Samsung to expand memory chip production as coronavirus boosts demand

The company is constructing an additional assembly line in South Korea to mass produce chips

Samsung last month began construction to expand its chip assembly line in Pyeongtaek. Courtesy Samsung

Samsung Electronics is increasing its memory chip production capacity to meet the growing demand for gadgets as the Covid-19 pandemic forces more people to work from home.

The world's largest manufacturer of memory chips said on Monday that work had started on the expansion of the assembly line in Pyeongtaek.

It intends to begin mass production of the chips, used in personal computers and other devices, on the new line by the second half of next year.

“The new investment reaffirms our commitment to sustain undisputed leadership in memory technologies, even in uncertain times,” Cheol Choi, executive vice president of memory global sales and marketing at Samsung, said.

“We will continue to serve the market with the most optimised solutions available … contributing to growth of the overall IT industry and the economy in general.”

Samsung did not disclose the amount of investment in the new production line.

However, analysts estimate that investment is between 7 trillion won (Dh20.85 billion / U$5.7bn) and 8tn won, according to a Reuters report.

Established in 2015, the Pyeongtaek plant consists of two of the world’s biggest production lines for next-generation memory chips.

The South Korean smartphone manufacturer will also add another assembly line at its second plant in Xi'an, China, with production expected to start in the first half of 2021.

Samsung said the additional capacity will “play a major role in helping to address mid to long-term demands” for chips that is “fuelled by advances in artificial intelligence, the Internet of Things and 5G expansion”.

South Korea's overall chip exports, one of the biggest sources of trade income, increased 7.1 per cent year on year in May, according to a trade ministry statement on Monday.

The business saw a sharp rise as remote working boosted demand for personal computers and China increased its investment in digital infrastructure.

As digital lifestyles become more prevalent, Samsung said it will continue to be “proactive in making new investments in order to seize future market opportunities”.

“Through balanced investment across its global sites, Samsung aims to maintain a robust production network that will further cement its market leadership,” the company said.

Samsung reported a 2.7 per cent yearly increase in its 2020 first-quarter operating profit to $5.2bn as a chip market recovery helped it to make up for slower sales in its consumer business.

Industry analysts said US restrictions on Chinese manufacturer Huawei also represent a golden opportunity for Samsung, which can plug the gap left by US chip manufacturers.

Huawei is one of the biggest buyers of chips and is spending around $8.1bn annually to buy chips from Samsung and SK Hynix, another South Korean company.