Samsung Electronics' application to set up a new NAND flash wafer plant in China reportedly has been approved by the South Korea government, which industry sources believe will enhance the firm's competitiveness against major rival Toshiba.

A BBC report quoted Korea's Ministry of Knowledge and Economy as saying that Samsung Electronics has won government approval to build a memory-chip factory in China.

Samsung issued a statement in early December 2011, disclosing it had applied with the government to establish a semiconductor production line overseas. Samsung would also conduct discussions with the China government on the possibility of building a NAND flash wafer plant dedicated to producing products at 20nm and below. The Korean firm added it expected to kick off construction of the China plant in 2012, and commence the operation in 2013.

Toshiba has been experiencing higher production costs by keeping its manufacturing sites in Japan. Industry watchers speculate that Samsung's move to construct an advanced 12-inch wafer fab for flash memory production in China would encourage the Japan-based rival to outsource in the future.

Toshiba has been trailing closely behind Samsung in the global NAND flash marketplace, but might lose its competitiveness over the long term due to its unfavorable cost structure, the sources commented.