Samsung starts building a £9 billion chip factory

Samsung started building its new chip factory to help increase growth, as the company’s smartphone sales slow, AFP reported on Thursday.

The company said it would invest a total of 15.6 trillion won (£9.38 billion) into the factory, until production begins in 2017.

The factory, located in the city of Pyeongtaek, 70 kilometres (44 miles) south of Seoul, will most likely make chips for Samsung’s new client, Apple.

Production at the 2.89 million square-meter plant will begin in the latter half of 2017, Samsung said in a statement, adding that this is the biggest investment in a single factory the company ever made.

"The Pyeongtaek semiconductor plant will play a key role in strengthening our leadership in mobile and server (chip) market where demand has soared recently, and secure a leading position (in) the next-generation Internet of Things market," it said.

Samsung’s chip making unit, second in size and smaller only than Intel’s, has been softening the hard fall of the company’s smartphone business.

The company, once the number one smartphone manufacturer worldwide, has reported an on-year decline in net profit for four straight quarters.

The two latest additions to Samsung’s arsenal are the Galaxy S6 and the Galaxy S6 Edge flagship devices, which were created to save the company’s declining smartphone sales.

But the smartphones’ success has been questioned. As Forbes’ Ewan Spence says, the majority of companies have not been able to recover once a key flagship device loses momentum. If Samsung reverses that trend this year, it would be one of the few companies who have achieved this turnaround.