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Samsung’s Largest Chip Factory Will Start Production in 2017

May 7, 2015 - Written By Lucius Bossio

When it comes to manufacturing components no other company captures as much of the global market as Samsung. Whether it be microprocessors, DRAM, or SSDs and flash storage Samsung either owns the market or is biting at the heels of the leading company; no other chip maker can lay claim to a significant portion of all these markets, not to mention displays and all of the other components Samsung manufactures.

Samsung does not expect to be slowing down anytime soon, as they just announced the Pyeongtaek semiconductor plant, the largest they have ever built, will be ready to start production before Q3 2017. Samsung is investing $14.4 billion in the new plant, which is the largest sum the South Korean company has ever poured into a single facility, and plans on investing a further $9.2 billion to boost capacity once it is up and running. According to Samsung’s statement the plant will help the company solidify its dominance in the mobile and server markets whilst ensuring the company has a strong presence in the emerging Internet of Things market. Local media in South Korea have claimed the plant will initially produce DRAM memory chips but will also produce mobile processors depending on demand. We expect the additional $9.2 billion Samsung plans to invest in the plant to be used to ramp up capacity for processors and possibly other components, such as storage devices. However, Samsung declined to mention what sort of capacity the additional $9.2 billion will be building.

Due to the strong presence of Samsung branded devices it is easy to forget Samsung supplies a large portion of all the components used to manufacture everything from servers down to the microcontrollers used in smart devices, microwaves, and washing machines. They are currently the second largest processor manufacturer in the world based on revenue behind Intel. In 2014 they captured 35% of the SSD market (nearly double second place Intel), and they produced 70% of the world’s DRAM by the end of last year. What Samsung has managed to do with respect to chip making is nothing short of impressive.

Samsung’s new plant should certainly help them power their own, and Apple’s, mobile devices in the future; between the two behemoths they capture approximately 47% of the entire smartphone market. Traditionally Samsung has been Apple’s primary component manufacturer and supplier; the display, processor, RAM, and storage of the iPad with Retina Display were all produced by Samsung. However, years of icy relations between Apple and Samsung lead to Apple’s decision last year to ditch the South Korean company as its processor manufacturer in favor of Taiwan Semiconductor Manufacturing Co., which was a huge blow to Samsung’s bottom line. A recent warming of Apple/Samsung relations allowed them to recapture their monopoly over the insides of Apple products, starting with the A9 processor that will debut inside the next iPhone. If this relation continues and the two companies capture the bulk of smartphone users in emerging markets like they have in the rest of the world the new plant will certainly be needed to meet demand over the long-term.

Samsung is also planning to unveil a microcontroller and processor platform designed for smart, Internet of Things devices, called Artik, at an event in San Francisco next Tuesday. Considering analysts from Gartner predict the number of networked smart devices will surge from 900 million to 26 billion units by 2020 this emerging market could prove to be incredibly lucrative. Between Samsung’s already dominant position in component production and the presence they hope to establish inside of connected things they will need an immense amount of capacity to produce chips. Their new factory should ensure they have no issues meeting demand in the future. Samsung’s announcement reminds us of the sheer breadth and reach of its business; they could literally stop making mobile devices tomorrow and still play a larger role in producing smartphones and tablets than any other company in the world.