Samsung starts new chip line to boost flash memory

SEOUL Thu Sep 22, 2011 5:13am BST

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SEOUL (Reuters) - Samsung Electronics, the world's No.1 memory chip maker, said it started mass production at a new $10 billion chip line, as it seeks to raise its share in the booming flash memory chip market fueled by robust demand growth in mobile products.

Samsung's new production line, its first in about five years, will help the company sharply lower production costs of the chips and could exacerbate oversupply in the market, stifling smaller rivals.

Apple Inc, the maker of popular iPhones and iPads, and Sony, which joined the crowded tablet market last month with two new devices, buy flash memory chips from Samsung.

The cost-competitive facility will make it difficult for its major customers to shift away to other suppliers.

Apple, Samsung's biggest customer locked in a series of patent legal battles with the South Korean firm, is trying to reduce sourcing from the emerging competitor.

"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.

Samsung, the world's biggest technology firm by revenue, on Thursday said the new line 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.

By 0355 GMT, shares in Samsung dropped 3.4 percent, versus a 3.3 percent drop in the broader market.

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