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Samsung Boosts Manufacturing, R&D Investment

Rising demand for semiconductors and memory products calls for new and improved production facilities and intense R&D efforts.

This year Samsung will invest almost $23 billion on manufacturing facilities and R&D, its largest annual investment outlay ever, the company announced on Monday.

In South Korea on Tuesday, Samsung broke ground on a memory semiconductor fabrication plant that will receive about one-third of this year’s investment, or $7.9 billion. The new facility will produce DRAM, NAND and next-generation memory products. The accelerated investment in the new facility represents a 64 percent increase from the original plan for 2010, and total multi-year investment in the new facility is slated to reach $10.6 billion.

The next-largest portion of Samsung’s 2010 investment is a $7 billion outlay on research and development. The company did not specify how that would be allocated across its semiconductor, LCD, telecommunication and digital media businesses.

Also, in response to demand for energy-efficient, high-density memory, Samsung will spend $4.4 billion on increasing the capacity of its 30nm DRAM production at an existing facility. Samsung’s semiconductor production is based at the Nano City Complex in Hwaseong, Gyeonggi Province, 30 miles south and a two-hour trip from the South Korean capital, Seoul.

Further investments include $2.2 billion for improved LCD facilities and $1.8 billion to improve operations and meet demand for System-on-Chip (SoC) mobile and set-top devices.

Samsung reported $30.5 billion in sales in the first quarter of 2010, according to the company’s April 2010 earnings report. The digital media division, including video devices and appliances, generated $11 billion of the quarterly total. During the same period, telecom sales were $8 billion and semiconductors $7.2 billion. In digital media, the company is expanding its focus on premium models, including 3-D televisions. The company forecasts higher demand based on 3-D, higher adoption of LED TVs, and interest in the World Cup.

In telecom, Samsung has outperformed market growth by shipping over 64 million handsets in the first quarter, for a year-over-year increase of 40 percent. The company expects increased demand in the second quarter due to economic recovery and higher adoption of mid-to-high-end products.

In semiconductors, Samsung expects to "strengthen market dominance based on technology leadership and cost competitiveness," according to a presentation accompanying the April earnings report. The company expects continued supply constraints of DRAM based on high PC shipments, and strong demand for mobile products based on new product launches in smart phones, tablet PCs and book readers.

Samsung expects to hire 10,000 new employees in 2010, including 3,000 for its semiconductor business and 4,000 for its LCD business.

(U.S. dollar figures have been converted at the rate of 0.00088 Korean won to the dollar.)

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