Samsung to change lines to non-memory chip manufacturing

Tech giant moves to expand production of higher efficiency chips


Samsung Electronics is considering transforming some of its existing memory fabrication manufacturing lines into non-memory ones at its plants in Korea and abroad.

Industry sources and analysts said that the move comes as demand for non-memory chips such as application processors is set to increase on burgeoning smart devices, while personal computers face decline.

AP non-memory chips, which operate much like central processing units for PCs, are key parts for smartphones and other smart devices. The Korean tech manufacturer’s main focus has been producing DRAM and NAND memory chips, which are less efficient with less storage power than non-memory. Global players such as Intel and Qualcomm have long dominated the non-memory chip sector, analysts noted.

Samsung Electronics mentioned at its last week’s earnings conference that line numbers nine and 14 at its Giheung plant in Gyeonggi Province had already been altered to non-memory manufacturing.

“We are pursuing a plan to further change facilities with flexibility,” a spokesperson said, adding that no decisions have been made regarding the timeline.

The Korean company had indicated that it will invest 15 trillion won ($13 billion) in the semiconductor business. As much as 8 trillion won will be invested in developing non-memory chips, an industry source and analysts said.

Chip suppliers normally make investments in facilities in the second quarter after going through a slowdown in the first quarter, which is considered an off-season for semiconductor manufacturers, analysts said.

Orders for chips hit their peak in the third quarter as tech firms move to market and sell their smart devices in the fourth quarter during the holidays. The first quarter is usually a time for tech firms to organize and clean out their inventories, so there’s practically no demand for semiconductors in this period, analysts explained.

To this end, Samsung Electronics saw its operating profit in semiconductors drop 54 percent to 760 billion won in the first quarter.

It attributed the drop to “weak seasonality and decreased demand” for DRAM and NAND, according to financial statements.

An industry source said that Samsung Electronics seems to be developing efficient server-based DRAM chips as global tech firms such as Apple, Google and Amazon boost their data systems integrated with cloud computing technologies.

By Park Hyong-ki (hkp@heraldcorp.com)