This Huge Investment Will Boost 1 Industry, Crush 2 Others
If the semiconductor industry is dead, someone forgot to tell the world's biggest chip makers.
According to Korean daily The Maeil Business Newspaper, local hero Samsung plans to spend 50% more on semiconductor manufacturing plants next year, jumping from $9 billion to $13 billion. A bit less than half of this investment would be targeted at making more memory chips; the rest goes toward other product lines such as mobile processors and digital camera sensors.
The Maeil cites anonymous sources inside Samsung and the industry, and the company itself says its plans for 2012 aren't set in stone yet. As I understand it, the paper is the closest thing to a Korean Wall Street Journal, and a far cry from a sensationalist blog. For example, the paper noted that Samsung was planning legal actions to block Apple (NAS: AAPL) from selling the iPhone 4S in Europe, about three weeks before the injunction requests were actually filed. I won't take this report as gospel, but these sources seem pretty legit.
To put that enormous capital expense into perspective, American chip giant Intel (NAS: INTC) is on track to spend $11 billion on new plant capacity in 2011. Intel's biggest year of infrastructure investments to date was 2001, when the dot-com boom inspired Chipzilla to invest $7.3 billion. Taiwan Semiconductor Manufacturing (NYS: TSM) , the leading stand-alone maker of factory-less chip designers' products, poured $8.1 billion into its infrastructure over the last year.
So yeah, Samsung's plans are big. Its own chip investments are a bit harder to track, as the Korean conglomerate works in many other industries besides being the world leader in memory chips. Over the last four quarters, the company has filed $22 billion under capital expenses.
An investment on this scale would be terrible news for memory specialist Micron Technology (NAS: MU) as Samsung's increased volume would flood this commoditized market and lower unit prices in a flash. And since Samsung also makes some backside illuminated camera chips today, you'd have to assume that new factories would make more of 'em and put fresh pressure on BSI leaderOmniVision Technologies (NAS: OVTI) . I own both Micron and OmniVision, and will keep a hawkish eye on Samsung's plans because they matter to my portfolio.
On the other hand, big factory investments from Samsung would be great news for known equipment suppliers including Veeco Instruments (NAS: VECO) and Nanometrics (NAS: NANO) . Click here to seed your Foolish watchlist for keeping a close watch on the chip-making equipment industry.
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At the time this article was published Fool contributor Anders Bylund owns shares of Micron and has created a synthetic long position in OmniVision but holds no other position in any of the companies discussed here. That's enough to have him chewing his nails on Samsung's supposed plans, though. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can go over Anders' holdings and a concise bio, follow him on Twitter or Google+, or check out our Foolish disclosure policy.
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