News Articles: Austin’s Bid for Samsung
Central Texas solidifies its future, thanks to Samsung
Austin American-Statesman, April 16, 2006 (editorial – excerpts)
The announcement that Samsung, the South Korean-based
chip maker, will build a next-generation factory that could
cost as much as $4 billion in Austin is terrific news, not
only for Central Texas but for the state as well. Gov. Rick
Perry's deputy chief of staff, Phil Wilson, said it will be the
"single largest capital investment in Texas history." The
decision to build here - construction starts next week bolsters this metropolitan area's position as one of the
nation's high-tech centers.
The massive plant will go up next to the existing Samsung
plant in northeast Austin, well away from any problems
that come with development in the Barton Springs
watershed or other Hill Country locations. When fully
built, the plant will employ 900 highly skilled, well-paid
employees making an average of about $63,000 a year. Its
presence will stimulate orders from suppliers to support
the plant and the people who work there, thus creating
more jobs and economic opportunity for individuals and
businesses alike.
The announcement Thursday also underlines an economic
reality that prosperity here is directly linked to the world
economy. Two of the three biggest, most celebrated new
manufacturing plant locations made in Texas in the past
few years involved Asian, not American, companies - this
new Samsung chip plant in Austin and the new Toyota
pickup truck plant at San Antonio. At the same time,
Round Rock-based Dell Inc. is expanding rapidly in Asia.
For Central Texas, globalization is not a concept but a fact
of life.
Another factor was $233.4 million in tax abatements and
other incentives provided by the state, the city, Travis
County and the Manor school district. Such concessions
remain controversial for some, and the U.S. Supreme
Court is considering a case from Ohio that seeks to stop
them. But the fact is that abatements and incentives are in
play as states and cities compete for the rare construction
of a major manufacturing plant.
As elected and business leaders note, the decision to build
a major, next-generation chip plant here is not just a
tactical win in the jostling over economic development. It's
also a strategic victory that solidifies Central Texas as a
high-tech center of national and even international
significance.
$250
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Domain Sematech Cabela's Samsung
Austin played the right chips with Samsung
Austin American-Statesman, April 16, 2006 (excerpts)
In late March 2005 in Seoul, South Korea, Shinoh Kim, a
Samsung Electronics executive, joined former Austin
Mayor Kirk Watson for breakfast at the Shila Hotel and
explained Samsung's attitude toward possibly expanding
its Austin operation: "One plus one equals five," and "one
plus zero equals zero."
The rough translation: Austin was competing for both a
new factory - a huge $3.5 billion to $4 billion expansion and other potential future Samsung projects. Samsung, the
world's second-largest chip maker, already had one factory
in Northeast Austin, and the company traditionally has
preferred to build several factories close together.
It was about to embark on a massive expansion, spending
more than $30 billion to build new plants worldwide.
But there was a downside risk: If Austin missed this
chance, it very likely would miss out on the chance to win
any future Samsung projects. Over time, Samsung would
wind down its Austin operations, once its only factory here
fell into obsolescence. Eventually, its presence in Austin
would diminish to zero.
Watson and the other six members of the Austin
contingent got the message. They had come to Korea to
ask Samsung to build its next giant semiconductor factory
in Central Texas. They were about to start a high-stakes
game that ended Thursday night, when Samsung's board
formally approved the new plant for Austin. "Shinoh Kim
was very good at being clear what we were playing for,"
Watson recalled.
Austin's chip manufacturing sector was eroding, and
Samsung represented the city's last, best hope for a major
comeback. Since the peak of the tech boom in late 2000,
semiconductor employment, which includes chip design as
well as manufacturing, has dropped 40 percent to about
15,000 jobs.
The Austinites aced their presentation that day at Samsung
headquarters. The room was filled with laptop computers
and projection screens so the dozen or more Samsung
executives could follow the PowerPoint presentations.
The visit to Seoul was essential, showing that Austin was
serious about the project. Each member of the Austin
contingent played a key role in Korea: Watson, Mayor
Will Wynn, lawyer Pike Powers, businessman Gary
Farmer, then state economic development director Jeff
Moseley and Economic Development Director Dave Porter
of the Greater Austin Chamber of Commerce all were
there.
But the clincher might have come from Juan Sanchez, vice
president of research at the University of Texas, who
adroitly pointed out that UT-Austin had more students
from South Korea than from any other foreign country. He
showed slides of Korean graduate students doing chip
research at UT's Pickle campus. "Their eyes lit up,"
Watson recalled of the Samsung executives' reaction. "It
was a prideful moment for them."
The Austin officials and the Samsung site selection team
started 16 weeks of intensive meetings to hammer out a
complicated incentive package involving four units of
government and reams of details. It took another two
months for elements of the package to win approval by the
Austin City Council, the Travis County Commissioners
Court and the Manor Independent School District board.
But it took another six months for the board to seal the
decision. The company especially wanted more
information on the region's transportation plans for the
next decade and beyond. Part of Samsung's concern was
growing congestion on Interstate 35. Every silicon wafer
that Samsung processes in Austin is shipped by truck to
Dallas, then flown to South Korea for final testing and
assembly. Traffic snarls on the interstate can cause a
shipment to miss its scheduled plane - an expensive delay.
Meanwhile, the Austin deal nearly came unraveled by
complications in winning approval for a $115 million
incentive package from the Manor school district. As
Watson and other participants describe the process, the
district's piece of the incentive plan was crucial. The
multibillion-dollar investment that a chip plant requires
can saddle companies with heavy property tax bills in
Texas.
The school district will get plenty in return for the $115
million in tax breaks it is bestowing on Samsung: The
plant is expected to generate $40 million in property tax
revenue during the first 10 years. Samsung will contribute
$1 million toward a scholarship endowment fund and up to
$500,000 worth of land for new schools for the fastgrowing district. State money will help pay for a $4.5
million math and science academy.