Samsung Electronics to Borrow 20 Trillion Won from Samsung Display to Secure Semiconductor Investment Funds

[Asia Economy Reporter Hyunseok Yoo] Samsung Electronics has decided to borrow 20 trillion won from its subsidiary Samsung Display. Amid concerns over a decline in operating profit due to the semiconductor market slowdown, it appears that the company is securing funds to continue investing in semiconductors in preparation for future demand.

On the 14th, Samsung Electronics announced that it would short-term borrow 20 trillion won from Samsung Display to secure operating funds.

The borrowing period is from the 17th of this month until August 16, 2025. The borrowing amount corresponds to 10.35% of equity based on the separate financial statements as of the end of 2021. The interest rate is 4.60% per annum.

Samsung Display is a subsidiary in which Samsung Electronics holds an 85% stake.

Samsung Electronics' unusual decision to short-term borrow 20 trillion won from its subsidiary is interpreted as a determination to proceed with semiconductor investments as planned, despite the global semiconductor companies' trend of reducing investments and production cuts.

Due to the global economic recession and semiconductor market downturn, Samsung Electronics' operating profit this year is likely to fall below 20 trillion won. Securities firms' reports predicting a first-quarter loss in Samsung Electronics' semiconductor division are also emerging one after another.

Considering that Samsung Electronics has earned around 50 trillion won annually and invested most of it in semiconductors, it is expected that semiconductor investment funds will temporarily be insufficient due to the decrease in operating profit this year.

Last year, Samsung Electronics' capital expenditure reached a record high of 53.1 trillion won, of which 90%, or 47.9 trillion won, was invested in semiconductors.

Although the total investment scale for this year has not been finalized, memory investment is expected to be at a level similar to last year.

Kim Jae-jun, Vice President of Samsung Electronics' Memory Business Division, said during a conference call on the 31st of last month, "Although the recent market downturn is not immediately favorable to performance, we believe it is a good opportunity to thoroughly prepare for the future," adding, "In conclusion, this year's capital expenditure (CAPEX) will be at a level similar to the previous year."

Foundry (semiconductor contract manufacturing) also plans to continue investing mainly to expand production capacity at the Pyeongtaek and Taylor plants in the United States to meet demand for advanced processes.

A Samsung Electronics official explained, "By utilizing the 'emergency measure' of borrowing from a subsidiary, we have decided to proceed with semiconductor investments as planned to prepare for future demand and strengthen technological leadership."

Samsung Electronics plans to repay the borrowed funds early if surplus cash becomes available, as semiconductor market conditions are expected to improve in the future.