Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Samsung SDS eyeing COVID-19 vaccine distribution business
Samsung Electronics Vice Chairman Lee Jae-yong inspects the company's network equipment during his visit to the company's R&D unit in Seoul, Wednesday. Lee is the second-largest shareholder of Samsung SDS, owning a 9.2 percent stake. / Courtesy of Samsung Electronics
By Baek Byung-yeul
By Baek Byung-yeul
Samsung SDS is considering joining the cold chain business for storage and delivery of COVID-19 vaccines, which must be kept at a consistently cold temperature, as part of efforts to expand its business beyond group affiliates.
The IT services arm of Samsung Group said Wednesday it conducted a simulation recently on delivering vaccines in conjunction with Yongma Logis, a local medicine and medical supplies delivery company, and Korea Superfreeze that operates ultra-cold storage facilities.
In the simulation, Samsung SDS took the role of managing the vaccine delivery procedure including checking the temperature of the vaccine using its Internet of Things (IoT)-based temperature tracking system.
“With Yongma Logis and Korea Superfreeze, we simulated vaccine delivery at an extremely cold temperature. As the government has yet to place an order for vaccine distribution, it is hard to tell whether Samsung SDS will join this business,” a company official said.
The government is set to soon announce how it will distribute the vaccines against COVID-19. Samsung SDS is expected to form a consortium to join the bid for the distribution business.
The company's move can be seen as the Samsung affiliate trying to expand its external business while cutting down on intra-affiliate work. Industry analysts estimated such business transactions will be increased to around 20 percent of total sales in 2021 from 16.5 percent last year.
Investors regard the move as positive possibly in terms of a valuation upgrade, as the share price of Samsung SDS rose 14.5 percent Wednesday from Dec. 29, according to data from the Korea Exchange (KRX), the country's main bourse operator.
The investors are also betting on the possibility that the share price will be buoyed from the payment of inheritance taxes on stocks by the heirs of the late Samsung Group Chairman Lee Kun-hee.
Currently, the late chairman's only son, Samsung Electronics Vice Chairman Lee Jae-yong, holds a 9.2 percent stake in Samsung SDS, with his two sisters ― Hotel Shilla CEO Lee Boo-jin and Samsung Welfare Foundation Chairwoman Lee Seo-hyun ― owning 3.9 percent each.
Given the family members of the late chairman are subject to pay 11.04 trillion won ($10.1 billion) in inheritance taxes, speculation and expectations are that the three will raise some of the money by unloading their Samsung SDS stock.
Even if the Samsung Electronics vice chairman puts his shares of Samsung SDS up for sale, Lee will still hold control of the group as Samsung's governance structure will see minimal changes ― Samsung Electronics holds 22.58 percent of Samsung SDS' shares.
Samsung SDS has two main business drivers ― IT services and business process outsourcing in the logistics sector. Due to the increased uncertainty caused by the coronavirus pandemic, Samsung SDS posted a below-expected performance in the first half of 2020, but analysts cast a rather rosy outlook for the company this year as demand for the logistics outsourcing business will increase.
“Samsung SDS is expected to post 11.4 trillion won in sales and 952.4 billion won in operating profit this year. The sales generated from business process outsourcing, which saw a sharp increase in 2020, will remain at a stable level in 2021, and sales from IT services will increase 6.7 percent year-on-year,” said Kim So-hye, an analyst at Hanwha Investment & Securities.
Also, three major data privacy laws were revised to ease regulations on the use of personal information, which will help the company get more financial sector customers as local financial companies are moving forward with cloud computing services.