Samsung Expands to Keep Up With Growing Mobile Demand

Samsung will build a plant to produce flash memory chips in China to meet demand for tablets and smartphones, retaining its dominance in components and underscoring growth in Asian markets.

The world's largest maker of computer memory chips revealed the plans to build the Chinese semiconductor factory in a regulatory filing, according to Bloomberg. The plans, which indicate construction will begin next year with production starting in 2013, are awaiting approval from the company's South Korean government.

NAND flash chips are used in mobile devices, like Apple's iPad, and demand for these kinds of chips, able to store media such as photos, videos and applications, is expected to grow by 20 percent in the next year to $26 billion, according to chip price tracker DRAMexchange, especially as the appetite for mobile devices shows no signs of abatement among consumers.

Demand for NAND chips is surging, and Samsung dominates the market with a 40 percent share, while rivals making DRAM chips, used mostly in personal computers, are struggling. The location of the plant in China also echoes the growth of the chip market, which is waning in Western markets, but heating up in Asia.

"This new NAND flash memory line will enable us to meet fast growing demand from our customers and at the same time, strengthen our overall competitiveness in the memory industry," said Jun Dong-soo, president of Samsung's memory business.

The plant will help Samsung retain its dominance of an important component market, which garners $59 billion a year in business.

This is not the first significant investment Samsung has made in China to strengthen its place among rivals. The company also reportedly invested $3 billion in a flat-panel production plant in China, at a time when Toshiba, Hitachi and Sony are pooling their small-panel liquid-crystal-display businesses into a new company, called Japan Display K.K., which is expected to control at least 20 percent of the fast-growing global market for the panels used in smartphones and other digital devices.

The consolidation may strengthen the Japanese LCD industry as it emerges from this spring's earthquake and tsunami disaster, and provide vigorous competition to their South Korean rival Samsung for China's growing LCD production.

The regulatory filing doesn't report how much money will be spent on Samsung's new factory, but analysts' estimates range from between $3.5 to $5.25 billion.

An exact site for the plant is unknown, but after construction, it will be the second plant the company owns outside of Korea. The company's other international chip factory is located in Austin, Texas.