Samsung Austin illustrates twists, turns of evolving manufacturing sector

Tech giant part of upswing in Texas manufacturing GDP -- but also shows the challenges of creating manufacturing jobs in high-tech fields.

Posted August 14th, 2017

As Texas Comptroller Glenn Hegar begins touring manufacturing plants around the state this month to highlight the changing industry, his first stop on Monday brought him, as well as Texas state Sen. Kirk Watson, D-Austin, to Samsung Austin Semiconductor’s 160-acre campus in North Austin, where a significant amount of foreign investment into computer and electronic manufacturing has taken place.

Hegar’s tour comes during a modest resurgence of manufacturing in Austin and across the state, with factories expanding payrolls, increasing production and reporting more optimistic outlooks on economic conditions. It also comes as the computer and electronic product manufacturing subsector has become the state’s fastest growing in terms of Gross Domestic Product growth (GDP).

“The investment by Samsung not only in the Austin area but in Texas -- you can see it,” Hegar said. “That commitment that Samsung provides is part of the reason I wanted to start (my tour) here.”


In the 12 months that ended in June, Texas factories boosted payrolls by 3.2 percent, adding 27,000 jobs, according to the Texas Workforce Commission. After three years of flat or shrinking payrolls, Austin manufacturers added jobs at a similar pace over the June-to-June period. Local factory payrolls rose 3.7 percent, adding 2,100 jobs. 

The recent rebound in the state’s manufacturing sector is welcome after the recession and then a sharp downtown in oil and gas prices hurt many manufacturers. Add to that a sputtering global economy and a strong U.S. dollar, which made American products more expensive overseas, and even factories that weren’t tied closely to the energy sector faced major headwinds.

A significant economic impact in the state’s manufacturing sector has been driven by the computer and electronic product manufacturing subsector, which grew in the state’s GDP contribution by 584 percent from 1997 to 2015, according to the U.S. Department of Commerce International Trade Administration. 

The subsector, which includes computer and peripheral equipment, semiconductors, audio and video equipment and other products, accounts for $28.6 billion of the state’s GDP and more than 309,000 jobs. It accounts for about 12 percent of what the manufacturing industry contributes to the state’s overall GDP. 

At Samsung’s Austin chipmaking plant, about 500 employees have been hired since January, the company said, making the workforce there roughly 3,500. 

The South Korean company has invested about $16 billion into its Central Texas operations since coming here in 1997. Its Austin campus is only roughly half built out.

Yet, the cutting-edge, automated manufacturing technologies displayed Monday by Samsung managers underscores the broader, long-term challenge to traditionally middle-class factory jobs in America.

While the state's manufacturing GDP has grown by 98 percent since 1997, the amount of manufacturing jobs has decreased by 19 percent, according to the U.S. Bureau of Economic Analysis and Texas Comptroller of Public Accounts.

Much like factories across the country, the combination of automation, offshoring and global trade have dealt a blow to local manufacturing jobs. Economists debate the weight of each factor. Samsung and many other manufacturers have expanded in the U.S., but it’s unlikely any of these forces will reverse in the near term. When Samsung made its latest significant investment, for example - a $18.6 billion fund in July- it went to a plant in South Korea, not Austin.

Michael A. Raiford, vice president of fab engineering for Samsung’s Austin operations, said some supply chain jobs have been replaced by computers throughout the years. He said the company trades closer proximity to customers, such as fab-less semiconductor companies in Austin and Silicon Valley, for cheaper labor costs elsewhere. 

The number of industrial robots in Texas increased 18 percent from 2010 to 2015, according to an analysis by the Brookings Institution, which pulled underlying data from a recent study by economists Daron Acemoglu and Pascual Restrepo. Austin saw a similar growth rate, Brookings policy director Mark Muro noted. 

Both locally and statewide, there were about 1.3 industrial robots per 1,000 workers – around the middle of the pack on both a state and large-metro level, according to Muro’s analysis. 

The decline in manufacturing jobs signals the importance for the industry to adapt, according to Hegar, who argued that while jobs have been in decline, average wages in subsectors like computer and electronic product have improved.

“Obviously, (the industry) has changed with technology automation,” Hegar said. “However, even though the economic contribution maybe doesn't have the same high correlation to jobs it used to, the economic impact that it has to people that live in the area and Texas is growing substantially.”

Hegar also said it’s important for companies like Samsung to lead the manufacturing industry as it becomes more tech-friendly by continuing investment and creating a pipeline for jobs. 

The smaller number of workers have been more productive than in the past, and in Austin they’ve been boosting the value of locally produced goods. Factories account for about 6 percent of Austin-area jobs, but the sector contributes more than 10 percent of the metro GDP, the Austin Regional Manufacturers Association reports. 

Samsung’s North Austin campus is composed of miles of “clean rooms” where boxed “vehicles” zip around, each carrying 25 wafers that are built along a supply chain before being split up into individual chips. 

The rooms at one time were swarming with workers, Raiford said. Now, only a handful of employees wearing biohazard equipment could be seen walking around Monday while the army of machines moved above them.