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Samsung investing $500 million in plant

The Korean company's Austin, Texas, chipmaking facilities will get the money, a strategy to prepare for an eventual upturn in the memory market.

Samsung Electronics intends to invest $500 million into its chipmaking facilities in Austin, Texas, over the next three years as part of its strategy to prepare for an upturn in the memory market.

The Korean memory giant already makes chips in Austin, its only overseas plant, but will upgrade the plant to make chips with the 90-nanometer process, a company representative said. Chips made with this process will be smaller and less expensive to manufacture than are chips made with the current 130-nanometer process.

The Austin plant, located in one of the largest chip-producing areas in the United States, will be used to manufacture different types of dynamic RAM (DRAM), the memory found in desktops and laptops.

Although memory prices enjoyed a strong and unusual surge upward in the early part of 2002, they've since been headed downhill. Prices have declined steadily due to an excess of factory capacity and a lack of PC demand.

Despite the circumstances, Samsung has managed to remain profitable, unlike some other competitors. The company reported a profit of $942 million in the first quarter. In the past few years, other companies have exited the market or sought merger partners to get out of debt.

In 2002, Samsung became the second-largest chip manufacturer in the world, with about $9 billion in revenue, up 49 percent from the year before, according to a iSuppli survey.

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The growth was largely attributed to sales of double data rate (DDR) DRAM, the most popular form of DRAM today, and flash memory.

Earlier this month, the U.S. Department of Commerce found that Samsung had improperly received subsidies from the Korean government, allowing the company to sell memory in the United States for less than cost. The effect of the subsidy, however, was minimal and analysts expected the penalty imposed on the company to be minimal. By contrast, Hynix, a Korean competitor accused of the same thing, is slated to face a 57 percent import tariff.

The company plans to formally announce the expansion next week.