Samsung spending $4B to update Austin semiconductor factory

August 21, 2012 — Samsung Austin Semiconductor LLC says it will spend "about $4 billion" to renovate and retrofit its existing facility for "full system LSI production," mainly to produce mobile systems-on-chip (SoC) on 300mm wafers using 28nm process technologies.

The project is beginning this month, and scheduled to begin mass production in 2H13. About 2500 construction workers and equipment vendors will be on-site. The $4B commitment — representing the largest single foreign investment ever made in the state of Texas — brings Samsung’s total investment in its Austin Semiconductor unit to more than $13B since 1996.

Earlier this year at an event, new Apple CEO Tim Cook described the "engine" of the iPhone and iPad as being made in Austin — almost certainly referring to (though not specifically naming) Samsung’s local plant which makes the A5 chips.

The investment isn’t exactly a surprise; a 3Q12 retrofit of Samsung’s Austin fab is one of the key capex drivers analysts have been tracking for the latter half of this year. Samsung is expected to push its capex by 11% in 2012 to $13.1B, just ahead of Intel’s $12.5B (16% Y/Y growth) — together representing fully 40% of worldwide capital spending this year.

Samsung has the ability (i.e., leading-edge capacity and a huge capital spending budget) and desire to become a major force in the IC foundry business, said IC Insights, in its top-12 foundry ranking for 2012. It is estimated that the company’s capacity dedicated to its IC foundry business reached 130K 300mm wafers per month in mid-2012. Using an average revenue per wafer figure of $2,500, Samsung currently has the potential to produce annual IC foundry sales of about $3.9 billion.

IC Insights also points out that Samsung is enjoying a tremendous amount of synergy by supplying application processors to the largest (itself) and second-largest (Apple) suppliers in the world of one of the hottest electronic system products in the world — smartphones.

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