Samsung Electronics Co. is investing US $14.7 billion (15.6 trillion Korean won) in a new chip plant in South Korea to keep up with growing demand from smartphones, enterprise computing and the rising 'Internet of Things' business. Construction of the new chip plant will begin in the first half of next year on a 790,000 square meter site in Godeok Industrial Complex in Pyeongtaek. Operations at the facility will commence at some point during the second half of 2017, Samsung announced on Monday.
Samsung, which is scheduled to report its third-quarters earnings on Tuesday, had announced in July that its second-quarter earnings shrunk by about 20 percent year-on-year due to price competition in mid and low-end phones from Chinese manufacturers and slowing demand in Europe. Samsung’s income at 52 trillion won in the second quarter was around 9 percent from the same quarter a year ago. Samsung likewise puts the blame of its weak performance in the second quarter on slowing request worldwide for tablets.
Samsung’s semiconductor business, which incorporates memory and logic chips, witnessed revenue of about 9.8 trillion won in the second quarter, up by about 13 percent from the same quarter a year ago. The biggest memory-chip market is investing in the chip factory as its smartphone business struggles to seek a place in the market captured by its US rival Apple, with its bigger screen iPhones and Xiaomi will cheaper devices in foreign markets. According to estimates by analysts, the third-quarter earnings report which is scheduled for tomorrow is expected to show a 47 percent fall, with sales to drop by 15 percent, which is one of the steepest decreases since 2009.
“Semiconductor has been Samsung’s long-time key business, while the company can no longer expect strong growth from its mobile unit,” said Lee Min Hee, an analyst at I’M Investment & Securities Co. in Seoul. “The company is now making a huge investment for the future as its key mobile business isn’t likely to contribute to profit as much as it used to.”
A Samsung representative said a decision has not been made on what kind of chips would be manufactured at the new fab and the assembling facility. The organization said in July it was on track to reveal 14-nanometer assembling process in volume before the end of 2014.
Samsung additionally estimates solid demand for Drams and NAND flash storage in the second half of the ongoing year, which originates from mobile phones and widespread adoption of SSDs (robust state drives) by ventures and PC manufacturers. The organization has wafer manufacturing facilities in Giheung and Hwaseong close Seoul and in Austin, Texas. It likewise does integrated circuit assembly and testing in Onyang in South Korea and Suzhou, China.