Samsung to Invest $1 Billion in Texas Chip Facility

Samsung will spend more than $1 billion to boost chip production at its facilities in Austin, Texas, part of a larger strategy to spend almost $24 billion in capital expenditures following the company’s problems with its Galaxy Note7 smartphones.

The money for the 19-year-old Texas facility will be used over the next eight months to help increase the production of processors for smartphones and other electronic devices. The company not only makes its Exynos systems-on-a-chip (SoCs) for such devices and memory chips—including DRAM and 3D NAND flash memory chips—but also builds processors for other vendors, including Qualcomm.

In a statement to the news media, Samsung officials said the decision to invest in the Austin facility was based on what was best not only for customers but also the region.

“We are committed to Austin and our contributions to the community,” Catherine Morse, general counsel and senior director of public affairs at Samsung Austin Semiconductor, said in a statement to new outlets. “This is our home and we want to ensure our community is healthy and prospering. These investments will support this, while also ensuring our customers’ growing needs are met.”

According to a report by the Austin American-Statesmen’s 512tech site, the $1 billion comes six years after Samsung invested $4 billion to upgrade the plant. The $1 billion will be used to buy manufacturing equipment and to cover construction costs. In addition, the company will hire between 250 and 500 manufacturing technicians as well as some engineers to run the new equipment, Morse told the news site. The plant currently employs about 3,000 people.

Overall, the $24 billion in capital investments will focus primarily on the semiconductor and display panel businesses, according to a report in the Wall Street Journal.

The spending comes after Samsung took a beating—both in the public realm and in its financial numbers—for its problems with its Galaxy Note7 smartphones. An apparent battery problem caused some of the devices to explode or catch fire, forcing the vendor to recall the smartphones. The problems mounted when reports surfaced that some replacement smartphones experienced heating issues, and the company announced it would discontinue the Galaxy Note7.

The Federal Aviation Administration (FAA) last month announced a ban of the device on all flights, not only in cabins but also in the holding areas for checked baggage. Samsung officials said the various recalls and subsequent cancellation of the smartphone could cost the company as much as $5 billion.

The fallout from the Galaxy Note7 problems was felt in the company’s third-quarter financial numbers. Samsung’s $41.9 billion in revenue during the quarter represented a 7.5 percent decline over the same period in 2015, while the $4.5 billion in operating profit was a drop of almost 30 percent year-over-year. The division responsible for the company’s mobile devices saw an operating profit of $87.8 million, a 96 percent fall.

However, Samsung’s semiconductor business saw $9.2 billion in revenue, fueled in large part by demand for mobile SoCs.

Samsung officials have said they are moving from the Galaxy Note7 and are turning their attention to the next-generation Galaxy Note8 smartphones.