Samsung Electronics Co Ltd will invest $500 million in Xi'an, Shaanxi province, to set up a packaging and testing facility.

The move comes one year after the South Korean company invested $7 billion to build a memory-chip plant in the Xi'an Hi-tech Industry Development Zone.

On Thursday, the company signed an agreement with the Xi'an hi-tech development zone, one of the largest industrial zones in central and western China, for the $500 million project.

With Samsung's new investment, local officials said that Xi'an now has a good chance of becoming a cluster for the semiconductor industry in the next few years with an annual output value of more than 100 billion yuan ($16.25 billion).

Kwon Oh-hyun, Samsung Electronics' chief executive officer and vice-chairman, said the new project will help the company build a complete industrial chain in Xi'an, covering areas ranging from the production of memory chips to hard disk manufacturing.

The project, which will comprise assembly lines for the packaging and testing of flash memory chips and solid-state disks, is a supporting project to Samsung's chip facility.

Kim Chang-yeong, director of Samsung Electronics' R&D center, said the investment will help provide support to areas such as the production of mobile phones and tablet PCs.