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Samsung Electronics, the world’s second largest chipmaker, on Monday said it would invest Won290.9bn ($314m) in building new production facilities for non-memory chips.

The announcement comes as the South Korean company is struggling to cope with falling prices of memory chips, especially those used in mobile digital consumer products.

Samsung said it was making the investment “to meet growing market demand and boost price competitiveness”.

Non-memory chips, called system LSI, contributed only 11 per cent of Samsung’s semiconductor sales in the first quarter. But the company is trying to expand the business and turn it into one of its 13 designated future “growth engines”.

Aggressive investment in digital segments has allowed Samsung to quickly catch up with bigger overseas rivals. The company said last year it aimed to double its annual revenue by 2010 by increasing the number of its products that are leaders in terms of market share from the current eight to more than 20.

Samsung won its first major non-memory chip deal in November - to supply non-memory chips to Qualcomm, the US mobile technology company. But competition is intensifying in the market, which is dominated by Taiwan Semiconductor Manufacturing and United Microelectronics.

Analysts said Samsung’s ample cash reserves, estimated at about Won10,000bn, allowed the chip-maker to continue its aggressive investment strategy. Samsung said last September it would invest Won25,000bn in its semiconductor business by 2010 to generate cumulative sales of Won200,000bn.

Chipmakers are required to continually engage in huge capital spending to cut production costs as the industry advances into nanotechnology.

Samsung last month said it suffered a 25 per cent drop in first-quarter operating profit, hit by falling prices of memory chips and mobile phones. Samsung is the leading global producer of memory chips, mobile phones and flat panel displays.

Samsung shares closed up 1.55 per cent at Won655,000 on Monday, outperforming a 0.78 per cent gain in the benchmark Kospi index.

Copyright The Financial Times Limited 2017. All rights reserved.
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