Samsung Electronics Co plans to invest $116bn in non-memory chips through 2030, to cut its reliance on the volatile memory chip market and develop chips to power self-driving cars and AI-enabled devices.
The plan underscores the South Korean firm’s ambition to challenge bigger rivals — Taiwan’s TSMC in contract chip manufacturing and San Diego-based Qualcomm Inc in mobile processing chips — as the memory chip market contracts sharply after years of an unprecedented boom.
Global semiconductor makers are in a race to produce powerful chips to support new technologies such as fifth-generation (5G) mobile networks, connected cars and artificial intelligence (AI). In March, US chip supplier Nvidia Corp agreed to buy Israeli chip designer Mellanox Technologies for $6.8bn, beating rival Intel Corp in a deal that would help Nvidia boost its data centre and AI businesses.
Samsung, which has expanded its chip business largely through organic investment, said on Wednesday its 133tn won ($116bn) spending will comprise of 73tn won for domestic R&D and 60tn won for production infrastructure. “The investment plan is expected to help the company to reach its goal of becoming the world leader in not only memory semiconductors but also logic chips by 2030,” it said in a statement.
Although Samsung does not disclose the breakdown of its investment in the semiconductor division, analysts said more than half of its total capital expenditure usually goes to memory chips. In 2018, Samsung spent 29.4tn won in capital expenditure and four-fifths of the budget went to the semiconductor division where memory chips generated 96% of the operation’s profit.
“Samsung appears to be aggressive on the non-memory side given the size of the spending, but it is too early to tell whether this long-term plan will work out because it depends a lot on the demand situation and market conditions,” said senior analyst Song Myung-sup at HI Investment & Securities.
The aggressive investment plan in semiconductors also comes as Samsung’s smartphone business, once its biggest earnings generator, struggles to revive growth.
The world’s top smartphone maker decided this week to delay the launch of its widely anticipated foldable phone after several reviewers discovered problems with the display.
Samsung said the chip investment will create 15,000 jobs. The firm’s heir apparent Jay Y Lee, awaiting a Supreme Court decision on his bribery conviction, has been under pressure from the government to help create more jobs, as Asia’s fourth-largest economy is battling rising numbers of jobless college graduates partly due to slowing economic growth.
South Korea, the world’s biggest producer of memory chips thanks to Samsung and domestic rival SK Hynix Inc, also wants to reduce its reliance on memory chip sales to smoothen volatile export trends.
The government is preparing its own support programme for the non-memory chip sector, an official at the industry ministry told Reuters by telephone yesterday, without giving further details.
Local media have reported that the government announcement could come later this month.
“It is hard to figure out what Samsung really wants to focus on in terms of products, but I suspect it can be a foundry, or chips related to cameras or displays,” said Kim Sun-woo, an analyst at Meritz Securities.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
Microsoft honours Ooredoo with Digital Transformation Award
Two start-ups join Ooredoo’s ‘Digital & Beyond’ incubation programme at QBIC ‘Demo Day’
Saudi sees tepid demand to replace Iran oil as Opec tensions mount
Opec signals intention to keep limits on oil supply all year amid Russia doubts
US Huawei ban ripples across industry as supplies halted
Trade row, US actions against Huawei knock stock markets
Why yuan at seven would risk further inflaming trade dispute
Taiwan export orders fall on shrinking tech demand
China’s CNPC breaks into Myanmar fuel retailing with Singapore brand