Samsung

Samsung has long been the top dog of the Android smartphone business. It is used to making huge profits which came, not only from smartphones, but also from its other consumer electronic businesses like televisions and white goods.  However Samsung is going through a bit of a rough patch at the moment and it is thought that the company will post poorer earnings for the third quarter of this year come October 7th. Mainly due to lackluster smartphone sales, it is expected that the company will post a Q3 operating profits akin to those in posted in 2011!

The semiconductor industrial zone set to be established in Pyeongtaek will take a crucial role in the future of Samsung's chip business.

To buck the trend Samsung has decided to invest heavily in its semiconductor business. Samsung makes logic chips (including SoCs) and memory modules for many of the major smartphone companies in the world. The company plans to invest $14.7 billion in a new chip facility located in Pyeongtaek, roughly 47 miles south of Seoul. It is the biggest investment Samsung has ever made in a single plant. The new plant should create around 150,000 jobs, equal to about a third of the city’s population!

Since Samsung makes chips for anyone and everyone, the success of this business doesn’t depend solely on the sales of its own brand Smartphones. Since the global demand for mobile devices is still increasing then this should be a sound investment for Samsung. The final decision on what type of chips (logic or memory) the plant will make has yet to be made. At the moment Samsung is the world’s biggest producer of RAM chips, used in personal computers and servers. It also makes flash-memory, which is used in mobile devices including smartphones and tablets.

Construction of the new facility will start next year and is scheduled to be completed by the second half of 2017.

When Samsung does post its quarterly results tomorrow, it is thought that its existing semiconductor business will report stronger operating profit than its smartphone division. This will be the first time in three years that the semiconductor group will post better results than the handset group.

The plan for the plant is part of Samsung’s long term planning, construction of the new facility will start next year and is scheduled to be completed by the second half of 2017. “The semiconductor industrial zone set to be established in Pyeongtaek will take a crucial role in the future of Samsung’s chip business,” said Kwon Oh-hyun, chief executive of Samsung Electronics.

In 2013, Samsung’s combined investment in its chip business came to around $12 billion. Samsung currently  has semiconductor factories in Texas, the United States, and three in China.