Samsung Sends Ultimatum to Texas Demanding Incentives for Investment – BusinessKorea

Samsung Electronics’ semiconductor plant in Austin, Texas

Samsung Electronics has reportedly submitted a revised proposal to Texas to request additional tax cuts for its planned investment in a new semiconductor plant.

In the first proposal submitted on Jan. 18, the Korean semiconductor giant requested a total of US$900 million in tax relief over the next 20 years for its US$17 billion new semiconductor plant, which it said would have a local economic impact of US$8.6 billion.

In the second proposal, Samsung Electronics specifically marked an idle lot of its current Austin semiconductor plant as the site of its new plant. It proposes that the state and municipal governments of Texas cut property taxes, lower utility tax rates and offer other non-cash benefits. The company’s demands go beyond the appraised value limitation (AVL), a tax cut plan for investors which exempts taxes for all or part of the increase in the value of the assets and property for up to 10 years.

Samsung Electronics’ Austin plant faced an unprecedented crisis last month. It ground to a halt as the power and water supply was cut off due to a snow storm that hit Texas. The plant is expected to resume operations in early April at the earliest. As a result, the plant is expected to suffer a loss of about 1 trillion won, which is its average quarterly sales revenue. The second proposal includes a request for utility rate reductions, which were not specified in the initial proposal. Analysts say the latest shutdown fueled Samsung’s sense of crisis.

Some analysts say that Samsung Electronics’ second proposal need to be regarded as the ultimatum to Texas and Austin City.

In the first proposal, Samsung Electronics called tax cuts the decisive factor in finalizing Austin as the location for its new semiconductor plant. But the chipmaker noted in the second proposal that competition is intensifying to attract its investment. It says Arizona, New York, and Korea are offering various incentives such as robust property tax cuts. It even states in the last sentence of the proposal that it will locate the project elsewhere unless Texas accepts Samsung’s request for tax cuts.

On the other hand, the prolonged shutdown of the Austin plant will globally prune production of smartphones by about 5 percent and production of 5G mobile smartphones by 30 percent in the second quarter of 2021, analysts forecast.


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