Samsung electronics is planning to invest $8 billion in it’s chip building facility in China. The massive investment is being done to boost the company’s NAND flash memory chips production. Chinese media made the news public on Tuesday.
In technical terms, a NAND chip us used to hold data permanently and are a part of many computing and storage devices. Samsung’s investment comes at a time when the memory chip industry is expected to rebound next year, amid a dragging slowdown this year. This is largely due to shortage of supply and increasing demand of fifth generation devices. 5G connections are being tested all over the world, with the performance being underwhelming so far.
Samsung’s rivals in NAND flash memory include Korea’s SK Hynix (000660.KS), U.S.-based Micron Technology Inc (MU.O), and Toshiba Corp (6502.T). Foreign companies have tried to enter the Chinese chip market but most of them succumbed to the local competition.
Samsung has been manufacturing NAND chips at it’s Xian facility since 2014. But in 2017, the company signed an MoU with the Chinese government to install a second plant at Xian facility due to shortage of supply. The company announced plans to invest $7 billion over the course of 3 years in Xian at that time. The Chinese government provided tax exemptions and usage of factory site in return. So far, Samsung is a little behind on the investment.
The second Xian plant has finished is under testing phase. Production may start by Feb 2020.