Samsung to build chip factory in China

Samsung Electronics, the world's top memory chip maker, said on Tuesday it had decided to build a plant in China to start production of flash memory chips from 2013 as it seeks to ride a boom in smartphones and tablet computers.

The plant, if approved, would be Samsung's second overseas chip manufacturing site, and reflects the growing importance of Chinese market. Samsung is also planning to build a flat-screen production base in China.

The new line "will enable us to meet fast growing demand from our customers and at the same time strengthen our overall competitiveness in the memory industry," the president of Samsung's memory business, Jin Dong-soo, said in a statement.

"China is expected to overtake the United States as the top market for electronics products with its income levels growing," said Kim Young-chan, an analyst at Shinhan Investment Corp.

Samsung, whose flash chips are used in Apple's iPhone and iPad tablet, said it had yet to decide the exact amount of investment or a site for the plant.

Kim estimated Samsung would invest between 4 trillion won ($3.5 billion) and 5 trillion won to build the new facility.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. 

China overtook the US as the world’s biggest smartphone market in the third quarter of this year, according to Strategy Analytics, the research firm. Demand is also being fuelled by Chinese manufacturers, such as ZTE and Huawei, which are gaining market share overseas.

While the overall smartphone market is still growing, weakness in consumer spending in the US and Europe has hit a number of smartphone makers. Taiwan’s HTC said on Tuesday that its November sales were down 30 per cent from a month ago, and 20 per cent from last year, to T$30.94bn ($1bn) and Research in Motion, the maker of Blackberry, lowered its forecasts last week.

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“This new NAND flash memory line will enable us to meet fast growing demand from our customers and at the same time strengthen our overall competitiveness in the memory industry,” said Jun Dong-soo, president of Samsung’s memory business.

The South Korean company plans to start construction on the new factory next year and begin operations in 2013. It will talk to Chinese provincial governments to decide where to build the plant.Samsung said it had filed an application for the foreign production base with the South Korean government, which requires firms to make such requests for fear of leakages of the country's prized high technology.

Samsung is the world's biggest NAND flash memory maker with around 40 percent of the market. It competes with Japan's Toshiba Corp, Hynix Semiconductor Inc of Korea and Micron Technology Inc of the United States.

Samsung's sole foreign chip plant in Austin, Texas has also raised production to full capacity of logic semiconductors such as the processing chips used to power mobile devices ahead of schedule after a $3.6 billion investment, it said in a separate statement on Tuesday.

Shares in Samsung closed down 2.1 percent prior to the announcement, lagging a 1.0 percent drop in the wider market.High quality global journalism requires investment.

The global market for NAND memory chips is forecast to increase by 20 per cent next year to $26bn, according to chip price tracker DRAMexchange. Samsung is the world’s largest Nand flash memory chipmaker with a 40 per cent market share, followed by Japan’s Toshiba, South Korea’s Hynix Semiconductor and Micron Technology of the US.