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Samsung Investing in New Chip Plants

Samsung Electronics Co. says it will spend $1.2 billion on semiconductor factories in South Korea for memory chips.

Samsung, the world's leading memory chip manufacturer, will produce memory chips by processing 12-inch, or 300 mm, silicon wafers.

The 12-inch wafer technology yields more than twice as many chips as an eight-inch wafer, which is the current standard for the industry. By moving to the new technology, Samsung will simultaneously boost production and lower its production costs.

While several other chipmakers have been hit hard this year, because of a slide in demand for memory and other semiconductors, Samsung continues to be profitable and is aiming to improve its efficiency, and profitability.

By the third quarter of 2003, Samsung says it plans to start mass production of DRAM and flash memory chips, at the facilities for the $1.2 billion factory expansion at chipmaking facilities south of Seoul.

German chipmaker Infineon Technologies AG and Taiwan's Nanya Technologies back in November said they will jointly build a similar wafer manufacturing facility, similar to Samsung's plans.

Samsung's profitability in the chip market is anomaly. Samsung's two main competitors in the memory chip market are Micron Technology and South Korea's Hynix Semiconductor have been suffering large losses, both have posted massive quarterly losses over the past two years. On Monday, Hynix received some good news, when creditors approved a $4.08 billion debt relief package. Micron is expected to object to the latest Hynix debt relief package.

Samsung, in the three months ending in September 2002, posted a 400 percent increase in profits, helped in part from sales of camera phones. Samsung has become the third leading mobile phone handset maker.

Questions remain about demand in 2003 for both semiconductors and mobile phone handset markets. Chip sales fell by one third in 2001, but have recovered to grow by an unspectacular 1.4 percent in 2002, according to research firm Dataquest. Forecasts for 2003 predict growth of between 5 percent and 10 percent.