Samsung to sink in $18.6 billion to maintain its lead in memory chip and next gen display business

With demand exceeding supply, chipmakers are expected to report record profits this year.

On Tuesday, Samsung Electronics Co Ltd disclosed it plans on investing at least $18.63 billion (21.4 trillion won) in South Korea in order to extend its lead in the memory chip and next-generation displays for smartphones business.

Samsung, the world’s biggest memory chip manufacturer by revenue, said the amount includes 14.4 trillion won it had already allocated for its new NAND factory in Pyeongtaek. It is set to sink in another 6 trillion won for a new semiconductor production line in Hwaseong.

Samsung did not elaborate on what the Hwaseong facility will produce and the timeline for its completion.

Samsung will also add a production line to its NAND plant in Xi’an, China, in response to surging demand for long-term data storage chips.

Again, it did not provide its investment amount or timeframe.

With a persistent surge in demands from storage space in smartphones and servers, memory manufacturers are widely expected to post a record profit in 2017. As per analysts and industry experts, the shortage in demand is very acute for NAND chips.

As per analysts, Samsung’s production technologies are at least a year ahead of rivals, including SK Hynix Inc and Toshiba Corp. The company routinely invests more than $10 billion semiconductors annually to help maintain and widen its lead among its peers, said analysts.

According to some analysts, the additional capacity building could result in slight oversupply in early 2018. However a crash in prices is unlikely since smartphone manufacturers are increasingly boosting internal storage capacity.

Further, demand for storage in high-end server for cloud computing and virtual reality applications are set to be its growth engine.

“I believe NAND market conditions will continue to favor suppliers until 2020,” said HMC Investment analyst Greg Roh. He went on to add, any oversupply issues will be temporary and limited to seasonally weaker periods.

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