Samsung Electronics has announced that it will invest $14.7billion on a new single plant for its semiconductor business. The plant will produce either logic or memory chips but this decision is not final yet. The new plant will be located in Pyeongtaek, about 75 kilometers (47 miles) south from Seoul (South Korea’s capital city). When this new plant has opened, it is expected to create 150,000 jobs, equals to about third of the city’s population. The new plant is expected to open in 2017.
The decision that leads to the new plant is because the company’s smartphone business is being squeezed by Apple Inc and Chinese rivals such as Lenovo Group Ltd. As such the operating profit for Samsung’s mobile division has been declining in annual terms. However, with higher demand of mobile devices, it will lead to higher order for mobile chips and thus Samsung Electronics’s semiconductor division is expected to fulfil the demand by supplying the chips, according to an analyst. As a result,Samsung Electronic’s stock was closed 0.9 percent higher on Monday.
Samsung Electronic said to bring forward its investment plant by more than a year so that the company can be in line with the government calls to help to boost the domestic economic activities. On the location of the new plant which is relatively close to Seoul is to make it easier to recruit local engineering talent. The local government has proposed a tax on excess profits at big corporations to encourage them to spend more on investment, wages and dividends.