California may be synonymous with Silicon Valley, but Texas is quickly earning its reputation as the “Silicon State.” The Lone Star State has emerged as a national leader in semiconductor manufacturing, producing the vital microchips that serve as the backbone of modern electronics.
Texas currently leads the nation in semiconductor chip exports, a segment of the industry that is witnessing unprecedented growth. “It seems unprecedented relative to what I have seen since I got into the business in 1998,” stated Steve Putna, director of Texas A&M’s Semiconductor Institute, highlighting the significant influx of funding and incentives that have revitalized the state’s semiconductor ecosystem.
Recent federal investments and the establishment of numerous data centers across Texas have further fueled this expansion. Noteworthy developments include Texas Instruments’ $40 billion semiconductor facility in Sherman and plans for new fabs by Nvidia and Winstrom Corporation in north Fort Worth, along with Elon Musk’s proposed “Terafab” megafacility in Grimes County.
The Semiconductor Industry Association reports that Texas hosts 57 semiconductor facilities, employing over 47,000 individuals in fabrication, materials manufacturing, and research and development. This workforce plays a crucial role in supporting the growing demand for semiconductor technology.
Texas A&M’s recent groundbreaking on a $226 million research facility is part of the $1.5 billion Texas CHIPS Act, designed to promote semiconductor manufacturing and workforce development. This initiative reflects a commitment to training the next generation of technicians and engineers, ensuring the industry remains competitive.
The Texas Semiconductor Innovation Fund, established with $698.3 million, has provided $512.3 million in grants to 29 projects, generating a total capital investment of $9.3 billion and creating nearly 2,700 direct jobs. Texas Governor Greg Abbott emphasized the state’s historical significance in semiconductor innovation, referencing the invention of the integrated circuit by Texas Instruments in 1958.
Despite the U.S. once dominating the global semiconductor market with a 40% share, that figure has dwindled to around 10% as companies have moved production overseas. This decline raises concerns about national security, given the dependence on foreign manufacturing for essential technology.
In response to the semiconductor shortage exacerbated by the COVID-19 pandemic, the Biden administration enacted the federal CHIPS and Science Act, allocating $52 billion to stimulate domestic semiconductor production. U.S. Senator John Cornyn, a key negotiator of the legislation, emphasized that this investment is vital for the economy and national security.
With Texas already possessing a strong semiconductor infrastructure, the state legislature sought to leverage this foundation through the Texas CHIPS Act. Cornyn credited both federal and state support for the recent surge of semiconductor facility announcements in Texas.
The growth of the semiconductor industry shows no signs of slowing down. Companies like Nvidia and LITREON are expanding their operations primarily due to the rising demand for chips driven by artificial intelligence. Texas, now home to the second-largest number of data centers in the United States, is positioned to lead this market, as servers within data centers rely heavily on microchips.
Putna noted, “The demand curb is not abating,” although he acknowledged the inherent risks of overbuilding. Nevertheless, the robust demand for semiconductors justifies continued investment in the sector.
While additional federal subsidies may be unlikely due to national debt concerns, the semiconductor industry in Texas is expected to thrive, primarily fueled by the increasing need for chips in AI technologies and the federal government’s push for domestic manufacturing.
Disclosure: Texas A&M University, Texas Instruments, and The University of Texas at Austin have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations, and corporate sponsors. Financial supporters play no role in The Texas Tribune’s journalism. Find a complete list of them here.
