Samsung to Build Chip Factory in Pyeongtaek

Samsung Electronics held a groundbreaking ceremony for the world's largest semiconductor factory in Pyeongtaek, Gyeonggi Province, South Korea.

The company said it will invest 15.6 trillion won ($14.35 billion) in building the first manufacturing line by 2017, under the Park Geun-hye administration's economic vitalization and deregulation drive.

The company revealed its goal to become the world's top semiconductor manufacturer.

"Based on the state-of-the-art semiconductor manufacturing cluster in Giheung, Hwaseong and now Pyeongtaek, we aim to become the largest semiconductor company in the world," said Samsung Electronics Vice Chairman Kwon Oh-hyun in a speech during the ceremony at the Godeok International New Town industrial complex.

Samsung Electronics has led the global memory chip market for the last 22 years. According to global market researcher IHS, the company ranked in second spot in total semiconductor production last year with a 10.7 percent share, following Intel's 14.1 percent.

Its sales from the semiconductor business reached 29.3 trillion won last year.

The 15.6 trillion won investment is the largest ever made by a local conglomerate for a single semiconductor facility.

Citing data from the Bank of Korea, the company said the investment is expected to generate industrial production worth 41 trillion won and create 150,000 new jobs. It also anticipated the new complex will facilitate related industries such as materials and manufacturing equipment.

When asked about further investment, division president Kim Ki-nam said, "Hopefully, I can make more."

The new semiconductor manufacturing complex's gross area is 2.89 square kilometers. The size is comparable to the combined areas of the company's other two complexes in Giheung and Hwaseong.

Samsung Electronics is producing DRAM memory chips at its Hwaseong plant and system semiconductor products at facilities in Giheung and Austin in the United States. It is also manufacturing V-NAND memory products in its Xian plant in China.

The company said the Pyeongtaek line will play a key role in producing semiconductor products for the expanding mobile device and server equipment market as well as the rapidly emerging Internet of Things sector.

Kim confirmed that the new manufacturing line will increase the company's semiconductor production capacity by 10 percent once it starts operating in the first half of 2017.

"We will run it depending on market conditions. Just operating it does not mean that we can have full capacity," he said.

The company has not decided whether the Pyeongtaek plant will focus on memory chips or system semiconductor products.

Samsung Electronics agreed with Gyeonggi Province in October to make the investment. The company said the decision was made a year earlier than originally planned, following the government's policy to vitalize the regional economy through deregulation.

The government promised to establish power supply infrastructure for the complex by the end of 2016 and secure a stable industrial water supply also. It also streamlined the permission process to attract manufacturers.

At the ceremony, President Park Geun-hye urged the public and private sectors to join together to vitalize the economy.

"The economy faces negative factors such as a global economic slowdown, fluctuation in oil prices and sluggish domestic demand. Our manufacturing industry is also undergoing difficulties in dealing with challenges in the United States, Europe and China amid a weak yen," Park said.

"The government and industries must work with one mind. Political parties should also work for national reform, leaving the interest of each party behind."

The President said local industries should expand investment to create jobs and facilitate domestic demand, jump into high value.

The Samsung investment is said to be the biggest investment thus far for a single semiconductor production line. The “Semiconductor Valley” complex in Pyeongtaek is set to start operations in 2017. The complex covers an area of 2,892,561 square meters (equivalent to 400 soccer fields), and is almost as big as the combined existing production facilities that Samsung has in the South Korean cities of Giheung and Hwaseong put together.

The US$14.26 billion investment comes three years since Samsung Electronics funded the establishment of 17 semiconductor production lines in its Hwaseong site, in 2012.

The Pyeongtaek site will be Samsung’s advanced manufacturing base, and is seen by industrial analysts as a core part of Samsung’s strategy to further widen the gap between the semiconductor giant and its competitor. It will be responsible for mass production of D-RAM, among other product lines that Samsung can use to compete within the IoT market.

Samsung will also benefit from synergies between the three facilities, creating a massive semiconductor cluster in South Korea.

It is as yet unclear what process the new facility will use. While the 20nm process is considered fairly cutting edge today, it is possible that the new production line will use a 10nm process when it starts operations in 2017. This speculation is backed up by Samsung’s plans to start mass producing 10-nano finFET starting end of 2016.

Although Samsung has not yet confirmed what chips will be fabricated there, the new plant is reported to employ about 150,000 people and to produce about $40 billion dollars per year in chip revenue producing DRAMs alone. It is also reported to be targeting the mobile space, server sector and the Internet of Things (IoT).

Samsung reported that its smartphone sales were slumping 20 per cent in the fourth quarter of 2014, while its semiconductor sales surged 50 per cent. Samsung has since been reported to have surged back in smartphone sales in the first quarter of 2015. However, its semiconductor division is still outpacing its smartphones potentially making its investment in a 10nm fab a smart (if expensive) move.

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