Daily Management Review

With Aim To Widen Chip Lead, $18.6 Billion Planned To Be Invested In South Korea By Samsung


07/05/2017




With Aim To Widen Chip Lead, $18.6 Billion Planned To Be Invested In South Korea By Samsung
In a plan that promises to create almost half a million jobs and with the aim to extend its lead in memory chips and next-generation smartphone displays, Samsung Electronics Co Ltd said that it will invest at least $18.6 billion in South Korea.
 
It is expected that Samsung would be propelled to record profit this year and the investment underscores Samsung's determination to widen its lead in memory chips. Samsung is Asia's third most-valuable company. It has been steadily staying ahead of competitors such as cross-town rival SK Hynix Inc and Japan's Toshiba Corp because it routinely invests more than $10 billion in chips annually.
 
As part of a wider job-creation agenda, South Korean President Moon Jae-in has bene calling for big businesses to invest more domestically and the announcement by Samsung follows that call. Its plan could open up to 440,000 roles by 2021, Samsung said.
 
There has also been fear that in the absence of Vice Chairman Jay Y. Lee, major decisions can be delayed and this huge investment is also likely to alleviate such shareholder fears. Charged with bribing former president Park Geun-hye for political favors, the leader of Samsung Group is on trial.
 
"Samsung is being more aggressive in domestic investments because of the current (political) climate," said Park Ju-gun, head of corporate analysis firm CEO Score.
 
Park said that after announcing a $380 million plant in the United States, the firm also needs to show initiative domestically.
 
In addition to a persistent supply shortage which analysts and industry sources said is more acute for NAND chips due to increasing adoption of high-end storage products and as prices rise in response to demand for more features in smartphones and servers, memory makers are widely expected to post record profits in 2017.
 
As new facilities will not make meaningful supply contributions until next year, shortages are expected to persist at least through 2017 despite the fact that Samsung, SK Hynix and Toshiba have committed billions of dollars to boost NAND output in recent years.
 
By 2021, 14.4 trillion won into its new NAND factory in Pyeongtaek would be put in by Samsung under its latest spending plan. While not elaborating on the timing of the project, the company said that it will invest 6 trillion won in a new semiconductor production line in Hwaseong.
 
Some analysts said that prices are unlikely to drop because demand is so strong despite additional capacity across the industry could cause slight oversupply in early 2018.
 
"There's no chance of major oversupply issues, and I think Samsung is investing so much because it's convinced that won't happen," said Shinhan Investment analyst Choi Do-yeon.
 
Though it has not yet set an investment amount or time frame, Samsung also said it will add a production line to its NAND plant in Xi'an, China.
 
Since Beijing objected to Seoul's deployment of a U.S. anti-missile defense system in March, some South Korean companies in China have had to reduce operations or have seen sales decline. But with Samsung still among China's biggest suppliers of chips and displays, components makers have not reported any problems.
 
Latest data from researcher TrendForce showed that the firm accounted for 40.4 percent of global memory chip revenue in January-March.
 
China is likely to take several years before they can compete with existing makers even though it is trying to develop its own memory chip producers, analysts said.
 
On a new organic light-emitting diode (OLED) display complex in South Korea, Samsung Display plans to invest around 1 trillion won, Samsung said.
 
The unit is widely expected to add production lines to cope with demand from phone makers such as Apple Inc and controls over 90 percent of the market for OLED smartphone screens.
 
(Source:www.reuters.com)






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