Samsung Busy Preparing for the Future... Poured 'Record-Breaking' Investment into Facilities and R&D

[Asia Economy Reporter Jeong Hyunjin] Samsung Electronics has executed the largest-ever scale of facility investment and research and development (R&D) investment this year. Amid significant changes in the global market due to the impact of COVID-19, this is interpreted as an active reinvestment effort to strengthen technological competitiveness in core key industries such as semiconductors and displays and to maintain future market leadership.

According to industry sources on the 31st, Samsung Electronics' facility investment in the first half of this year amounted to 23.3 trillion KRW, a 36% increase compared to the same period last year. This surpasses the 22.5 trillion KRW invested in 2017, when large-scale investments were made in both semiconductors and displays. In particular, the facility investment in the second quarter of this year reached 13.6 trillion KRW, exceeding the 13 trillion KRW in the fourth quarter of last year, marking the highest quarterly investment ever.

This large-scale investment is seen as a preparation for the future. Through facility investments exceeding operating profits, Samsung Electronics aims to secure production facilities and equipment to respond to potential future demand. The scale of Samsung Electronics' facility investment this year is more than 1 trillion KRW higher than the operating profits of 21.9 trillion KRW in the first half and 12.6 trillion KRW in the second quarter.

Most of Samsung Electronics' facility investments are concentrated in semiconductors. 90% of the facility investment in both the first half and the second quarter of this year was allocated to the semiconductor sector. The semiconductor facility investment in the second quarter also surpassed the 11.7 trillion KRW in the fourth quarter of last year, setting a record high.

A Samsung Electronics official stated, "In the case of memory, investments were made in expansion and process conversion at Pyeongtaek and Xi'an, China, to respond to future demand increases," adding, "In foundry, investments focused on extreme ultraviolet (EUV) lithography equipment for 5-nanometer (nm; one billionth of a meter) processes were made, and especially, we plan to maximize supply capacity by actively shipping mass-produced products from the Pyeongtaek line."

Samsung Electronics Pyeongtaek Campus

With large-scale facility investments made in the first half, Samsung Electronics is highly likely to continue investing in production plants and equipment in the second half to keep pace with the semiconductor 'supercycle,' increasing the possibility that this year's facility investment will exceed 40 trillion KRW. As Samsung Electronics is also pursuing new and expanded semiconductor factories in the United States, the expansion of facility investments is expected to continue for the time being. Attention is focused on whether it will surpass the record of 43.4 trillion KRW set in 2017, the largest annual scale to date.

Samsung Electronics is pouring funds not only into facility investments but also into R&D. The company's R&D expenses in the first half reached 10.82 trillion KRW, the highest ever for a half-year period. Although the R&D expenses in the second quarter were 5.38 trillion KRW, a 1.1% decrease from the record high in the first quarter, they increased by 3.1% compared to the same period last year.

Based on these investments, Samsung Electronics plans to mass-produce new products within the year, such as 14-nanometer DRAM applying EUV processes and consumer SSDs based on 176-layer V-NAND in the memory market.

Meanwhile, Samsung Electronics announced that it is preparing for strategic mergers and acquisitions (M&A). Seo Byunghoon, Vice President in charge of IR at Samsung Electronics, said during the second-quarter earnings conference call, "Due to many internal and external uncertainties, it is difficult to specify the timing of execution, but as mentioned in January, we positively view the possibility of realizing meaningful-scale M&A within three years," adding, "We are reviewing various fields considered new growth engines such as artificial intelligence (AI), 5G, and automotive electronics."