With its smartphone business on the wane, Samsung bets $14.7 billion on new chip facility

“Samsung Electronics plans to spend $14.7 billion on a new chip facility – its biggest investment in a single plant – leaning on its semiconductor business to bolster profits as its smartphone dominance wanes,” Se Young Lee reports for Reuters.

“Samsung, the world’s top memory chip maker, said the plant would be located in Pyeongtaek, roughly 75 kilometers (47 miles) south of Seoul. The company said it would create 150,000 jobs, equal to about a third of the city’s population,” Lee reports. “The bet on chips comes as its smartphone business is being squeezed by Apple Inc in the premium segment and undercut by Chinese rivals like Lenovo Group Ltd in mid-to-low end. April-June operating profit for Samsung’s mobile division fell in annual terms for the second straight quarter, the longest streak since at least 2011.”

“The plant in Pyeongtaek will make either logic or memory chips, Samsung Electronics said, adding that a final decision had not been made yet,” Lee reports. “The chip business is likely to be a lone bright spot in what is otherwise expected to be a poor third quarter for the South Korean giant. Samsung will issue its earnings guidance for the period on Tuesday… Some analysts forecast that the semiconductor division will report stronger operating profit than the handset division in the third quarter for the first time in more than three years. The chip business recorded a 1.9 trillion won (US$1.78 billion) profit in the second quarter, compared with 4.4 trillion won (US$4.1 billion) for the mobile business.”

Read more in the full article here.

MacDailyNews Take: Somebody engrave a plaque for Tim Cook’s office:

“No Apple business for Samsung until justice is finally and fully served.”

30 Comments

    1. It takes more than a building and money to produce art. It also takes patents. While they have been weakly enforced in the case of Samsung, they are still a limiting factor. Merge with these creeps? What for? Apple is far more than a phone to copy. They have failed to grasp this. Apple is an ever growing ecosystem with many integrated parts. My work flows from my Macbook air, to my phone, to my iPad, and soon to my watch. Services of iTunes, soon my health care, and very soon my daily purchases are all connected by this ecosystem. I have yet to see a SINGLE competitor seem to grasp this. This ecosystem is highly UNfragmented, unlike the android crap-pile. NO other competitor seems capable of grasping just what Apple has been building for decades now. They are hopelessly being left in the dust for a reason.

      1. I get the reason for the chill. Do I want everything in my life in one basket…YES., but the function of competition is to keep Apple honest. Given the safe guards built into Apple pay, the least honest players in the game, (i.e. the government) are feeling kind of left out. Apple’s biggest threat is not Samsung, but Uncle Sam. I am waiting to hear cries of “monopoly” and rather mystified why it has not happened yet….

        1. I don’t get the “keep Apple honest” mantra. Apple has been designing and manufacturing products to “delight” it’s customers. It’s Samdung, HTC, Nokia, Motorola, Lenovo, that produce crap, BOGOF stuff designed to trick you into thinking you got Apple quality at knockoff price, the whole marketing strategy to simply separate the cheapskate dumbasses from their money.

          How in the world does this competition keep “Apple honest”?????

          1. All I’m saying is that it is easy to think you have arrived and get lazy. Apple is not perfect, just a heck of a lot better than their closest competitor. They have had years to get Pages and Numbers up to speed, but have yet to add many of the features of other word processors. When they went from Pages 4 (if memory serves) to the latest version, I LOST many features the old one had. It was a step backwards for me and I still have the old version of Pages installed for some documents. I do not mind having all my eggs in one basket as long as Apple keeps turning out gems like they have been. I am still curious though why their competition has not sought to take them out with government help…

  1. I had hoped that TMSC would be able to take all of the chip business from Samsung. Unfortunately it already looks like the A8 is bing made by both companies.
    Still this is the reality of the business. Apple needs to secure component supply because they do not need a part to become a bottleneck in production. I still remember the G5 CPU production issues and the impact it had on Apple’s ability to release new products.
    Samsung have deep pockets and huge capacity. For Apple not to use it when they do not have other options would be wrong. Hopefully Apple are working with TMSC and other suppliers to build up their capacity but for items like the A8 and A9 it takes a lot of investment and time to build the capabilities needed.

  2. I fully agree that Samsung, as opposed to innovating, tends to take design features from whomever is most innovative at any given moment, which happens to be Apple.

    And I agree that something needs to be done about it, that being said, the tone that MDN takes in this and many related matters comes off as off-putting and oddly quasi-religious at times.

    For instance, ““No Apple business for Samsung until justice is finally and fully served.””

    Really? That’s creepy because Apple is a consumer electronics company–albeit a very good and innovative one–but that’s it.

    And as much as Samsung should be developing their own designs, most of us here don’t work for Apple, so why we would treat this like some sort of holy crusade that we somehow have direct stakes in is a bit…odd.

