Samsung Electronics will invest a whopping $14.7 billion on a single plant that it will use for its semiconductor business.
The plant, which will be located in Pyeongtaek, will either produce logic chips or memory chips – the decision is yet to be arrived at.
The plant is expected to start operations in 2017 and will open up 150,000 jobs, meaning it will employ about one third on the city’s population.
Samsung now relies heavily on its chip unit for profit growth since its smartphone business continues to suffer from intensifying competition from low-end handsets made in China.
The smartphone business currently account for about 60 percent of its total profit. According to analysts, the demand for Samsung’s memory chips will remain strong for the rest of this year.
According to Samsung, the construction of this new chip plant will begin in 2015 with operations beginning in 2017.
Samsung expects that due to higher demand for mobile devices there will be equally higher demand for mobile chips that this semiconductor division will be supplying.
Samsung brought forward its investment plant by more than one year so that it can be inline with the government’s calls to help to boost domestic economic activities.
It also chose Pyeongtaek because it is relatively close to Seoul making it easier to recruit local engineering talent.
The local government had proposed a tax on excess profits at big corporations as a means to encourage them spend more on dividends, investment and wages.
Samsung typically spends more than its rivals while investing in high-tech chip manufacturing facilities. This ability has allowed it to maintain its lead in memory chip production. And by moving quickly to finer chip-process technology, the firm has drastically reduced its chip manufacturing costs.
Samsung is the world’s largest producer of dynamic random access memory chips used in smartphones and PCs. It also produces NAND flash memory chips used in mobile devices including digital cameras.
Analysts expect the company’s chip-division profit to exceed mobile phones for the first time in three years.