Can Samsung increase investment?
By Kim Yoo-chul
With Samsung Electronics taking a bigger slice of the pie in the smartphone market despite its ongoing patent war with Apple, attention is being paid to how aggressive the Korean technology giant will be in fresh investment in the coming year.
There is much speculation regarding the firm’s plan for 2013 but it is believed Samsung will balk at aggressive spending and may cut down on new investment for three reasons.
They are the patent dispute, technology barriers for the development of advanced memory chips, and hurdles for the development of large-sized flat-screens using organic light-emitting diode (OLED) technology.
As the world’s biggest supplier of memory chips, Samsung has upgraded its manufacturing technology but has yet to secure capabilities to mass produce them.
Samsung and industry officials said Sunday that unless they secure mass-production capabilities, the company will not expand investment in manufacturing facilities.
In flash-type memory chips, where Samsung has a 39.3 percent global market share, the company is also situated to mass produce the chips with three-dimensional (3D) structural design from the current’s second-dimensional (2D) manufacturing technology.
``If Samsung sees a major breakthrough for those advanced chip-making technologies sometime next year, then the firm may increase its spending on the components to further lead its rivals and to charge buyers more,’’ said another Samsung official.
Another consideration is the company’s commitment to large-sized OLED televisions. The world’s biggest TV manufacturer Samsung scrapped its plan to sell 55-inch OLED TVs to retailers and distributors this year due to serious problems in production yields.
``All TV majors will definitely invest more in OLED TVs next year as the sets are completely new and believed to be the next cash cow for them. But I don’t think consumers are ready to pay 50 percent more to buy an OLED TV than the mainstream LCD sets of the same size,’’ said a fund manager from a U.S.-based investment bank in Seoul adding the bank expects Samsung to lower investment in facilities next year.
``Chances are currently low Samsung will increase spending for parts-related businesses next year. Rather, it will spend more in 2014 with the company putting more emphasis on sharpening technologies,’’ said the manager.
For the first nine months of this year, the Suwon, Gyeonggi Province-based outfit had invested 18.48 trillion won on facilities, taking up 74 percent of this year’s earlier investment plan of 25 trillion won, Samsung said in a regulatory filing.
The filing also showed that the company invested 4.53 trillion won in facilities during the July-September period, the lowest quarterly investment in more than two years after Samsung spent 4.14 trillion won in the first quarter of 2010.
``Basically, Samsung won’t be too aggressive in capital spending for key facilities next year as the outlook in the United States, Europe and China looks uncertain. We will apply scenario-based risk management tools. That will mean more flexibility in terms of investment upon situations,’’ said a senior Samsung official by telephone.
Samsung’s ongoing patent war with Apple is another issue. Its mobile chief Shin Jong-kyun said that the company currently has no plans to agree to end the legal battle with its top client in terms of parts.