SEOUL: South Korean IT giant Samsung Electronics plans to spend $14.7bn on a new chip facility — its biggest investment in a single plant — leaning on its semiconductor business to bolster profits as its smartphone dominance wanes.
Samsung, the world’s top memory chip maker, said the plant would be located in Pyeongtaek, roughly 75km south of Seoul. The company said it would create 150,000 jobs, equal to about a third of the city’s population.
The bet on chips comes as its smartphone business is being squeezed by Apple Inc in the premium segment and undercut by Chinese rivals like Lenovo Group Ltd in mid-to-low end. April-June operating profit for Samsung’s mobile division fell in annual terms for the second straight quarter, the longest streak since at least 2011. But with the higher demand for mobile devices come increased orders for mobile chips, and Samsung Electronics’ semiconductor division will be key to propping up the company’s bottom-line, analysts say. The plant in Pyeongtaek will make either logic or memory chips, Samsung Electronics said, adding that a final decision had not been made yet. “Right now the only part of the company that is bringing in steady profits is the semiconductor division, so it looks like the company will keep investing in the business,” said IM Investment analyst Lee Min-hee.
The chip business is likely to be a lone bright spot in what is otherwise expected to be a poor third quarter for the South Korean giant. Samsung will issue its earnings guidance for the period today.
Some analysts forecast the semiconductor division will report stronger operating profit than the handset division in the third quarter for the first time in more than three years. Reuters
