Samsung said it plans to build a $17 billion semiconductor factory outside of Austin, Texas, amid a global shortage of chips used in phones, cars and other electronic devices.
“This is the largest foreign direct investment in the state of Texas, ever,” Texas Gov. Greg Abbott said in announcing the project Tuesday.
Samsung said it will start building the Texas plant next year and hopes to begin operations in the second half of 2024. The South Korean electronics giant chose the site based on a number of factors, including government incentives and the “readiness and stability” of local infrastructure, said Samsung Vice Chairman Kinam Kim, speaking alongside the Republican governor.
The chip shortage has emerged as both a business obstacle and a serious U.S. national-security concern. Short supplies of semiconductors kicked off by COVID-era shutdowns have hampered production of new vehicles and electronic devices for more than a year. New questions of economic and national security are also at stake since many U.S. companies are dependent on chips produced overseas, particularly in Taiwan, which China has long claimed as its own territory.
“It’s a concentration risk, a geopolitical risk” to be so reliant on Taiwan for much of the world’s chip production, said Nina Turner, a research analyst at IDC. She said the current shortages will likely subside but there will be a long-term demand for chips as more and more everyday products rely on them.
Many chipmakers are spreading out their manufacturing operations in response to the shortages, which have taken a toll on sectors from automakers to the video game industry.
“It makes sense for the supply chain to be a bit more diversified geographically,” said Angelo Zino, an analyst at CFRA. “You’re clearly seeing some new foundry capacity plans being announced in the U.S. as well as Europe.”
Zino said another factor is the expectation that Congress will approve federal subsidies for the semiconductor industry to build its factories in the U.S., in the hopes it will bring jobs, lessen future supply concerns and give the U.S. more leverage over economic rivals like China.
Samsung had previously indicated it was exploring sites in Texas, Arizona and New York for a possible new U.S. chip plant. It has had a chip fabrication plant in Austin, Texas, since the late 1990s. But most of its manufacturing centers are in Asia.
Samsung said it expects to spend $17 billion on the Texas project, which will make it the company’s largest investment in the U.S. It said the new facility will boost production of high-tech chips used for 5G mobile communications, advanced computing and artificial intelligence, and also improve supply chain resilience.
The U.S. share of the worldwide chip manufacturing market has declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association, a trade group. The Biden administration has been pushing for Congress to pass the $52 billion CHIPS Act to increase computer chip manufacturing and research. Separate legislation also under consideration would create a new tax credit for investment in semiconductor manufacturing facilities.
Samsung’s Kim was effusive about Republican-led Texas in his comments Tuesday but also credited partnerships with the Biden administration and congressional leaders from both parties. Abbott said the project will benefit from “multi-tiered” incentives at the federal, state and local levels.
“Increasing domestic production of semiconductor chips is critical for our national and economic security,” said U.S. Commerce Secretary Gina Raimondo in a written statement praising Samsung’s announcement.
Several chipmakers have signaled an interest in expanding their American operations if the U.S. government is able to make it easier to build chip plants. Micron Technology, based in Boise, Idaho, said it will invest $150 billion globally over the next decade in developing its line of memory chips, with a potential U.S. manufacturing expansion if tax credits can help make up for the higher costs of American manufacturing. Pat Gelsinger, the CEO of California-based chipmaker Intel, has urged the U.S. to focus its semiconductor subsidies on American companies.
Intel earlier this year announced plans to invest $20 billion in two new factories in Arizona. Taiwan Semiconductor Manufacturing Co., or TSMC, has been building its own plant in Arizona.
Samsung is the dominant player in the market for the memory chips that are key to smartphones and other gadgetry, but Zino said it’s also expanding its role on the “foundry side,” meaning the manufacture-for-hire of chips designed by other firms.
“My expectation is it’s going to be foundry-based in nature,” he said of the Texas plant. “It’s in line with their intent to triple their foundry capacity.”
Other countries have made similar pushes to get chips made closer to where they are used. The European Commission earlier in November said it could approve aid to fund production of semiconductors in the 27-nation bloc.
Officials in Williamson County have been working for several months on a package of incentives that would bring Samsung’s plant to a rural tract between the cities of Taylor and Hutto that would employ about 1,800 workers. Abbott said Tuesday it will bring more than 2,000 jobs.
