Samsung Electronics said that it is planning to invest a total of $14.7 billion for the construction of a new chip production factory in its home country of South Korea.
The plant, which will be constructed in the city of Pyeongtaek about 75 kilometers south from Seoul, is expected to be completed on the latter half of the year 2017.
The decision shows that the company is leaning more towards its semiconductor business as opposed to its smartphone business, which has seen slumping earnings in recent quarters.
Samsung, which is currently already the largest maker of memory chips in the world, said that the planned factory will increase its competitiveness in the growing semiconductor industry that has been boosted by the increasing demand for mobile gadgets.
Samsung added that it is planning to produce either memory or logic chips in the new plant, and that the company's capacity for producing chips will increase by a percentage in the low double digits.
The chip business of Samsung is expected to be the only good aspect for the company's otherwise-poor third quarter.
The profit that Samsung is making from its smartphone division is rapidly decreasing. This is due to the fact that Apple has gained most of the profit at the higher end of the smartphone market, while Chinese manufacturers that produce inexpensive but feature-packed models such as Xiaomi and Lenovo have gained most of the profit at the lower end of the market.
A survey carried out by Thomson Reuters that included 42 analysts resulted in expectations of the third-quarter operating profit for Samsung to come in at 5.6 trillion won, equivalent to about $5.24 billion, which would be the lowest for the company since the last quarter of the year 2011.
In addition, some analysts are expecting the chip business of Samsung to bring higher operating profit to Samsung compared to the mobile phone business, which would be the first time in over three years.
"Semiconductor has been Samsung's long-time key business, while the company can no longer expect strong growth from its mobile unit," said I'M Investment & Securities analyst Lee Min Hee. "The company is now making a huge investment for the future as its key mobile business isn't likely to contribute to profit as much as it used to."
The market for memory chips has retained its favorability as the demand for personal computers and similar devices remain higher than expected. Companies operating in the industry such as Samsung have also been able to properly manage the expansion of their production capacities, which has kept the supply in the market tight.
