South Korean IT giant Samsung Electronics plans to spend $14.7 billion (€11.6 billion) on a new chip facility – its biggest investment in a single plant – leaning on its semiconductor business to bolster profits as its smartphone dominance wanes.

Samsung, the world's top memory chip maker, said the plant would be in Pyeongtaek, 75km south of Seoul. The company said it would create 150,000 jobs, equal to about a third of the city's population.

The bet on chips comes as its smartphone business is being squeezed by Apple in the premium segment and undercut by Chinese rivals such as Lenovo in mid-to-low end. April-June operating profit for Samsung's mobile division fell in annual terms for the second straight quarter, the longest streak since at least 2011.

But with the higher demand for mobile devices comes increased orders for mobile chips, and Samsung Electronics’ semiconductor division will be key to propping up the company’s bottom-line, analysts say.

The plant in Pyeongtaek will make either logic or memory chips, Samsung Electronics said, adding that a final decision had not been made yet.

“Right now the only part of the company that is bringing in steady profits is the semiconductor division, so it looks like the company will keep investing in the business,” said IM Investment analyst Lee Min-hee.

The chip business is likely to be a lone bright spot in what is otherwise expected to be a poor third quarter for the South Korean giant. Samsung will issue its earnings guidance for the period on Tuesday.

The mean forecast from a Thomson Reuters I/B/E/S survey of 42 analysts calls for the firm’s July-September operating profit to come in at 5.6 trillion won ($5.24 billion), its weakest performance since the fourth quarter of 2011.

Samsung Electronics closed 0.9 percent higher yesterday, compared with a 0.4 per cent decline in the broader market. – (Reuters)