Samsung Electronics Co. will spend $15 billion constructing a chip plant in South Korea as it heads for the roughest quarterly result in years amid competitors from Apple Inc. and Xiaomi Corp. smartphones. Building in Gyeonggi province, south of Seoul, will..
Samsung Electronics Co. will spend $15 billion constructing a chip plant in South Korea as it heads for the roughest quarterly result in years amid competitors from Apple Inc. and Xiaomi Corp. smartphones.
Building in Gyeonggi province, south of Seoul, will begin in the 1st half of next year with semiconductor operations due to commence in 2017, Suwon, South Korea-based Samsung mentioned in a statement. Samsung is shifting toward additional complex and profitable processors to be the brains for new corporations such as wearable devices, sensible cars and smart houses.
The greatest memory-chip maker is investing as its smartphone business struggles to stay dominant with Apple introducing larger-screen iPhones and Xiaomi promoting low-cost devices in a lot more overseas markets. Third-quarter operating profit, due to be released tomorrow, is projected to plunge 47 percent and sales may possibly drop 15 % in the steepest declines given that at least 2009, according to analyst estimates.
"Semiconductor has been Samsung's long-time key business, whilst the business can no longer expect sturdy growth from its mobile unit," stated Lee Min Hee, an analyst at I am Investment & Securities Co. in Seoul. "The organization is now producing a substantial investment for the future as its important mobile organization isn't probably to contribute to profit as substantially as it utilized to."
The organization may perhaps improve spending on the new plant immediately after the initial investment, which is triple the quantity Tesla Motors Inc. might commit on its planned battery "gigafactory" in Nevada.
Profit at Samsung's chip unit was two.14 trillion won in the third quarter, according to a Bloomberg News survey of analysts. That enhance from 2.06 trillion won a year earlier is partly due to Samsung supplying semiconductors for the new Apple phones.
Shares of Samsung rose .9 % to 1,151,000 won in Seoul, paring this year's decline to 16 %. SK Hynix Inc., South Korea's second-largest chipmaker, slumped five.1 %.
Analysts have been cutting their profit estimates for Samsung pretty much day-to-day, with at least 27 of 42 tracked by Bloomberg decreasing their estimates in the past 4 weeks.
Samsung moved up the release date for its Galaxy Note four smartphone to the finish of September, meaning device sales will help third-quarter final results.
"Samsung wanted to release the Note four in China ahead of Apple to give an earlier splash," stated Greg Roh, a Seoul-based analyst at HMC Investment Securities Co.
Item release dates are determined based on a variety of internal and external factors that affect enterprise operations, Suwon, South Korea-based Samsung said in an e-mailed response to Bloomberg News.
Apple's iPhone 6 and 6 Plus have screens of 4.7 inches and 5.five inches, respectively, compared with four inches for earlier models, and are comparable to the sizes of Samsung's devices. Apple mentioned it sold a record quantity of the new models during their debut weekend last month.
At the annual IFA consumer electronics show in Berlin, Samsung stated Sept. 3 the Galaxy Note four would be released in October. Apple introduced new iPhone models Sept. 9 and the phones went on sale beginning Sept. 19 in pick markets.
The Cupertino, California-based corporation will get started selling new iPhones in China on Oct. 17 just after the government granted the smartphones a network access permit, the final step in the approval process.
The Note 4 is offered via China Mobile Ltd. for five,199 yuan ($847).
Samsung will get started global sales of its 5.six-inch Note Edge in the fourth quarter, the business has mentioned. The Edge allows customers to read messages, news and stock tickers from an angle by extending the show down the side of the phone.
Beginning in the 2010 monetary year, Samsung adopted International Monetary Reporting Standards for its earnings. That adjust implies comparisons to outcomes prior to 2009 are not on a like-for-like basis.
Samsung and Apple face stiffer competitors in the world's largest marketplace as China Mobile requires steps to do away with $2 billion in smartphone subsidies, almost doubling the expenses of some high-finish devices for customers.
"Samsung's third-quarter earnings will be pretty ugly," Claire Kim, a Seoul-primarily based analyst at Daishin Securities Co., said by phone. "The most critical issue for Samsung now is to guard its speedy-falling industry share, especially in China."
Samsung fell to fourth in Chinese industry share in August with ten percent, behind Lenovo Group Ltd.'s 17 %, Huawei Technologies Co.'s 16 % and Xiaomi's 14 %, according to Hong Kong-primarily based Counterpoint Technology Marketplace Investigation Ltd.
Whilst the introduction of smartphones aimed at low- to mid- range markets might help retain market share, it may well take the release of Samsung's subsequent marquee device, such as a successor to the Galaxy S5, for earnings to recover.
"We can not seriously expect good news from Samsung's mobile company this year," stated Song Myung Sup, a Seoul-based analyst at HI Investment & Securities Co. "To reverse the existing tide, the company must bring out the Galaxy S6 with flexible screens."
