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May 17, 2010 9:55 am

Samsung unveils $23bn investment plan

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Samsung Electronics on Monday unveiled a record Won26,000bn ($23bn) investment plan for this year as the world’s largest technology company by sales looks to cement its leadership in semiconductors and flat panel displays.

The total investment, which includes Won8,000bn for research and development, is about three times bigger than the South Korean company’s original budget of at least Won8,500bn that was announced in January.

Samsung said excluding R&D, its capital expenditure would triple to Won18,000bn this year from Won8,180bn last year, including Won11,000bn for semiconductors and Won5,000bn on liquid crystal display.

Samsung’s spending this year will be bigger than the combined investments of Intel, IBM and Sony, according to Bloomberg. Samsung’s spending on chips will be much higher than the up to $4.9bn that Intel plans for this year.

The South Korean company also said its chairman, Lee Kun-hee, would meet Sir Howard Stringer, Sony’s chief executive, on Monday. Samsung would not say what the meeting was about and Sony declined to comment. However, media reports suggested that the two men would discuss further cooperation in the liquid crystal display panel and 3D television sectors.

“Although the global economy is still uncertain and business conditions are expected to change rapidly, we have to increase investment and hire more people to take global business opportunities,” Mr Lee said in a ground-breaking ceremony of Samsung’s new chip plant in Hwasung, outside of Seoul.

Samsung’s ambitious investment plan comes after Mr Lee, who returned to the chairmanship in March after less than two years on the sidelines because of a corruption scandal, warned that Samsung risked losing market share if it did not completely overhaul its business model.

Samsung will increase its spending on memory chips to Won9,000bn from the earlier planned Won5,500bn.

The South Korean group’s new chip plant in Hwasung marks the first construction of its kind in five years after the industry’s worst-ever downturn. Samsung will invest a total Won12,000bn in the new chip plant, which is due to come on stream in 2011.

The company also plans to build a new LCD production line to cope with rising demand for large-size LCD TV panels.

Samsung Mobile Display, an affiliate of the group, will also invest Won2,500bn by 2012 to build a new active-matrix organic light-emitting-diode line, the world’s biggest. The factory will help Samsung produce large-size AM-OLED TV panels, which produce a brigher picture and use less electricity.

Samsung, which built up market share even during last year’s downturn by investing heavily in its main business, is benefiting from a dramatic recovery in global chip prices and LCD TV demand.

The South Korean company recently reported a seven-fold increase in first-quarter operating profit to Won4,405bn on sales of Won34,638bn.

Other chipmakers have also been rushing to expand production facilities to take advantage of robust sales of new mobile gadgets such as smartphones and tablet personal computers.

Japan’s Toshiba said last week it would boost capital spending, mainly in its chip and infrastructure businesses.

Additional reporting by Robin Harding in Tokyo

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