“Now it is mostly agricultural row crop and grazing,” said Russ Boles, the county commissioner whose precinct encompasses the site. “The place where they are looking at has great infrastructure. It has big electricity, it has big water and it has a good road system. Those nuts-and-bolts things are important to Samsung and to the project.”
The school board in Taylor had a meeting on Nov. 15 to approve an arrangement that would enable Samsung to save on taxes if it built a facility within the school district’s boundaries. That followed an earlier approval of tax incentives and infrastructure improvements from government officials in Williamson County, where Taylor is located. The site is about a 40-minute drive northeast of Austin.
Google failed to respect ‘Don’t Be Evil’ policy when firing engineers
“Don’t be evil,” is the famous motto of Alphabet Inc. was not honored by the company especially after breaching their employment contracts, a group of former Google employees highlighted on Monday.
Google have failed to respond to comments on the matter, while it previously said that the employees violated data security policies.
Furthermore, former Google employees Rebecca Rivers, Sophie Waldman and Paul Duke alleged, in the lawsuit filed in California state court in Santa Clara County, that they were fired two years ago for fulfilling their contractual obligation to speak up if they saw Google violating its “don’t be evil” pledge.
The lawsuit noted that the motto that comes under Google’s policies calling for “acting honorably and treating each other with respect” and engaging in “the highest possible standards of ethical business conduct,” was considered by workers within immigration work as “evil.”
The company’s code of conduct says workers who think the company may be falling short of its commitment should not stay silent, the lawsuit said. For around 20 years, Google promoted “don’t be evil” as a core value, including when it went public in 2004.
In addition, the three software engineers raised concerns in forums inside Google about the company potentially selling cloud technology to U.S. immigration authorities, which at the time were engaging in detention tactics considered inhumane by rights activists, including separating migrant children from their families.
Workers taking part in the suit have failed to specify the amount of damages.
China to set rules to protect drivers’ rights in ride-hailing Industry
China defined new rules on Tuesday to protect the rights of drivers in its giant ride-hailing industry, requiring operators of the services to provide them with social insurance and make their earnings public.
As such, the rules came after Chinese regulators told companies including Didi Global, Meituan, Alibaba Group’s Ele.me and Tencent Holdings, in September, to improve their income distributions and guarantee rest periods for drivers and food-delivery riders.
Also, China’s state media has also criticized Didi, the country’s dominant ride-hailing platform, for not paying drivers fairly.
The new rules come as President Xi Jinping called for China to achieve “common prosperity,” seeking to narrow a wide wealth gap that threatens the country’s economic incline and the legitimacy of Communist Party’s rule. Also, the rules could increase costs for ride-hailers and impact their earnings.
In addition, the industry in China hit an overall transaction volume of $39.22 billion in 2020, according to a report by the Internet Society of China.
To be more specific, the transport ministry said that ride-hailing companies should improve income distribution mechanisms. “Anti-monopoly measures will be stepped up against such companies and a ‘disorderly expansion of capital’ will be prevented in the sector,” it added.
However, regulators in China criticized the biggest technology firms regarding their policies that exploit workers and violate consumer rights, as part of a campaign to exercise more control over large swathes of the economy after years of runaway growth.
The Chinese regulator imposed, in August, a limit on the percentage the delivery platforms take from drivers’ fee, according to a transport ministry official.
Cyber Monday caps holiday shopping weekend as virus lingers
Americans are spending freely and going back to store shopping, knocking out some of the momentum in online sales from last year when Americans were making many of their purchases exclusively via the internet.
Shopper traffic roared back on Black Friday, but it was still below pre-pandemic levels, in part because retailers spread out big deals starting in October. The early buying is expected to also take a bite out of online sales on Monday, coined Cyber Monday by the National Retail Federation in 2005.
In fact, Adobe Digital Economy Index said that it was the first time online sales on Thanksgiving and Black Friday hadn’t grown, and Cyber Monday could likewise see a decline compared with a year ago. Adobe, which tracks more than one trillion visits to U.S. retail sites, had previously recorded healthy online sales gains since it first began reporting on e-commerce in 2012.
Still, Cyber Monday should remain the biggest online spending day of the year. For the overall holiday season, online sales should increase 10% from a year ago, compared with a 33% increase last year, according to Adobe.
