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Samsung Electronics to Invest US$8 Bil. in NAND Production Plant in China
In Anticipation of High Demand
Samsung Electronics to Invest US$8 Bil. in NAND Production Plant in China
  • By Kim Eun-jin
  • December 13, 2019, 08:59
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Samsung Electronics’ semiconductor manufacturing facilities in Xian, China

Samsung Electronics is planning to invest approximately US$8 billion in its second semiconductor manufacturing plant in Xian, China. The investment is for a larger share in the global NAND flash market. According to Samsung Electronics, the market demand is likely to increase next year with China launching commercial 5G services and Intel releasing the Ice Lake CPU for servers.

Back in August 2017, Samsung Electronics announced that it would invest US$7 billion in the same plant for about three years. This investment is scheduled to be completed in March next year. This investment and the upcoming investment are expected to boost the plant’s 3D NAND flash output to at least 130,000 units a month. For reference, Samsung Electronics has invested US$10.8 billion so far in its first plant in Xi’an.

The 128Gb MLC NAND flash price reached US$3.93 per unit, below the breakeven point, in May. The price remained at US$4.31 last month. Samsung Electronics’ investment plan under the circumstances is to provide for an increase in NAND flash demand. In addition, it is to keep dominating the global NAND flash market with China trying to raise its self-sufficiency in the semiconductor industry to at least 70 percent by 2025.

Market research firm TrendForce said on Dec. 12 that Samsung Electronics accounted for 33.5 percent of the global NAND flash market in the third quarter of this year with runner-up Kioxia’s share standing at 18.7 percent. In that quarter, Samsung’s share fell 1.4 percentage points and Kioxia’s share rose 0.6 percentage point compared to the previous quarter. In addition, Intel beat SK Hynix and came in fifth by increasing its share from 8.7 percent to 10.9 percent.

At present, Samsung Electronics’ sales in China are falling rapidly. In China, Samsung Electronics is showing a very high degree of dependence on semiconductor with its smartphone and consumer electronics business units failing to make profits. For the first three quarters of this year, Samsung Electronics’ sales in China totaled 28,312.9 billion won, down more than 30 percent from a year earlier due to falling semiconductor prices. The ratio of Samsung Electronics’ sales in China to its total sales dropped from 33 percent to 24 percent during the same period.

China is trying to increase its self-sufficiency in the NAND flash market by nurturing local semiconductor companies. For example, Yangtze Memory Technologies is producing 64-layer 3D NAND products equivalent to 5,000 wafers a month and is planning to increase the amount to 60,000 a month by late next year. The company is aiming to unveil its 128-layer product next year, too.

The global NAND flash demand is likely to increase over time in that commercial 5G services will lead to more high-capacity data to be stored in NAND flash memories. TV manufacturers and content providers are expected to unveil various 8K services at next year’s CES in Las Vegas, which is another positive demand factor. Also, the memory chip demand of cloud computing companies such as Microsoft, Google and Amazon may exceed the supply in the market if Intel releases the Ice Lake in the second half of next year. At its latest conference call, Samsung Electronics declared that it would continue to lead the global semiconductor market by making aggressive investments, saying, “Most of the Q4 capital expenditures, 12.2 trillion won, will go to memory infrastructure and this year’s capital expenditures will add up to 29 trillion won, close to last year’s.”