Business | Technology

Samsung to invest $4b to boost Texas processor output

Production at the Austin factory may be tailored for iPhone and iPad chips

  • Bloomberg
  • Published: 15:15 August 21, 2012
  • Gulf News

  • Image Credit: AFP
  • A woman uses the Samsung Galaxy Note in New York. Samsung is shifting away from chips used to hold memory in personal computers and digital gadgets to more complicated, yet lucrative processors acting as the brains of devices.

Seoul: Samsung Electronics Co., the world’s largest maker of memory chips, said it will invest about $4 billion (Dh14.69 billion) in its Texas factory to boost output of processors increasingly used in smartphones and tablet computers.

The investment will help convert the production of memory chips to logic products, including processors that power mobile devices, at the Austin, Texas, plant, Samsung said in a statement on Tuesday. The Suwon, South Korea-based company plans to complete the conversion and start mass production in the second half of 2013.

Samsung is shifting away from chips used to hold memory in personal computers and digital gadgets to more complicated, yet lucrative processors acting as the brains of devices. As the exclusive manufacturer of Apple Inc.-designed chips running the iPhone and iPad, Samsung has benefitted from the popularity of the US rival’s devices and its own Galaxy phones that together control more than half the global smartphone market.

“It’s the right move to concentrate on the non-memory business because it’s much more profitable,” Choi Do Yeon, a Seoul-based analyst at LIG Investment & Securities Co., said. “The market for mobile application processors is getting big, and Samsung is having a hard time keeping up with demand. They need extra capacity.”

Samsung, which plans to spend 15 trillion won (Dh47.75 billion) on the semiconductor business this year, had added another production line dedicated to logic chips at the Austin plant and began full operations in October.

Unprecedented investment

With the new investment, the largest in size to be made by a foreign company in Texas, Samsung’s spending on the factory since 1996 will exceed $13 billion, according to the statement. About 2,500 construction workers and equipment vendors will be hired for the project, it said.

In April, Samsung announced it will spend $7 billion building a semiconductor factory in China to satisfy growing demand for mobile devices. The initial investment in that project was $2.3 billion.

Samsung’s shares fell 0.1 per cent to 1,282,000 won in Seoul trading on Tuesday, before the announcement. The stock has risen 21 per cent this year, adding on three consecutive years of gains.

Production at the Austin factory may be tailored for iPhone and iPad chips, Choi said.

Apple accounts for 8.9 per cent of Samsung’s revenue, making it the company’s largest customer, according to a Bloomberg supply-chain analysis, even as the two companies have been locked in global patent disputes for more than a year.

Engine for Apple

Apple’s reliance on Samsung chips for its best-selling phones and tablets will be worth as much as $7.5 billion to Samsung this year, a 60 per cent jump from 2011, Gartner Inc. estimates. Chief executive officer Tim Cook said at a conference earlier this year that “the engine” for the iPhone and iPad is made in Austin, without mentioning Samsung.

Samsung and Apple’s interdependence traces its roots to the beginning of the iPhone. The two companies, which had already worked together in screens and memory chips, cut a deal that resulted in Samsung becoming the sole manufacturer of the so-called A-series of chips, which are at the heart of the iPhone and iPad.

The two companies also are locked in patent disputes on four continents, with lawyers scheduled to make final arguments in a California courtroom on Tuesday after a three-week trial.

Gulf News

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