Samsung Electronics will invest €16.3bn in South Korea to extend its lead in memory chips and next-generation smartphone displays. This will create half a million jobs.
The investment underscores Samsung’s determination to widen its lead in memory chips, which are expected to propel Asia’s third most valuable company to record profit this year.
It routinely invests more than $10bn in chips annually, helping it stay ahead of competitors, such as Korean rival, SK Hynix, and Japan’s Toshiba. The announcement follows repeated calls from new South Korean president, Moon Jae-in, for big businesses to invest more domestically to create jobs.
Samsung said its plan could create 440,000 roles by 2021. The huge investment is also likely to alleviate shareholder fears of major decisions being delayed in the absence of vice-chairman, Jay Y. Lee.
The leader of Samsung Group is on trial, charged with bribing former president, Park Geun-hye, for political favours. “Samsung is being more aggressive in domestic investments, because of the current (political) climate,” said Park Ju-gun, head of corporate analysis firm, CEO Score.
The firm also needs to show initiative domestically, after announcing a €334m plant in the US, Mr Park said.
Memory-makers are widely expected to post record profits in 2017, as prices rise in response to demand for more features in smartphones and servers, as well as a persistent supply shortage, which analysts and industry sources said is more acute for Nand chips, due to increasing adoption of high-end storage products.
Samsung, SK Hynix, and Toshiba have committed billions of dollars to boost Nand output in recent years, yet shortages are expected to persist, at least through 2017, as new facilities will not make meaningful supply contributions until next year.
Under its latest spending plan, Samsung will put €11bn into its new Nand factory in Pyeongtaek by 2021.
It will invest six trillion won in a new semiconductor production line in Hwaseong, but did not elaborate on timing or product.
Additional capacity across the industry could cause slight oversupply in early 2018, but prices are unlikely to drop, because demand is so strong.
“There’s no chance of major oversupply issues, and I think Samsung is investing so much, because it’s convinced that won’t happen,” said Shinhan Investment analyst, Choi Do-yeon.
Samsung also said it will add a production line to its Nand plant, in Xi’an, China, though it has not yet set an investment amount or time frame.
Some South Korean companies in China have seen sales decline or have had to reduce operations, since Beijing objected to Seoul’s deployment of a US anti-missile defence system in March.
But components-makers have not reported any problems, with Samsung still among China’s biggest suppliers of chips and displays. The firm accounted for 40.4% of global memory-chip revenue in January-March, showed latest data from researcher, TrendForce.
China is trying to develop its own memory-chip producers, but it is likely to take several years before they can compete with existing makers, analysts said.
Samsung also said Samsung Display plans to invest one trillion won on a new, organic, light-emitting diode (Oled) display complex in South Korea.
The unit controls 90% of the market for Oled smartphone screens, and is widely expected to add production lines to cope with demand from phone makers, such as Apple.
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