Wednesday, May 4, 2011

In Texas everything is bigger, even Samsung

Samsung will invest $ 3.6 billion (approx. 2.4 billion euros) in its sole U.S. plant located in Texas, to transform it into a giant complex of over 213 000 m2. This will be one of the largest factories in the U.S. in all categories. It should make for processors and memory manufacturers such as Apple.

Samsung take this location to limit the costs of customs, transport and reduce delivery times. It is true that Apple products are assembled in China, but research and development takes place in the United States. This is also the case for many other manufacturers. Samsung also hopes to outsource chip manufacturing to TSMC and Globalfoundries.

This allows other smelters to inflate their order books without spending the $ 6 billion (approx. EUR 4 billion) needed to build a new plant. Finally, divide its production capacity across the globe can avoid being too affected by natural disasters or geopolitical conflicts that affect the proper functioning of a plant.

The semiconductor market is expected to grow 2% this year and Samsung hopes to win a significant share of this cake. Samsung's investment is still a fraction of what Intel has spent on the establishment of two factories and updating of four other buildings. We remember also that experts from HSBC and IBS had been warning the market last April against excessive investment in foundries due to an overestimation of demand.

The founders themselves could end up then with production lines and underutilized ROI longer, resulting in passing higher prices (see "There would be too foundries"). As explained by iSuppli analysts IHS, invest in a factory is a bit like putting money in a dice game until they fall. It's a risky bet on changes in demand.

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