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Samsung starts new chip line; may squeeze rivals

Reuters News
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Posted: Sep 21, 2011 7:53 PM
Samsung starts new chip line; may squeeze rivals

SEOUL (Reuters) - Samsung Electronics, the world's No.1 memory chip maker, said on Thursday it had started operations at a new memory chip line, a move that may further exacerbate semiconductor oversupply and hit smaller rivals.

The South Korean firm said the new line was the industry's largest and most advanced memory fabrication facility, producing chips with 20-nanometre class processing technology, which improves manufacturing costs by some 50 percent.

Lower line-widths processing technology allows more circuits on a chip, making them smaller, cheaper, more powerful and more energy efficient.

The new line comes as computer memory prices have fallen more than 30 percent over the past three months to below production costs due to faltering demand from computer makers.

Global shipments of computers are projected to grow only a low-to-mid single digit percent this year as consumers switch to more popular tablets and smartphones.

Samsung competes with local rival Hynix Semiconductor Inc, Japan's Elpida Memory Inc and Taiwan's Powerchip.

Smaller rivals are struggling with worsening profitability and bracing for a tough outlook as weak demand and falling prices force them to delay capital-intensive facility upgrades.

Elpida said last week it was considering shifting some production to Taiwan to cope with a currency near record highs and to survive in a dwindling market.

Samsung invested 12 trillion won ($10.4 billion) in construction of the new facility in Hwaseong, south of Seoul, since it started construction in May last year.

Samsung said it would also boost production of NAND-type flash memory chips to meet market demand.

(Reporting by Miyoung Kim and Jungyoun Park; Editing by Jonathan Hopfner)