By Kim Yoo-chul
Staff Reporter
Samsung Electronics said Friday it will invest 8.5 trillion won ($7.2 billion) in memory chips and flat-screens in 2010 to meet rising demand for consumer electronic products.
Samsung, the world's biggest maker of memory chips and flat-screens, plans to inject 5.5 trillion won in its semiconductor business next year and use 3 trillion won for the LCD business, the company said.
Meanwhile, it aims to attain $400 billion in annual sales in 2020, sending it into the ranks of the global top 10 in terms of annual sales. The company will mark its 40th anniversary Nov. 1.
The latest capital expenditure target represents an increase of 20 percent from this year's estimated 7 trillion won or $5.92 billion for the two businesses, which are Samsung's key cash-cows.
"Amid rising demand for highly-advanced and low-voltage consumer products, Samsung will use most of the projected investment to migrate into thinner technologies for PC and flash memory chips," Robert Yi, head of Samsung's investor relations team said.
Samsung is moving faster to apply thinner technologies to its chip making to cut costs and generate efficiency, different to moves by its cash-strapped Japanese and Taiwanese rivals.
"Samsung's LCD business is at a turning point. But we are positive over the strong demand for LCD televisions with light emitting-diode (LED) backlights for next year," said the executive. Samsung plans to sell over 10 million LED TVs in 2010, up from 2.5 million this year.
Computer memory and LCD screen businesses are highly susceptible to market and macro situations. Consumers usually cut back their spending on electronic products when the economy goes down.
The investment increase by Samsung, therefore, means that the sectors' leader is positive over the continuance of the global economic recovery next year and looks to maintain its current position as the global leader in both sectors.
Meanwhile, the Suwon, Gyeonggi Province-based company expects its profitability to improve in 2010 from 2009.
The upbeat facility investment comes after Samsung reported a strong quarterly operating profit for the latest quarter thanks to the stellar contribution of its semiconductor unit.
Samsung got 4.2 trillion won in operating profit during the July-September period. Its memory unit realized 1.15 trillion won in operating profit for the quarter, which is a significant increase from 240 billion won in the previous three months.
"Rising prices for DRAM and NAND flash memories, with soaring demand for highly-advanced DDR3 chips, finally paid off. Our chip business will maintain growth thanks to seasonal and sector recovery," Yi said.
Analysts say Samsung's fourth-quarter results will be dependent on its chip business as the appreciation of the won, increased marketing expenses for mobile phones and sets, and a decline of LCD panel prices may lead to a quarter-on-quarter decline in profit.
"Business momentum for Samsung's chip unit is still strong. That's why we are expecting Samsung to get 3 trillion won in operating profit for the fourth quarter," Seo Do-won, an analyst at Hanwha Securities, said.
"If the won stays between 1,150 and 1,190 won to the dollar, Samsung shouldn't face big problems. But if it strengthens past 1,150 won, that would be a serious problem," said Lee Ka-keun, an analyst at IBK Securities.
Yi said a weak U.S. dollar won't significantly impact the company’s financial performance as the greenback takes only 50 percent of its exchange position.
He added that a strong euro and yen will enable Samsung to maintain its price competitiveness alongside European and Japanese set manufacturers.
Samsung's quarterly net profit for the three months ending Sept. 30 more than tripled to 3.72 trillion from 1.22 trillion a year earlier, while its consolidated revenue rose 19 percent to 35.87 trillion won from 30.27 trillion won a year earlier.
All of Samsung's businesses reported jumps in operating profit year-on-year, though the gain was the smallest in its cellphone division, which is the company's largest by revenue.
The company sold 60.2 million handsets in the third quarter and said its shipments would continue to increase.
Samsung has set a $400-billion sales target in 2020, enough to make it the world's top electronics company in terms of annual sales after passing over Hewlett-Packard of the United States and Siemens of Germany.
"We are aiming to reap $400 billion in annual sales on a consolidated basis in 2020, and enter the list of the global top 10," Samsung said in a statement.
With the new corporate vision, "Inspire the World, Create the Future," Samsung will expand its lifecare-related business portfolio, which includes biotechnology, eco-technology and energy from its high reliance on telecom- and information-focused ones.
"We need to nurture new and promising business models in the 21st century. With the lifecare-focused businesses, Samsung will boost the combined sales portion of printers, PCs and home appliances to 30 percent of demand by 2020 from the current 20-percent level," a spokesman said.