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CAPEX Double Down? Samsung makes a market strategy play


It was the odd holds on CAPEX and diminished spends that marked some of the early warnings of the recession for the semiconductor industry.  So, perhaps, the reverse is true as well?  Increases in CAPEX spends are an important indicator of positive market and investment sentiment in the industry (cf. also the MarketWatch Commentary here and here for the most recent discussions including CAPEX).

The big news this week has been Samsung's almost doubling of their 2010 CAPEX budget (from 5.5 trillion won to 9 trillion won).

What's the addition spend for?  The first half of a two-year investment of roughly 12 trillion won (roughly US$11 billion) for Samsung's new "GigaFab."

According to Samsung, this significant CAPEX investment addition will be used thusly:

"[e]stablishing new Line-16 [fab] for DRAM, NAND and next generation memory products in Hwaseong [Korea], and increasing the capacity of the existing Line-15 for the production of 30 nanometer (nm) class* DDR3 Dynamic Random Access Memory (DRAM).

* Editor's note: 30nm-class means a process technology node somewhere between 30 and 39 nanometers."

Why the additional spend?  That's the even more interesting part and speaks to the larger industry movements that we've been tracking at Smith's MarketWatch Commentary (cf. links above) and MarketWatch Quarterly (cf. here, especially, for a deeper look into the Korean geo-economic situation).  Specifically, this is a bold and exciting strategic move by Samsung to secure the leader spot in memory.  With all of the volatility in memory, coupled with the interesting ASP, demand, and historical trajectory of memory, we'll be watching closely to see how this new 'GigaFab' along with the additions at Line-15 will affect memory sector dynamics.

According to Samsung's Chairman, Kun-hee Lee, Samsung's official reasons behind this bold move say it all:

"Although the global economic environment and business conditions remain changeable and uncertain, if we invest aggressively in expanding facilities and in hiring then these circumstances also present Samsung an opportunity for future growth and to stimulate the economy."

Lisa Ann Cairns, Ph.D.
Written on Wednesday, 19 May 2010 13:51 by Lisa Ann Cairns, Ph.D.

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