Samsung Is Ploughing Ahead With Plans to Invest Over $100 Billion in Its Chip Business as the Smartphone Unit Takes a Hit From COVID-19
Samsung Electronics (KRX:005930) reiterated on Wednesday its commitment to ambitious investment plans even as the global tech industry continues to reel from the coronavirus pandemic.
Speaking at the general shareholders meeting, Koh Dong-Jin – the President of Samsung’s Mobile and Network business, told investors that:
“The global smartphone market was expected to turn to growth this year, but with virus showing signs of being prolonged, the smartphone market is contracting. But 5G smartphone demand is expected to rise.”
Even though Samsung is a global leader in the smartphone sphere, its fortunes have been lagging in China where the South Korean giant faces strenuous competition from the cheaper offerings of Huawei, Xiaomi, etc. The company was hoping to reverse its decline in China this year but the attendant plans have now been derailed due to the disruptions caused by the coronavirus pandemic.
However, Samsung is banking on its chip business – that experienced a slump last year but is expected to register appreciable growth in 2020 – to recoup some of the revenue shortfall from its smartphone business.
Samsung noted in the meeting that the demand for its chips has not appreciably declined due to the coronavirus pandemic. Consequently, the South Korean behemoth is pushing ahead with its plan to invest 133 trillion won ($105 billion) in system semiconductors by 2030, along with 13 trillion won ($10.3 billion) in quantum dot displays by 2025.
Samsung Electronics CEO, Kim Ki-nam, stated that the company has the requisite technology to compete effectively with the Taiwan Semiconductor Manufacturing Co. (TSMC) (TPE:2330), which currently controls nearly half of the global chip foundry market. He went on to note that:
"High technology will be more important in the foundry market. In that sense, Samsung's foundry has never been behind Taiwan, and in fact many customers are coming to us nowadays. In short, we will drastically improve Samsung's foundry business by securing leadership in next-generation process technology."
Although Kim did not elaborate on the identity of those prospective new customers, his comments echo those made by the company’s Vice Chairman, Lee Jae-Yong, about a month back while visiting Samsung's extreme ultra violet (EUV) lithography production lines for 7nm chips in Hwaseong, south of Seoul.
In an interesting caveat, Samsung’s Koh said that the company was trying to study the strategies that Apple (NASDAQ:AAPL) uses to draw people to its products:
"I also know that Apple's smartphones are touching young people's feelings and drawing them to its products. We should learn such a thing from a competitor."
This startling admission came after a shareholder confessed at the meeting that his child had demanded an Apple handset instead of one from Samsung.
Nonetheless, Koh expressed confidence in the company’s newest offerings by stating that they package an impressive experience and that those products are drawing attention.
CEO Kim further noted that:
"We expect uncertainties will continue at home and abroad due to the COVID-19 and the U.S.-China trade conflict. We will pursue business opportunities by investing in AI chips, foldable phones as well as system chips and QD display in any circumstances."