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Samsung plans US$116b splurge on chips to take on Intel
[SEOUL] Samsung Electronics intends to invest 133 trillion won or US$116 billion over the next decade or so to take on Intel Corp. and Qualcomm Inc in the business of making advanced chip processors, quickening an effort to take greater control of the global semiconductor industry.
Samsung, which now leads the market for the memory chips used in devices from servers to smartphones, said it plans to ramp up investment in semiconductors in the years leading up to 2030 to take the lead in so-called logic chips. It aims to create 15,000 production and research jobs over that period to become the world leader in a field dominated by its US rivals. Shares in chipmaking gear providers such as Signetics Corp and Alpha Holdings Inc rose in Seoul.
Samsung, which is also looking to challenge Taiwan Semiconductor Manufacturing Co in the business of making chips for other corporations, joins companies from Huawei Technologies to Apple Inc that're increasingly devising the brains that power computing devices. The Korean company has profited by designing its own microprocessors for devices such as Galaxy phones, but Intel has a commanding lead in the market for central processing units used in PCs and servers.
"It's rare for Samsung to detail such a long-term plan," said Yoo Jong-woo, an analyst at Korea Investment & Securities. "It's an expression of Samsung's commitment in a chip business that includes not only Intel but also a variety of chipmakers, such as in mobile processors."
The company may in part be trying to keep up with its main rivals. TSMC for instance has earmarked US$10 billion to US$11 billion of spending for 2019 alone.
The Korean firm's semiconductor division has become the main driver of the overall business, yielding three-quarters of its 2018 operating income. The global market for non-memory chips rose to US$290 billion in 2017, according to Gartner Inc, compared with US$130 billion for memory. It spent 23.7 trillion won on semiconductor equipment last year, expanding capacity to cater to a surge in demand from makers of artificial intelligence and automotive technologies and the so-called Internet of Things.
But slower orders from data center owners such as Amazon.com and handset makers including Apple have pushed down prices for both DRAM and NAND memory in recent months. Samsung said in preliminary results that its operating profit for the March quarter dropped 60 percent to about 6.2 trillion won, the worst decline in more than four years.
Worries over the durability of Samsung's first-ever foldable smartphone also add to concerns surrounding the company's longer-term growth. Samsung has indefinitely postponed the April 26 launch of the highly touted Galaxy Fold to run more tests on the product.
Samsung's main targets would likely be companies like foundry operator TSMC and mobile chipmaker Qualcomm, as dethroning Intel in computer microprocessors would be close to impossible for now, said Ahn Ki-hyun, a director at Korea Semiconductor Industry Association. "This is a major step toward cementing a No 1 position in global chip revenue," he added.