[Asia Economy Reporter Su-yeon Woo] Samsung Electronics has expressed its intention to pursue meaningful mergers and acquisitions (M&A) in the semiconductor sector within the next three years. This year, the company plans to actively increase strategic facility investments, including in the semiconductor sector, but has taken a cautious stance on specific matters such as the recently highlighted expansion of its foundry plant in the United States.
On the 28th, Samsung Electronics announced this position during its Q4 earnings conference call. Yoon-ho Choi, President and Head of Samsung Electronics' Management Support Office, stated, "We will actively utilize our available resources to expand strategic facility investments and pursue M&A of a meaningful scale over the next three years."
This is the first time Samsung Electronics has officially mentioned M&A since acquiring the automotive electronics company Harman in 2017. At the same time, Samsung announced that it will maintain its policy of distributing 50% of free cash flow as dividends over the next three years (2021?2023), raising the annual dividend amount to approximately KRW 9.8 trillion.
During the Q&A session, there were many criticisms regarding the lack of meaningful M&A despite retaining cash after dividends over the past three years (2018?2020). In response, President Choi said, "We have been very cautious in continuously reviewing M&A targets over the past three years and are well prepared," adding, "It is true that continuous cash accumulation poses a management burden for the company."
He continued, "Due to internal and external uncertainties, it is difficult to specify the timing of execution, but based on the preparations made so far, there is a high possibility of executing M&A of a meaningful scale within this policy period (2021?2023)."
Additionally, Samsung Electronics announced plans to expand not only M&A but also strategic facility investments, considering free cash flow. However, the company refrained from making specific comments regarding the expansion of its foundry plant in the United States, which has recently attracted attention due to Intel's increased foundry orders as an integrated device manufacturer (IDM).
President Choi said, "Intel's expansion of outsourcing is expected to lead to growth in the foundry market size," and added, "Samsung Electronics plans to actively respond to HPC demand by providing leading-edge process leadership and specialized solutions."
He further stated, "No decisions have been made yet regarding investments such as building plants in the U.S., and given the nature of the foundry business, production capacity reviews are ongoing," adding, "We are reviewing optimal site utilization plans not only for Giheung, Hwaseong, and Pyeongtaek but also for Austin in the U.S."
Regarding the memory semiconductor business, including DRAM, Samsung mentioned that it is considering expanding investments in line with market demand. Samsung expects that the average selling price (ASP) will rise in the first half of this year as demand delayed by the COVID-19 pandemic last year and new server-related demand begin to expand significantly.
However, Samsung took a conservative stance, noting that due to ongoing demand fluctuations caused by COVID-19 and geopolitical risks, it is necessary to be cautious before expecting entry into a 'semiconductor supercycle' similar to that of 2017?2018.
Samsung stated, "Our basic policy remains to monitor supply and demand conditions and proceed with flexible investments, but rapid demand fluctuations and excessively fast memory price increases in the past negatively impacted the entire ecosystem," adding, "We will decide mid- to long-term price supply considering demand conditions."
Over the past year, Samsung Electronics made facility investments totaling KRW 38.5 trillion, of which KRW 32.9 trillion was invested in semiconductors and KRW 3.9 trillion in displays. This represents a 43% increase compared to the previous year. In the memory sector, advanced process expansions were carried out to respond to future demand growth, and in the foundry sector, investments were significantly increased compared to the previous year through expansions such as the EUV 5-nanometer process.
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