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Samsung plans huge chip center

Samsung Electronics Co, the world's second-largest chipmaker, yesterday announced an ambitious investment plan aimed at building the world's largest cluster of semiconductor production facilities in the next seven years.

The company said it would spend US$33 billion to build eight chip fabrication lines and one research and development facility by 2012 at its semiconductor complex in Hwaseong, 50km south of Seoul.

Samsung Electronics said the investment is part of plans to achieve annual semiconductor sales of US$61 billion by 2012, up from US$16.3 billion last year.

Samsung, which specializes in making commodity-like memory chips, is betting its strategy of outspending rivals will help it catch up to Intel in the US$213 billion semiconductor industry and extend its lead over smaller chipmakers such as Micron Technology Inc. Samsung's chip investments exceeded Intel Corp's last year by 23 percent, according to market researcher IC Insights Inc.

"We plan to put in US$33 billion to create the world's largest semiconductor cluster," Samsung Electronics president Hwang Chang-kyu said at the groundbreaking ceremony for the project.

"Capital spending is everything in the chip industry, as economy of scale is very important," said Oh Sung-sik, who oversees about US$1.6 billion in South Korean equities as chief investment officer at Franklin Templeton Investment Trust Management Co in Seoul.

"Unless there some new technological developments, it will be really hard for the competitors to catch up to Samsung in memory chip business," Oh said.

When they are complete in 2012, Samsung will have a total of 24 semiconductor production lines at its massive Hwaseong complex, with the first new line to begin operation in the first half of next year.

The project is expected to create some 14,000 new jobs by 2012, it added.

The US$33 billion includes some US$850 million for a new research and development facility dedicated to developing next generation semiconductor chips on top of its existing five research and development operations.

The research and development center will hire 5,000 researchers, it said.

Hwang Chang-gyu, head of Samsung's semiconductor business, earlier this month said the company will post record sales in the second half of the year, fueled by demand for flash memory chips known as NAND that go into Apple Inc's iPod MP3 players and Sony Corp's PlayStation Portable game console.

Asia's largest electronics maker by market value made 67 percent of its operating profit from semiconductors during the second quarter.

Combined equipment spending by chipmakers such as Intel, Samsung Electronics, Taiwan Semiconductor Manufacturing Co (台積電) and Hynix Semiconductor Inc will probably rise 8 percent next year, according to Dan Tracy, director of industry research at Semiconductor Equipment & Materials International, last week.
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