Samsung Electronics, the world's No.1 memory chip maker, has started mass production at a new chip line as it seeks to raise its share in the booming flash memory chip market fueled by mobile products.
Samsung, the world's biggest technology firm by revenue, has been the most aggressive investor among global memory chipmakers, and the new production line could exacerbate oversupply and stifle smaller rivals.
The South Korean firm said Thursday the new line, its first in about five years, was the industry's largest and most advanced memory fabrication facility, producing chips with 20-nanometre class processing technology.
Lower line-widths processing technology allows more circuits on a chip, making them smaller, cheaper, more powerful and more energy efficient.
The new production line will help Samsung benefit from the growing demand for mobile devices such as tablet computers and smartphones, and lower production costs sharply.
The new line won't have any immediate impact on the supply side, as it will take some nine months to fully raise capacity run rates, but it shows Samsung's attempt to take more share in the flash chip market, said Song Myung-sup, an analyst at HI Investment & Securities.
By 0127 GMT, shares in Samsung dropped 2.5 percent, in line with the broader market.
FLASH MEMORY BENEFIT
The line mainly makes NAND-type flash memory, widely used in mobile gadgets such as smartphones and tablets.
Samsung said it has already started producing chips earlier this month from the line with a monthly output of some 10,000 twelve-inch wafers and plans to raise production rates further.
At full capacity, the new line can produce 200,000 wafers per month.
Samsung competes with Toshiba Corp in flash memory and local rival Hynix Semiconductor Inc, Japan's Elpida Memory Inc and Taiwan's Powerchip in dynamic random access memory (DRAM) chips.
The new line and production of DRAM chips using 20-nanometre technology comes as computer memory prices have fallen more than 30 percent over the past three months to below production costs due to faltering demand from computer makers.
Global shipments of computers are projected to grow only a low-to-mid single digit percent this year as consumers switch to more popular tablets and smartphones.
Smaller rivals are struggling with worsening profitability and bracing for a tough outlook as weak demand and falling prices force them to delay capital-intensive facility upgrades.
Elpida said last week it was considering shifting some production to Taiwan to cope with a currency near record highs and to survive in a dwindling market.
Samsung has invested 12 trillion won ($10.4 billion) in construction of the new facility in Hwaseong, south of Seoul, since it started building it in May last year.
(Reporting by Miyoung Kim and Jungyoun Park; Editing by Jonathan Hopfner and Vinu Pilakkott)