A possible game changer is the omicron variant of the coronavirus, which could put a damper on shopping behavior and stores’ businesses. The World Health Organization warned Monday that the global risk from the omicron variant is “very high” based on early evidence, saying the mutated coronavirus could lead to surges with “severe consequences.”
Jon Abt, co-president and a grandson of the founder of Abt Electronics, said that holiday shopping has been robust, and so far overall sales are up 10% compared to a year ago. But he said he thinks Cyber Monday sales will be down at the Glenview, Illinois-based consumer electronics retailer after such robust growth from a year ago. He also worries about how the rest of the season will fare given the new variant.
“There are so many variables,” Abt said. “It’s a little too murky.”
Here is how the season is shaping up:
CYBER MONDAY STILL KING BUT COOLING
Consumers are expected to spend between $10.2 billion and $11.3 billion on Monday, making it once again the biggest online shopping day of the year, according to Adobe. Still, spending on Cyber Monday could drop from last year’s level of $10.8 billion as Americans are spreading out their purchases more in response to discounting in October by retailers, according to Adobe.
Both Black Friday and Thanksgiving Day online shopping came in below Adobe’s prediction. On Black Friday, online sales reached $8.9 billion, down from the $9 billion in 2020, the second largest day of the year. On Thanksgiving Day, online sales reached $5.1 billion, even from the year-ago period.
Harley Finkelstein, president of Canadian e-commerce platform Shopify, which has 1.7 million independent brands on its site, said that so far, Cyber Monday is off to a strong start. Sales on his platform were up 21% on Black Friday compared with 2020 and more than double compared with 2019. He said he believes that independent brands will see better percentage sales gains online than big national chains, as shoppers gravitate more toward direct-to-consumer labels and look for brands with social conscience. And he says these brands have been able to get the inventory. Among some of the hot items on Shopify are children’s couches from Nugget and luxurious linens from Brooklinen.
“I think it is a tale of two different worlds,” he added.
BLACK FRIDAY BACK BUT NOT THE SAME
Overall, Black Friday store traffic was more robust than last year but was still below pre-pandemic levels as shoppers spread out their buying in response to earlier deals in October and shifted more of their spending online. Sales on Friday were either below or had modest gains compared with pre-pandemic levels of 2019, according to various spending measures.
Black Friday sales about 30%, compared with the year-ago period, according to Mastercard SpendingPulse, which tracks all types of payments, including cash and credit cards. That was above its 20% growth forecast for the day. Steve Sadove, senior adviser for Mastercard, said the numbers speak to the “strength of the consumer.” For the Friday through Sunday period, sales rose 14.1% compared with the same period in 2020 and were up 5.8% compared to 2019, Mastercard reported.
Customer counts soared 60.8% on Black Friday compared with a year ago, but were down 26.9% on the same day in 2019, according to RetailNext, which analyzes store traffic with monitors and sensors in thousands of stores. Sales rose 46.4% on Black Friday but were down 5.1% in 2019, according to RetailNext. Sensormatic, another firm that tracks customer traffic, reported a 47.5% surge in traffic on Black Friday compared with a year ago but that number fell 28.3% compared with 2019.
THE CHANGING DISCOUNT LANDSCAPE
Unlike in years past, many big box stores like Walmart didn’t market their discounted goods as “doorbusters,” in their Black Friday ads, choosing instead to stretch the deals out throughout the season or even the day. And the discounts are smaller this season as well.
Shoppers were also expected to pay on average between 5% to 17% more for toys, clothing, appliances, TVs and others purchases on Black Friday this year compared with last year, according to Aurelien Duthoit, senior sector advisor at Allianz Research. That’s because whatever discounts are offered will be applied to goods that already cost more.
And for the first time, discounts on Cyber Monday compared with a year ago are expected to be weaker, according to Adobe. Still, Cyber Monday remains the best day to buy TVs with discount levels at 16%, compared with 19% discounts last year. Other categories where consumers will find deals include clothing at a 15% markdown, compared with 20% last year. Computers are being discounted at 14%, compared with 28% last year, according to Adobe.
Overall holiday sales could be record breaking. For the November and December period, the National Retail Federation predicts that sales will increase between 8.5% and 10.5%. Holiday sales increased about 8% in 2020 when shoppers, locked down during the early part of the pandemic, spent their money on pajamas and home goods.
NEW YORK (AP)
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