The profits of Samsung's smartphones may have been wavering lately, but the company apparently thinks its semiconductor business can't be beat. The South Korean firm is beginning construction on a new manufacturing complex to supply the essential components to the electronics industry, investing 15.6 trillion won ($14.3 billion) in a site the size of 400 soccer fields. The complex — which is almost as big as the company's two largest semiconductor factories put together — is slated to begin production in 2017, and will further consolidate Samsung's position in the industry.
As engineers have continued to push the limits of chip design (straining Moore's Law in the process) and companies have driven down prices by scaling up production, the cost of entry for building semiconductors has escalated. Unlike the smartphone industry, where companies like Huawei and Xiaomi have been able to undermine Samsung by operating at razor-thin profit margins, this isn't a business that's open to newcomers. Samsung's decision to build a new facility, first reported by ET News and confirmed by The Verge, will only exacerbate this trend, locking out would-be competitors.
The iPhone might be making more money, but at least samsung's chips are powering it
"The more important long-term story [for Samsung] is components," Hong Kong-based analyst Mark Newman told the Financial Times last month. Newman was speaking after the announcement of Samsung's latest quarterly earnings, which showed smartphone sales falling 20 percent year-on-year, while operating profit from its semiconductor division rose 50 percent. Although Samsung remains the world's biggest smartphone manufacturer in terms of volume, its semiconductor business is also the world's second largest after Intel. It's also some consolation that while Apple may be the most profitable smartphone company around, the iPhone maker still relies on Samsung for its processors — a dependency which this new expansion from the Korean company will look to strengthen.