Samsung Electronics Co plans to invest 15.6 trillion won ($15 billion) on a new South Korean semiconductor plant to meet the growing demand for chips that power smartphones, tablets, appliances and wearable devices.
The move towards chip-making implies that the South Korean company’s days of huge profits from selling smartphones, which account for around 60 per cent of its operating profits, might be coming to an end.
Samsung’s third quarter operating profit dropped to 4.1 trillion won ($3.8 billion) from 10.2 trillion won last year.
In an e-mailed statement, the company revealed that although total smartphone shipments increased in Q3, the mobile division’s profit margin dropped due to higher marketing spending as well as the lower average selling prices of its devices.
Despite battling against rival smartphone makers such as Apple, Samsung is also one of their biggest suppliers of processors and memory chips for the iPhone, among others.
The company produces around 30 per cent of the A8 chips found in the iPhone 6 and 6 Plus. It has also been reported that the company agreed to manufacture Apple’s A9 chip, which will be used in next year’s iPhones.
With construction work set to commence early next year, the new semiconductor plant can be configured to make either processors or memory chips depending on demand when the factory starts to operate by 2017.
“We anticipate that Samsung’s key growth driver will be switched from smartphones to semiconductors next year,” said Peter Lee, an analyst at Woori Investment & Securities in Seoul.