Samsung Electronics will build Xian Line 2 in China to cope with explosive demand for 3D NAND flashes. By increasing its production capacity in addition to the current Xian Line 1, the semiconductor giant is planning to cement its position in China, the world's largest memory semiconductor market.
Samsung Electronics will spend US$7 billion for three years for investment in Xian Line 2.
In 2019 when the second line will be completed, its NAND production capacity will jump again. It is expected that Samsung Electronics will maintain its market position with the high volume and good quality of high-performance 3D NAND flashes from its factories in Xian, China and Hwaseong and Pyeongtaek Complexes in Korea.
Samsung Electronics announced that the company held a groundbreaking ceremony for Samsung Electronics’s Semiconductor Memory Line 2 in Xian, Shanxi Province of China on March 28. In attendance were Kim Ki-nam, president of Samsung Electronics, Roh Young-min, Korean ambassador to China and high-ranking Chinese government officials. In August of last year, Samsung Electronics signed an MOU with Shanxi province government to invest in the second line in Xian. "We will continue to contribute to the growth of the global IT market by providing differentiated solutions to our customers with production of the best memory semiconductor products through the successful operation of the second Xian line," president Kim said.
The Xian line targets the Chinese market with the highest demand for NAND flashes and clusters of many production bases of global information technology (IT) companies. Samsung Electronics already ranking number one in the NAND market will scale up NAND flash production in China. It is said that the second line’s NAND flash production capacity will be about 120,000 wafers per month. This capacity tops 20% of Samsung Electronics's total NAND flash production capacity, which is estimated to be between 460,000 and 490,000 units per month.
Currently, the NAND flash market is dominated by five companies including Samsung Electronics, Toshiba and Western Digital. Samsung Electronics (38.0%) is taking the top spot, but Toshiba (17.1%), Western Digital (16.1%), Micron (11.5%) and SK Hynix (11.1%) are in hot pursuit of Samsung Electronics. Toshiba's efforts to expand its production capacity and develop technology started to expand its market share this year. Western Digital and Micron also are competing in fierce technology competition, producing 64-layer 3D NAND flashes. Moreover, the Chinese government is zeroing in on promoting the Chinese semiconductor industry. Therefore, Samsung Electronics is faced with a task to maintain a "super-gap” with its competitors.
The construction of the second production line also means that Samsung Electronics will be able to sell more profitable high-performance 3D NAND flashes in the Chinese market. Samsung Electronics is increasing the proportion of production of 3D NAND flashes which are superior in productivity, performance, and stability compared to 2D NAND flashes. 3D NAND flashes are produced based on a method of vertically stacking cells, which are the basic unit of information storage, and is more advantageous than conventional 2D NAND flashes in terms of cost per capacity. As of the end of last year, Samsung Electronics's 3D NAND flash percentage exceeded 80% and is expected to hit 90% by the end of this year, according to IHS Markit.
Xian Line 2 is a production base that will fuel such 3D NAND flash expansion. The line is also expected to be the base for rolling out next-generation 3D NAND flashes. Samsung Electronics is currently producing 64-layer 3D NAND flashes and planning to develop 96-layer 3D NAND flashes within this year.