Samsung Electronics says it will invest at least $18.6 billion in South Korea to extend its lead in memory chips and next-generation smartphone displays, in a plan that promises to create almost half a million jobs. As Sonia Legg reports, the investment underscores Samsung's determination to widen its lead in memory chips, and stay ahead of competitors such as cross-town rival SK Hynix Inc and Japan's Toshiba Corp.
The timing of Samsung's decision to invest at least $18.6 billion in its memory chips is interesting to say the least. It's almost doubling its usual investment in the business at a time when one of its key rivals is trying to sell its chip business. Taking advantage of Toshiba's turmoil may not be the main aim but there is great rivalry between South Korea and Japan. (SOUNDBITE): PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING "Companies are deciding that they can't compete in certain areas and they are having to divest and, I think, in Japan where companies are beginning to divest out of what used to be called the base part of the I.T. sector." Demand for memory chips is on the up as smartphones and servers look to offer more features. Supplies are also short, particularly with high-end NAND chips. Samsung's plan promises to create up to 440,000 jobs by 2021. It will widen its lead in memory chips and could propel Asia's most valuable company to record profit this year. It also follows repeated calls from South Korea's new President Moon Jae-in for big businesses to invest more at home as part of a wider job-creation agenda. (SOUNDBITE): PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING "There's an intensified amount of competition still coming from Taiwan. And of course as China continues to expand its industrialised base it too is a major player in the chip business and both will become increasingly so, I think, over the course of the next 10 years." Samsung may also be hoping the huge investment alleviates shareholder fears that major decisions could be delayed in the absence of Vice Chairman Jay Y. Lee. The leader of Samsung Group is on trial charged with bribing former president Park Geun-hye for political favours.