Samsung investment in chips expected up 86 percent

Samsung Electronics is expected to invest 24.5 trillion won ($21.77 billion) in its semiconductor production lines this year, up 86 percent from a year earlier, according to Shinhan Financial and Investment Securities, Thursday.

“Samsung Electronics’ capital expenditures this year will break its previous record of 14.7 trillion won in 2015,” said Choi Do-yeon, an analyst at the brokerage house, in a report.

Samsung will spend 12.5 trillion won on its NAND flash memory chips used for mobile devices, with 8 trillion won going for non-memory businesses, the analyst said.

His forecast comes amid a boom in the semiconductor industry, as prices for NAND and DRAM chips have surged in recent months. Growing demand for servers and mobile applications have spurred hikes in chip prices.

Samsung has yet to confirm its exact investment amount for chip manufacturing facilities.

“Nothing has been settled about the capital expenditures for our chip businesses this year,” a Samsung Electronics spokesman said. “But given the boom in the semiconductor industry, we are likely to allocate a greater budget than last year.”

In a conference call after the announcement of its positive first-quarter performance last month, Samsung expected substantially bigger investments in semiconductor facilities this year.

The optimistic chip outlook has been driving up Samsung Electronics’ share prices. The world’s largest memory chipmaker has seen its stock prices renewing all-time highs this year. Samsung Electronics shares are hovering around 2.3 million won, up 80 percent from a year earlier.

This stunned investors here and abroad, as it came after the company took a severe financial blow over the unprecedented recall of its Galaxy Note 7 smartphone last year.

Despite the fiasco, the company remains solid in its corporate value, with SK Securities raising the company’s target price to 3.2 million won. Analysts say Samsung’s quick compensatory reaction helped tighten its brand image, even though bullish chip sales were the main driver of its upward stock momentum.

Samsung Electronics is expected to post $14.94 billion in semiconductor sales in the second quarter, according to IC Insights.

The market researcher predicted Intel, the decades-long chip market leader by sales, will likely lose its top spot to Samsung during the same period for the first time since 1993.

“This would mark a milestone achievement not only for Samsung, but for all other competing semiconductor producers who have tried for years to supplant Intel as the world’s largest supplier,” IC Insights said.