Samsung spends $7b to build memory chip plant in Xi'an

Samsung Electronics Co, Asia's largest consumer electronics maker, announced on Tuesday it will open a memory chip factory valued at $7 billion in Xi'an, Shaanxi province, its largest ever overseas investment.

The move signals Samsung's expansion in the Chinese market, and is the largest foreign investment by value in western China.

The Samsung NAND flash factory in the capital city of Shaanxi province is expected to become operational at the end of 2013, with a monthly output of 100,000 units of chips. NAND flash is a type of memory widely used in smartphones and tablet computers.

The Xi'an plant will also be the company's second-largest memory chip production base worldwide.

China is now Samsung's largest overseas market. So far, the South Korean electronics maker has 23 companies and 155 sites in China. Nationwide, Samsung has three semiconductor bases.

"The new factory shows our commitment to the Chinese market, and we will continue to step up our efforts here," said Kim Young-ha, president of Samsung in China.

China is the largest market for NAND flash memory. Statistics from the market technology research provider Gartner showed China's NAND flash consumption accounted for half of the global market, reaching $29 billion. And by 2015, the nation's consumption is expected to rise to 55 percent of the global total.

China is now South Korea's largest trade partner and a major destination for South Korean companies.

Samsung's investment comes as a slew of foreign companies are relocating their factories to the western region from the coastal areas in East China due to rising labor costs.

While exports slide, "China aims to expand domestic consumption in the next five years, and Samsung's move signals its confidence in China's policy", said Wang Chao, deputy minister of commerce.

And it is also "in line with the nation's strategy to develop the western region".

Last year, foreign direct investment in western China grew 28.24 percent year-on-year to $11.57 billion, compared with an increase of 10 percent nationally over the same period, according to the Ministry of Commerce.

Ford Motor Co said earlier this month that it will increase the annual capacity at its factory in the southwestern city of Chongqing by 350,000 units to 950,000 vehicles by 2014, together with joint venture partner Chang'an Automobile Group Co.

Late last year, the central government launched a new version of industrial guidelines on FDI in China, in which the authorities encourage foreign companies to invest in western and central regions.

The guidelines also called for increased investment in high-tech, strategic emerging industries, research and development, and services.

Samsung's move is expected to spark a new wave of investment by foreign companies in China's western region.

"There will be a positive ripple effect from the Samsung case. We are confident foreign investment will grow in western regions," said Zhao Hongzhuan, member of the standing committee of the Xi'an Municipal Committee of the Communist Party of China.

Contact the writers at dingqingfen@chinadaily.com.cn and luhongyan@chinadaily.com.cn