Samsung's smartphone sales have been in decline this year

Samsung to build new chip plant amidst falling smartphone sales

South Korean electronics giant Samsung plans to build a large-scale chip factory in a bid to boost its semiconductor business to make up for declining smartphone sales.

The $14.7bn (£9.2bn) plant, to be built in Pyeongtaek, about 75km (47 miles) south of Seoul, is Samsung’s biggest investment ever in a single plant.

Samsung, the world’s number one producer of memory chips, has decided to reinforce its semiconductor branch amidst falling smartphone sales.

Having dominated the smartphone market in the last five years, the South Korean manufacturer has been struggling to maintain its sales in the last year, facing growing competition not only from arch-rival Apple but also from low-cost Chinese producers.

Between April and June this year, operating profit of Samsung's mobile division fell in annual terms for the second straight quarter, the longest streak since at least 2011.

Samsung hopes its new plant, expected to employ about 150,000 people, will ensure the company’s dominant position as supplier of mobile chips to other smartphone manufacturers.

The plant in Pyeongtaek will make either logic or memory chips, Samsung Electronics said, adding that a final decision had not been made yet.

"Right now the only part of the company that is bringing in steady profits is the semiconductor division, so it looks like the company will keep investing in the business," said IM Investment analyst Lee Min-hee.

The chip business is likely to be a lone bright spot in what is otherwise expected to be a poor third quarter for the South Korean giant. Samsung will issue its earnings guidance for the period on Tuesday.

Some analysts forecast that the semiconductor division will report stronger operating profit than the handset division in the third quarter for the first time in more than three years. The chip business recorded a 1.9 trillion won profit in the second quarter, compared with 4.4 trillion won for the mobile business.

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