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Samsung to invest over $18 Billion at home in memory chips and smartphone displays

By
Efe Udin
 - 
Jul 6, 2017

Samsung Electronics is investing heavily and it is creating lots of jobs both at home and abroad. It recently opened a new $380 million home appliance manufacturing plant in the US and also invested $1 billion in its production facility in Houston, Texas in preparation for the fourth industrial revolution. Back in South Korea, the Pyeongtaek NAND chip plant which will concentrate on the production of Samsung’s fourth-generation V-NAND (64 layers) has commenced mass production. Today, Samsung announced that it will invest at least $18.6 billion in its home town, South Korea, to solidify its leading role in the memory chip and smartphone displays production.

This investment will create at least half a million jobs and it shows Samsung's  seriousness in the memory chip line. Samsung is set to record its highest-ever profit this year. Many thanks to its routine investment in chips, an action that contributed immensely to Samsung recording the highest operating profit globally for the second quarter of 2017. South Korean president, Moon Jae-in, called for big businesses to invest more at home so as to create jobs and a better environment. Samsung seems to be responding to this call as it plans to create 440,000 jobs by 2021. It will pump 14.4 trillion KRW into its NAND factory in Pyeongtaek by 2021 and will also invest 6 trillion KRW in a new semiconductor production line in Hwaseong in the near future.

Park Ju-gun, head of corporate analysis firm CEO Score, said

"Samsung is being more aggressive in domestic investments because of the current (political) climate,...The firm also needs to show initiative domestically after announcing a $380 million plant in the United States" he added

Due to the increasing demand for high-end storage products, such as NAND chips, there is a consistent increase the prices of these chips and supply shortage. This trend will make memory makers expect record profits this year. Apart from Samsung, SK Hynix and Toshiba have also invested heavily in the NAND chip line to increase the output. However, shortages in 2017 will still persist as these new investments/facilities won't make significant supply until next year. The demand for high-end chips is so strong that even though analysts expect minimal oversupply in early 2018 due to the massive investment, the prices of these chips won't drop. Shinhan Investment analyst Choi Do-Yeon noted that "There's no chance of major oversupply issues, and I think Samsung is investing so much because it's convinced that won't happen,".

Samsung also plans to invest 1 trillion KRW in an OLED display plant in South Korea as this unit controls over 90% of the market for OLED smartphone. This investment is necessary because Samsung is expected to meet up with the demand from phone makers.

Outside South Korea, Samsung will expand its NAND plant in Xi'an by adding a production line. The detail of this expansion is not known for now. However, since Beijing kicked against Seoul's deployment of a U.S. anti-missile defense system in March, some South Korean companies in China have reduced operation probably due to the sales decline. Nevertheless, Samsung still remains China's largest supplier of chips and display. Although China has advanced plans in place to produce its own memory chip, it will take some time for it to be at par with existing manufacturers.

These huge investments by Samsung in memory chips strengthens the minds of shareholders who have been a bit skeptical about its ability to take huge decisions since the absence of Vice Chairman Jay Y. Lee who is been tried for allegedly bribing former president Park Geun-Hye for political favors.

 

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