Today in New Delhi, India
Apr 23, 2019-Tuesday
New Delhi
  • Humidity
  • Wind

Samsung unveils $33 bln 7-year chip investment

Samsung has announced a $33 billion investment plan on Thursday to add new production lines.

india Updated: Sep 29, 2005 18:45 IST
Rhee So-eui (Reuters)
Rhee So-eui (Reuters)

Samsung Electronics Co Ltd, the world's top memory chip maker, announced a $33 billion investment plan on Thursday to add new production lines, aiming to more than treble its chip sales by 2012.

The plan, the biggest single investment project since Samsung entered the semiconductor business in 1974, was set to widen the gap with its smaller rivals while adding capacity in the relatively weak non-memory area, analysts said. Samsung also said it was considering building new production facilities in the United States, although nothing was set.

Memory chip makers have huge capital spending requirements as production moves to finer circuitry technology that makes chips smaller and helps cut manufacturing costs. "It is Samsung's intention to be completely out of reach of smaller memory chip makers," said Kim Ik-sang, an analyst of CJ Investment & Securities.

In the first quarter, Samsung had a 31 per cent share of the DRAM (dynamic random access memory) market, followed by US company Micron Technology In. with 16.8 per cent and South Korea's Hynix Semiconductor Inc with 16.5 per cent.

"This is going to have an impact on the capex plans of second-tier companies like Hynix," said Bak Sun-bo, head of the equity management team at Shinhan BNP Paribas Investment Trust Management.

Lifted by the investment, Samsung expects its semiconductor sales to reach $61 billion in 2012, more than treble the $17.5 billion in sales in 2004, the company said in a statement.

Computer memory chip prices are expected to recover later this year ahead of the Christmas season when there is traditionally high PC demand and with a shift in production capacity to flash memory chips from DRAM chips.

Analysts expect firm demand for memory chips over the coming years due to growing PC markets in emerging countries and booming sales of digital cameras and music players, which use flash memory chips.

Samsung, which sells computer memory chips to global PC makers such as Dell, also controls nearly 60 percent of the world's NAND flash memory market, which is getting a boost from the launch of Apple Computer Inc.'s popular iPod Shuffle and other MP3 music players.

Samsung said the aggressive investments should enable the company to meet new demand. By 2012, it would build eight new chip fabrication lines to produce memory and system LSI chips, and a line solely for research & development.

The allocation between memory and non-memory would be decided later, Samsung said.
The lines would be added to Samsung's Hwaseong semiconductor plant, south of Seoul and nearby Kiheung, its main semiconductor fabrication site.

"When completed in 2012, Samsung's Kiheung-Hwaseong complex will be the world's largest semiconductor fabrication facility," it said.


Samsung has a history of investing in the industry's downturn and making the most of an upturn. It rose to the world's No.1 memory chip maker in 1993 from the 21th in 1985 and has defended the position since by investing ahead of the competition.

Of the eight new fabrication lines, four were expected to be designed for higher capacities using a 300mm or larger wafer unit, Samsung said. One of the lines is now under construction and will be introduced in the first half of 2006.

Samsung did not give annual breakdowns of the investment, and a spokeswoman said the $33 billion plan did not represent all of its investment plans in chips. For 2005, Samsung has allocated 6 trillion won ($5.8 billion) investment in the semiconductor business.

The company did not reveal its 2006 investment plans.

Intel Corp, the world's largest chip maker, plans to spend about $5.9 billion in 2005 to support higher expected demand. In the second quarter, Intel posted $9.2 billion in revenue versus Samsung's companywide revenue of $13.1 billion.

In a separate statement, Samsung said it was considering some offers from a few US states trying to attract chip investment.

Samsung runs its only chip fabrication plant outside Korea in Austin, Texas.
Shares in Samsung, the most valuable technology firm outside the United States, fell 1.34 percent to 590,000 won, lagging the wider market's 0.22 percent gain.

Samsung, a technology powerhouse that makes everything from chips to flat screens and mobile phones, exports over 90 percent of its chip production.

First Published: Sep 29, 2005 18:45 IST