samsung opened a second fab there in 2007.
Everything is supposed to be bigger and better in
Texas.
Texas does indeed have plenty of land for the
gigantic footprint of modern chip fabs.
Now, Samsung is adding a whopping 1200-acre new
site in Taylor, 30 miles north of Austin, where it
plans to make its first advanced chips in the U.S.
starting next year.
Our customers love to come to Texas.
It's equidistant from either coast, and we know
that some of the world's most prominent fabless
companies are actually in the United States.
Bringing Taylor on board is just going to increase
their ability to source their chips domestically
and not have to go into areas of the world where
they may have some discomfort.
Texas has long been famous for policies that entice
new businesses. It's one of only a handful of
states with no income tax.
Combine that with sales tax exemptions for
manufacturing machinery and a variety of other tax
waivers, and it's no surprise that a number of
major companies have relocated or built in
Texas lately. There's Tesla's expanding
Gigafactory in Austin, and major companies that
relocated their headquarters to Texas
recently include Caterpillar, Charles
Schwab, Hewlett-Packard and Oracle.
Now, the chip industry has its own special set of
incentives. In June, Abbott approved the Texas
Chips Act, setting aside $1.4 billion to subsidize
companies that manufacture in the state,
as well as universities willing to build related
R&D centers.
Texas ranks number one in the United States for tier
one research universities, and within a
100 mile area of where Samsung is going to be
located, they have access to so much incredible
intellectual talent.
It's not hard to see why Abbott aims to keep Texas
at the center of the national conversation
about reshoring chip manufacturing. More than
half a trillion worth of semiconductors were sold
globally in 2022, and chips accounted for more
than 300,000 jobs in the U.S.
Chips are vital not only for powering our cars,
phones and computers, but for national security, for
military communication systems, to fighter jets
and advanced weaponry.
And when peaking demand during the pandemic
coincided with supply chain disruptions, the
resulting chip shortage made it abundantly clear
how much the world relies on chips made in Asia.
As of 2021, 92% of the world's most advanced
chips were made in Taiwan by Taiwan Semiconductor
Manufacturing Company, and China has repeatedly
threatened to invade Taiwan, a move that could
cut the U.S. off from the majority of advanced
chips.
One thing that we've learned with international
hostilities, and that is we can't be relied upon
hostile countries for our everyday needs.
So the United States of America needs to make sure
that we are manufacturing everything that we need.
We learned that during the time of Covid, and we
shall not make that mistake again.
Over the last 30 plus years, the U.S.
share of global chip production has plummeted
from 37% to just 12%.
That's because it costs at least 20% more to build
and operate a new fab in the U.S.
than in Asia. Labor is cheaper there.
The supply chain is more accessible and government
incentives are far greater.
The Chips Act aims to change that, setting aside
52 billion for companies to manufacture in the U.S.
And Texas hopes to get as much of those federal
dollars as possible.
Since the National Chips Act was introduced in
2020, more than 50 new semiconductor projects
have been announced in the U.S., creating some
44,000 new jobs and totaling more than $210
billion of investment.
More than $61 billion of that is happening in
Texas, with six projects expected to create more
than 8,000 jobs.
The $17 billion Samsung fab we saw being built in
Taylor is one of the two largest projects.
But the biggest investment by far is the
$30 billion Texas Instruments fab coming to
Sherman.
For a city of 45,000, that's a huge investment
in our community. Our entire city tax base was
around $4 billion.
This particular space is about 370,000 square feet.
So it's one of our largest actually our
largest wafer fab that we have in production.
But when it comes to new chip fab investments,
Arizona has taken the lead with a $20 billion
fab coming from Intel and a $40 billion site from
the world's top advanced chip maker, TSMC.
Still, Texas is in close second, and it's the state
with the highest number of chip fabs in the
country. TI, for instance, has had another
fab in Sherman since 1966.
Texas Instruments went a long way of putting
Sherman on the map.
The support we've had from the state legislature and
then also the federal support in this industry,
Texas continues to be a hub for where we can build
this manufacturing industry.
German-based Infineon Technologies is one of the
world's biggest providers of automotive chips, and
it makes many of them in Austin.
The number of chips in an automotive, in an EV, any
automotive in general is drastically increasing.
And all the connectivity, everything communicating
within the car around the car is increasing the chip
content in every vehicle.
Infineon has been in the U.S.
for 25 years.
In 2020, it expanded manufacturing in Texas
when it bought Cypress Semiconductor for about 10
billion, taking over its Austin fab where we got a
tour.
So it's about two football fields in length all the
way from the front to the end, and it's close to
100,000ft² of clean room space.
That's because we're building so many chips at
the same time. We have wafers in here that are
the beginning of their multi month life in this
fab and wafers that are about to ship out to back
end facilities.
Netherlands-based NXP Semiconductors also has
two fabs in Austin and recently made plans for a
$2.6 billion expansion that would add an
additional four story fab .
X-Fab, a chip company that's been in Texas for
more than two decades, also recently announced a
$200 million expansion of its Silicon Carbide fab in
North Texas.
As the world's second biggest maker of advanced
chips, Samsung is a huge draw for other
semiconductor suppliers to come to Texas,
especially with its coming 1,200-acre advanced
fab north of Austin.
When you start bringing in a fab like that, you need
to build the ecosystem.
And the supply chain is really important.
