Report on potential Samsung chip plant in UAE met with industry skepticism

Samsung Electronics is rumored to be planning a chip plant in the UAE, but industry insiders believe it is extremely unlikely given the current climate in the sector.

Engineers walk at a Samsung Electronics factory in Pyeongtaek, Gyeonggi. [YONHAP]

Samsung Electronics is in discussions with the United Arab Emirates (UAE) to build a chip manufacturing complex there, according to the Wall Street Journal, although some industry insiders believe the project is extremely unlikely to be realized due to weaker-than-expected chip demand and geographical disadvantages.

The Suwon, Gyeonggi-based company declined to confirm the report.

The media outlet said that senior leaders of Samsung Electronics recently visited the UAE, as did representatives of Taiwan’s TSMC on a separate occasion. If realized, the project could cost as much as $100 billion in aggregate with Abu Dhabi-based sovereign development vehicle Mubadala taking a central role in raising funds.

Still, local analysts and semiconductor industry insiders have expressed strong skepticism given that Samsung is adjusting the pace of investments and construction of factories under development in Korea and the United States on the back of lower-than-expected demand for its chips.

"The company is slowing down investments in factories in Pyeongtaek and Hwaseong, which are on its home turf,” a source in the local semiconductor industry said.

“Therefore, it sounds a bit far-fetched to claim that they will build a fab in regions like Dubai, with geographical conditions that make it tough to secure water and other resources to keep factories running around the clock,” the source said.

The Korean chipmaker suspended the building of the P5 factory in Pyeongtaek earlier this year, and recently resumed the construction of P4. Still, it is considering entirely dedicating P4 to memory chips, a deviation from the initial plan to build production lines for processing chips designed by third party clients.

The chipmaker is also constructing a new plant in Taylor, Texas, but progress has been pushed back, according to some local media reports, due to a lack of orders from third-party clients in the foundry business.

An anticipated growth in memory chip prices has also come at a slower clip.

“There are concerns about a potential slowdown in memory chip price increases due to uncertainty around IT demand recovery, rising memory inventory levels among PC OEMs, and expanded memory output from greater China’s memory producers,” said a Daishin Securities report co-authored by analysts Shin Seok-hwan and John Park.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]