Samsung responds to Apple competition with $15bn chip plant in South Korea

Samsung has announced that it will spend $15bn building a chip plant in South Korea. The aim is to meet growing market demand for more advanced technology as the electronics firm nears the data for its toughest quarterly results in years.

The company stated that it has not yet made a final decision on everything to be manufactured at the new facility but the products will likely include memory chips and logic chips.

Responding to the colossal success of Apple’s latest smartphone generation and Xiami’s growing dominance in the Chinese market with cheaper alternatives, Samsung has struggled to preserve its status as market leader.

The world’s largest memory chipmaker revealed it will begin to construct its new plant in the Gyeonggi province, south of Seoul, in the first half of 2015.

Samsung also revealed in a statement that semiconductor operations will not begin until 2017.

Semiconductors are what the tech giant plans to tie the majority of its capital expenditures to once the plant is up-and-running.

Samsung’s expenditure has dropped steadily over the past couple of years from 14% of sales in 2010 to just 10% last fiscal year.

Lee Min Hee, an analyst at I’m Investment and Securities in Seoul, informed Bloomberg that the “semiconductor has been Samsung’s long-time key business, while the company can no longer expect strong growth from its mobile unit.”

He added: “The company is now making a huge investment for the future as its key mobile business isn’t likely to contribute to profit as much as it used to.”

Meanwhile, Samsung’s chief executive told the Financial Times: “Our investment into the new fabrication plant will influence the shaping of Samsung’s future semiconductor business.”

According to Reuters, a Thompson Reuters I/B/E/S survey of 42 analysts called for a July –September operating profit of 5.6trn won, which would be the company’s weakest performance since 2011’s fourth quarter.

Samsung is expected to release details on its July-September earnings on Tuesday while full results will likely appear at the end of the month.