South Korean IT giant Samsung Electronics plans to spend $14.7 billion on a new chip facility – its biggest investment in a single plant – leaning on its semiconductor business to bolster profits as its smartphone dominance wanes.

Samsung, the world’s top memory chip maker, tells Reuters that the plant would be located in Pyeongtaek, roughly 47 miles south of Seoul. The company said it would create 150,000 jobs, equal to about a third of the city’s population.

The bet on chips comes as its smartphone business is being squeezed by Apple Inc. in the premium segment and undercut by Chinese rivals like Lenovo Group Ltd in mid-to-low end. April-June operating profit for Samsung’s mobile division fell in annual terms for the second straight quarter, the longest streak since at least 2011.

But with the higher demand for mobile devices comes increased orders for mobile chips, and Samsung Electronics’ semiconductor division will be key to propping up the company’s bottom-line, analysts say.

The plant in Pyeongtaek will make either logic or memory chips, Samsung Electronics said, adding that a final decision had not been made yet.

“Right now the only part of the company that is bringing in steady profits is the semiconductor division, so it looks like the company will keep investing in the business,” IM Investment analyst Lee Min-hee told Reuters.

The chip business is likely to be a lone bright spot in what is otherwise expected to be a poor third

Samsung Electronics said its chip production capacity was expected to rise by a “low double-digit percentage”. Construction of the new plant is scheduled to be completed by the second half of 2017.

Release Date: October 6, 2014
Source: Reuters