Samsung Electronics share price up, to spend $15 billion in South Korean chip plant in search for growth

Samsung Electronics Co. Ltd announced that it will invest KRW15.6-trillion ($15-billion) in building a chip plant located in South Korea. The plant, which will be able to make both memory and processor chips, is considered a part of the companys strategy to seek growth in other industries apart from the saturated smartphone segment.

The Chief Executive Officer of the company – Kwon Oh-hyun – shared in the companys statement: “Our investment into the new fabrication plant will influence the shaping of Samsung’s future semiconductor business.”

According to Samsungs statement, the construction of its new plant, which will be situated in Gyeonggi province, south of Seoul, is planned to start in the first six months of 2015. Semiconductor production is intended to begin in 2017. The company currently owns several chip plants situated in the U.S. and China.

The announcement of Samsungs latest investment comes at a time when the company is struggling to retain its leadership in the smartphone market, considering the fierce rivalry of Apple, which recently released its newest bigger-screen iPhone models, and Xiaomis low-cost handsets stealing market share from Samsung in China.

One of the analysts at Daishin Securities – Park Kang-ho – commented on the latest investment of Samsung for the Financial Times: “Demand for mobile D-ram and processor chips used in smartphones continues to grow so this new plant is aimed at cementing its leadership in the future market. There is not much concern about oversupply as the chip market is pretty good, at the moment and other producers are not ramping up capacity much.”

Samsung, the largest memory-chip manufacturer, will report third-quarter operating profit tomorrow. According to initial analysts forecasts, the companys operating profit may have declined by 47% as sales likely plunged 15%, the sharpest drops in five years.

Samsung Electronics Co. Ltd settled 0.88% higher at KRW1 151 000 per share on Monday in Seoul, valuing the company at KRW169.54 trillion. According to the Financial Times, the 40 analysts offering 12-month price targets for Samsung Electronics Co. Ltd have a median target of KRW1 500 000, with a high estimate of KRW2 200 000 and a low estimate of KRW1 050 000. The median estimate represents a 31.46% increase from the previous close of KRW1 141 000.