And there's a lot of discussion these days
about onshoring supply chains.
Of the $17 billion price tag for Samsung's Taylor
fab, $11 billion is going to machinery and
equipment. Similarly, TI told us the tools will
account for at least 65% of its new fab costs in
Sherman. Tools like the $200 million EUV
lithography machines made by ASML, the only devices
in the world that can etch with enough precision
for the most advanced chips. ASML has offices in
Dallas and Austin and the tools made by Applied
Materials, the world's next biggest provider of
semiconductor equipment in Austin since 1992.
We have been a part of the technology high tech
ecosystem for more than 30 years in Austin.
That's where our main workforce is and we
continue to grow.
And also recently we announced we are going to
further expand in Austin, Texas.
How helpful is it that some of those tool
companies like Applied Materials, have facilities
here in Texas?
I think it's absolutely critical.
They have their expertise that is here.
Should we identify a problem?
Having that on site in hours rather than days is
a huge benefit to the efficiency of our
operations.
As TI expands in Sherman, there's another big
supplier expanding manufacturing there too.
Taiwan-based GlobalWafers through its U.S.
based subsidiary GlobiTech is spending $5
billion to build the country's biggest silicon
wafer factory. The base disks that chips are made
on.
The wafers are actually sawed out of this ingot
and polished and ultimately end up being
this bare silicon wafer.
They were looking to build the first plant of its
kind to be built in America in 20 years.
So we were in competition with Ohio and South Korea
to bring that plant to Sherman.
When it comes to why GlobalWafers and Texas
Instruments chose Sherman, water was a major
factor.
And what you see behind us, that is a process
cooling water line that is used to cool the tools
as they're operating.
It takes a lot of water to make chips, right?
It does take quite a bit of water, but it'll
probably be somewhere between 1,700 and 2,500
gallons per minute.
Previous councils and mayors have bought water
rights at Lake Texoma, one of our largest inland
lakes in America.
So we have plenty of water, which is gold
currency.
But water isn't plentiful in all parts of Texas.
About a quarter of the state remains in drought.
Where will that water come from here, especially
in periods of drought?
So we have the Texas Water Board that's working on
that and legislation that we're working on this
session to make sure that with a growing population
in Texas, we will be able to provide for the water
needs not just of businesses, but also for
our growing population.
In 2021, Samsung used about 38 billion gallons
of water to make its chips.
Now, what you see here are the cooling towers behind
us. And, you know, we've got a very aggressive goal
this year in Austin, Austin campus.
We want to reuse over 1 billion gallons of water
this year.
This factory will be twice as efficient in reuse and
recycling than our existing facilities that
are in production.
Flesner says the 300 millimeter wafer size
being made in Richardson and Sherman will help.
We can produce 2.3 times the number of chips on
this wafer and yet it only costs us fractionally
more to manufacture.
But also it's it's better for the environment
because there is less waste in our electricity
and water usage per chip is substantially improved
in the 300 millimeter form factor.
Making chips also takes a massive amount of power.
Each of those advanced chip etching machines that
Samsung will use in Taylor is rated to consume
about one megawatt of electricity, 10% more than
the previous generation.
One study showed Samsung used more than 20% of
South Korea's entire solar and wind power
capacity in 2020.
So behind me is our natural gas powered power
plant that's 750 megawatts.
So we are feeding a good percentage of the grid for
Texas. We've got power and water.
When you have those two things, then you're
already ahead of most other communities,
nationwide.
But Texas also has a uniquely independent grid
that largely cuts it off from borrowing power
across state lines.
In Denton, Texas, where the winter storm and power
crisis continues this afternoon, outages are
ongoing as low temperatures—
In 2021, that grid failed during an extreme winter
storm, leaving millions of Texans without power
and causing at least 57 deaths.
We asked Governor Abbott about grid reliability in
the face of mounting needs.
I already signed 12 laws to make the power grid
more reliable, more resilient and more secure.
And so we can definitely assure any business moving
here they will have access to the power they
need, but also at a low cost.
Samsung, Infineon and NXP were forced to shut down
their Austin fabs temporarily during the
blackout in February 2021.
Infineon told investors output levels wouldn't
return to normal until June that year.
Now, Samsung, Infineon and other chip companies
have switched entirely to renewable power.
This site is on 100% green power, and that's sourced
from wind farms here in Texas.
We're also able to recycle the majority of
the water we use on site.
In addition to resource challenges, chips are also
facing hard times right now when it comes to sales
amid a broader downturn for tech and an
overabundance of inventory in the wake of
the chip shortage.
Intel, the third biggest advanced chip maker after
TSMC and Samsung, aims to cut costs by up to $10
billion over the next three years.
In Texas, it's selling its 61-acre Austin
research hub. Samsung, meanwhile, reported dismal
Q1 earnings in April and cut production of memory
chips in response to falling prices.
But it's doubled down on the foundry side of its
business, Making logic chips in Texas, where
Samsung hinted to CNBC, it will be expanding
beyond the first fab announced in Taylor.
$17 billion investment on that site as a first
factory. But we have 1,200 acres and that first
factory is taking up about 250 acres of it.
So we have room to expand.
And early this year, Texas Instruments suffered its
first sales decline since 2020.
But that hasn't slowed down its fab expansion in
Texas.
We're in the relatively early stages, but we are
making tremendous progress towards having
production out of this facility in 2025.