Samsung has no plans for now to change chip capex

TAIPEI/SEOUL: Samsung Electronics said on Tuesday it had no current plans to change its chip capital spending plans, amid market talk that it would raise investment by some $2 billion to further enjoy a strong sector recovery.

Samsung, the world's top memory chipmaker, said in January it was "seriously considering" its raising 5.5 trillion won ($4.85 billion) semiconductor capex for this year and stronger than expected computer sales and demand from China have led investors to increase their bets on a spending boost.

"We expect Samsung to raise total spending to 6.5 trillion won or even more to boost production," said Lee Seungwoo, an analyst at Shinyoung Securities.

"But it appears to be taking a cautious approach as an aggressive spending plan could prompt rivals to follow suit and create oversupply when demand outlook for the longer term is still uncertain due to things like China's tightening policy."

As the chip sector recovers quickly from its worst-ever downturn over the past three years, companies are gearing up to increase investment, threatening to derail the nascent recovery, although so far spending has mainly focused on moving to finer processing technology to cut costs rather than adding extra production lines.

"We are waiting for the second quarter outcome and we are collecting information from our clients," Kwon Oh-hyun, in charge of Samsung's semiconductor business, told Reuters when asked about the firm's chip investment plans on the sidelines of an industry event held in Taipei.

Growing oversupply fears promoted UBS to cut its rating on the global DRAM chip sector to "neutral" this month and Citigroup estimates chip prices will drop 30 percent later this year from the first half as total capital spending is set to more than double to $10 billion this year, marking the first annual rise in three years.

In January, Samsung, also the world's top maker of LCD flat panels and No.2 handset producer, said positive earnings growth would continue in 2010, driven by a global economic recovery.