December 17, 2012 – Samsung Austin Semiconductor sent out a PR last week about previously announced $4B investments in its Austin, TX facilities. The site is on schedule for production in 2H13 for mobile application processors (28nm process technologies on 300mm wafers). Samsung Austin Research Center also is adding about 200 engineers to fuel this effort, according to the company. The commitment — representing the largest single foreign investment ever made in the state of Texas — will bring Samsung’s total investment in its Austin Semiconductor unit to more than $15B since 1996.
The original Samsung Austin investment announcement — much less this update, thin on new details — wasn’t exactly a surprise; a 3Q12 retrofit had been seen as one of the key capex drivers 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.
In a quick research note, Barclays’ CJ Muse notes that Samsung’s overall capex could be as much as halved this year (a -30% to -50% range), with most of it coming from the logic side due to an Apple defection. He currently models Samsung LSI’s capex in 2013 declining about 25% to KRW 6 trillion (~$5.4B), and possibly even more, and that it will focus on a 32nm-to-28nm transition, i.e. "spending will be shrink-oriented vs. capacity-oriented." Near-term, Muse sees Samsung’s orders, currently at "negligible levels," as possibly picking up in 1H13 to support this Austin push. He thinks this will contribute to an overall sector-wide orders environment of "flattish to slightly up (in-line with expectations)."
Another thing this announcement accomplishes, Muse notes, is a signal to the marketplace that Samsung is still investing to remain competitive with TSMC. Apple has openly partnered with Samsung in Austin to make the "engine" of the iPhone and iPad, despite the two companies’ fierce and broad competition in finished electronics devices. That business is in doubt, though, as many speculate about the electronics giant will seek other noncompetitive partners for future chip orders. With this $4B pledge, even if Samsung loses Apple’s business, it is sending a message to other fabless firms who may decide to grab some of that vacated capacity in 2013-2104.