    They’re not a church (we’ve got enough issues with religion as it is without elevating a maker of electronics in a similar fashion) and while I enjoy their products as much as anyone, we really need to re-think some of this.

      1. I agree. Copying other people’s products is the height of lameness. That being said–and I have to say that I don’t buy any other electronic devices along the lines of computers and mobile devices unless they’re from Apple–that doesn’t mean that Apple itself becomes an object of worship.

      1. I’m of South Korean descent and visit there often. Believe me, there are many Koreans who despise Samsung just as much as we do. But I will say that Koreans are hyper-competitive and tend to rush and cut corners instead of taking a long-term view and thinking things out. Well, that way of doing things will eventually bite SameDung in the ass and it’s already happening.

        1. ScreenPhiles, that “Apple as a religion” concept is largely a myth meant to degrade people who choose to use Macs (and, more recently, iOS devices) as brainwashed lemmings who blindly support Apple. It has been around for a long time. As a result, you will find many who resent the very mention of it, particularly in the “Mac-safe” haven of MDN.

          I appreciate your candor and search for open dialog, but you need to understand your audience. I don’t know anyone on this forum who worships Apple or blindly supports anything and everything that the company does. But we do hold grudges when we are wronged. We remember…

          1. That’s not true. As I have said before, I have been purchasing Apple products for years, and have noticed–and been a part of– an oddly cult-like aura that surrounds the company (particularly during the Steve Jobs years, but it has continued through Tim Cook’s era as well).

            I am not saying that that anyone is a “brainwashed lemming (nor implied it, I think) though there are some elements of group thing that are interesting (and as I said, mildly creepy).

            Most of the people who post here are adults, and can engage in discussion as long as it remains civil, so I don’t expect anyone to go all troll on me just for bringing something up they may not necessarily agree with.

            1. The Cult-like Aura is but one part of this. The Double Standard that exists towards Apple, as exhibited by The Media and Wall Street, is tantamount to “religious persecution”. There’s no other way to adequately describe the negative press and analyst sentiment that continues to hound Apple, despite it being the most successful technology company in the world.

              As for MDN’s sentiment, I agree whole-heartedly, especially after reading Apple’s mind-boggling experience through our legal system for the past three years. Apple won a billion-dollar judgment against Samsung for IP theft, and has yet to collect a penny. All Apple has ever wanted was for Samsung to stop stealing its ideas. Samsung needs to be humbled.

    1. Samsung’s copying ways steals sales and profits from Apple. I am an AAPL shareholder, so that directly affects me.

      At some level, Samsung’s IP theft also damages the U.S. economy in terms of jobs.

      1. I agree. That being said, Apple still isn’t a religion, they’re a consumer electronics company.

        That seems to be lost sometimes (and as I said, I love Apple products) but there’s something discomfortingly cult-like about some of their advocates.

        And this is coming from a person that a tendency to defend Apple vociferously.

  3. as materials change and everything goes system on a chip 2 or 3 generations after 3G/LTE – and wifi calling is the beginning here – will Samsung be left holding a giant chip fab and no customers.

    1. Chip foundries are very expensive – lots of investment tied up in a factory that is close to outdated by the time that it is completed and ready to produce.

      If Samsung focuses their new semiconductor foundry on memory chips, then they may be in for some big losses. The memory chip business is cyclical and due for a downturn in the next year or so.

  4. Samsung sees the writing on the wall. People running it may be slimeballs but they’re not stupid. They know they’re best at making things that others order (chips, displays, etc.), not creating their own. They held a global “crisis management” meeting last winter knowing that they’ll get checkmated once Apple releases the large-screen phones. There’s no way they’ll be able to stem the rise of the Chinese phone makers so they’re sandwiched between Apple on top and the likes of Lenovo, Xiaomi, Huawei, ZTE, etc. on the bottom. So the management has to be thinking, “We better start focusing on what got us here in the first place…”

  5. Tim Cook should be given all the credit for turning the tables on Samsung. He took a measured and very patient approach while looking at the big picture and the long-term. He wasn’t impulsive (as SJ tended to be) and didn’t do anything irrational out of hatred or anything like that.

    He’s a brilliant strategist and long-term strategists have to have patience. Apple is a different company than when SJ was running the show. It’s much, much bigger and that takes a different kind of leadership and management style than the fiery impetuous style that SJ exhibited.

    Apple will soon surpass $200 billion in annual revenues. Apple won’t grow at 50% rate anymore like it did in ’10~’11. Apple will have to continue innovating with a startup mindset but, at this size, the company will also have to hold itself together. When you have a lot, you have a lot to lose.

    There’s a great quote from Genghis Khan, possibly the greatest conqueror the world has ever seen: “Conquering the world from the horseback is easy. It’s dismounting and governing that’s hard.”

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