XI'AN - Samsung Electronics Co, the world's largest maker of memory chips, started construction on its semiconductor plant Wednesday in Xi'an, capital of northwest China's Shaanxi province.

Total investment on the first phase of the project, located in Xi'an Hi-Tech Industrial Development Zone, will reach $7 billion, making the project Samsung's single largest overseas investment for a chip-making plant, the company said in a statement.

The first phase of the project is expected to be completed by next year, with 100,000 10-nano-level NAND flash memory chips to be produced monthly from 2014, said the company.

Industry insiders said Samsung's move is aimed at diversifying its production lines and cutting its production costs, as it faces fierce competition from other electronic giants in the market.

Meanwhile, strong demand for NAND flash memory chips in the Chinese market is another reason for Samsung to invest heavily in China.

According to statistics from Gartner, the world's leading information technology research and advisory firm, China accounted for about half of the world's NAND flash memory chips sales last year, with sales reaching $29 billion.

China's market share is estimated to further rise to 55 percent by the year of 2015, Gartner said in a report.

The Xi'an municipal government said Samsung's project will boost its economy and increase employment.

The project is expected to generate annual sales revenue of 66 billion yuan ($10.4 billion) and bring about 10,000 jobs upon the completion of the first-phase project, according to the company.