Texas’ capital city is living up to its reputation as the U.S. city most poised to quickly recover from the economic downturn. Forbes, for one, made this prediction last summer when it said the Austin-Round Rock area tops the list of “best cities for recession recovery.” Then, on June 9, as if on script, Samsung Electronics, Seoul, South Korea, announced it will invest $3.6 billion to expand the capacity of its existing semiconductor plant in Austin. The investment in the 300-acre Austin campus, the company’s only semiconductor fabrication site outside South Korea, will build out the second phase of its 2.3-million-sq-ft semiconductor manufacturing facility.

Photo Courtesy Samsung Austin Semiconductor Llc

Aerial photo shows Samsung’s Austin campus, the company’s only semiconductor fabrication site outside of South Korea. A $3.6-billion plant upgrade to build out the second phase of the 2.3-million-sq-ft complex is scheduled to be complete by end of next year.

W.S. Han, present of Samsung Austin Semiconductor, says the investment ensures “Austin’s premier status as a center for semiconductor research and manufacturing.”

The Austin metropolitan region, with a population of 1.4 million, is known for its highly trained and technology-savvy workforce.

Speaking at a city-hall conference, Austin Mayor Lee Leffingwell said, “This type of investment speaks volumes about our city’s attributes as a national and international center of technological innovation.” Samsung’s investment is the largest private capital investment in the U.S. this year, Leffingwell noted.

In Austin, the project is expected to create about 3,000 temporary construction and vendor jobs, says Samsung spokesman Bill Cryer. The company also will hire an additional 500 employees.

The 1.538-million-sq-ft building will be used to build logic chips, Cryer says. Samsung Semiconductor Austin LLC will serve as the general contractor. Cryer did not name local firms that would be involved in the project but says that equipment move-in and building activities will begin soon and be finished by the second quarter of 2011.

Samsung has been an Austin-area employer since 1996, when it built the $1.4-billion Fab 1 plant, which produced an 8-in. wafer fabrication used in memory chips.

The fact that Samsung continues to upgrade and invest in Austin is great for the city and the country, too, says Dave Porter, senior vice president of economic development at the Greater Austin Chamber of Commerce. “Their chips go into many of the consumer products we use, so the fact that they are investing indicates that they see consumer spending,” he says. That’s a good sign for the economy as a whole, Porter says.

In 2006, with a $10.8-million grant from the state’s Texas Enterprise Fund and a total of $233 million in government incentives to grow its chip fabrication facilities, the company began the first expansion of the Austin campus. The city of Austin provided a 20-year incentive package, Porter says. In the first 10 years, to receive a 100% tax rebate, Samsung had to invest $2.5 billion and add 700 jobs. Leffingwell said Samsung met that requirement two years early in December 2008.

“Anything after ’08 is gravy,” Porter says.

Porter commends local government for extending the incentive to 20 years; typically, such an incentive is offered as a 10-year package. “These projects come around once in a lifetime. If someone else wants to spend $10 billion on a project, that 20-year incentive should be encouraged,” Porter says.

In 2007, while Samsung was building the first phase of the 1.538-million-sq-ft Fab 2—which used 12-in. silicon wafers to manufacture memory chips it will continue to produce—it included a 118,000-sq-ft clean room, Cryer says.

What was left unfinished, he says, is a 182,000-sq-ft space for a second clean room. “That is what we will be building out over the next several months,” Cryer adds.

The original 8-in. Fab 1 was closed in 2009 and converted to run “copper interconnects” as part of the new Fab 2, Cryer says.

The decision to add capacity to the Austin plant was based on the company’s long-term business requirements, Cryer says. The abatements with the city, county and the local independent school district will continue forward with the new investment, he says. “There should be no problems meeting our requirements under those agreements,” he adds.