Samsung NAND Plant: Ode to China Market 三星NAND工厂落户西安 看好中国市场
There’s lots of interesting news on smaller company developments today, but I want to take a step back from some of those to write about a much bigger development that will probably get much less attention, namely a massive new memory chip being built by Samsung (Seoul: 005930) in the interior city of Xi’an. This plant, which was first announced in April, will manufacture NAND memory chips used in smartphones and USB computer memory drives. The plant is in the news once again because construction has just officially begun in Xi’an, with top officials from Samsung, South Korea and Shaanxi province all in attendance at a ground-breaking event. (company announcement)
The reason for all the attention is the sheer size of this mega-plant, with initial investment pegged at $2.3 billion and total investment set to reach $7 billion when construction is complete. The plant is only Samsung’s second memory facility outside Korea, complementing an existing chip plant in the US city of Austin, Texas. The investment is also Samsung’s largest ever in interior China.
So, now that I’ve rehashed all of Samsung’s propaganda about why this plant is so important, I’ll give my own assessment of what all of this means. In short, this massive investment is a huge acknowledgement of the importance that the China smartphone and PC markets will play for global product and component manufacturers in the decades ahead.
China passed the US to become the world’s largest PC market several years ago, and there’s every indication that it will eventually become at least 2 to 3 times the size of the US over the next 20 years as more of the nation’s 1.3 billion people can afford computers. That translates to huge sales potential for the NAND memory drives that are increasingly the preferred method for data storage on PCs, both desktop and laptop models and also potentially for tablet PCs in the future.
At the same time, China is also set to pass the US this year to become the world’s largest smartphone market. And like PCs, smartphone sales will probably continue to grow to eventually become 2 to 3 times as big as the US over the next 20 years, as the majority of China’s 1 billion-plus mobile subscribers use their phones for data functions like web surfing and music downloading. Again, anyone who uses a smartphone knows that NAND chips are the preferred form of data storage for these devices.
Samsung’s decision to build the plant in Xi’an also marks a major victory for the city, and more broadly reflects China’s drive to bring more economic development to the country’s less developed interior regions. The comparisons between Austin, home to Samsung’s other overseas chip plant, and Xi’an are interesting and perhaps hint at what the future holds for Xi’an.
Austin is a college town in Texas that has become one of the region’s most dynamic high tech hubs. Xi’an clearly wants to follow that model, with 80 universities and another 100 research institutes in and around the city. Micron Technologies (NYSE: MU), one of Samsung’s top memory rivals, already has its own plant in the city, and just announced a major expansion of the facility last year. (previous post) This new Samsung investment will certainly put Xi’an on the global memory manufacturing map, and we can probably expect to see many more supporting companies setting up shop in the area in the next few years.
Bottom line: Samsung’s $7 billion investment in a memory chip plant in Xi’an testifies both to China’s booming smartphone and PC markets, and to Xi’an’s rise as a high-tech hub.
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