Hardline Managers
It was known that the Samsung Group’s overall business plan forced Samsung C&T’s Resort and Construction Division to decisively put off a plan to build a hotel near Everland, the group’s amusement park near Seoul. It is said that even though the investment volume is not large, the return on investment is expected to be small, causing the group headquarters to order Samsung C&T to rethink the investment plan.
Samsung SDI clearly exemplifies that the group’s growth strategies are making its investment conservative. The company is planning to pour 3 trillion won (US$2.6 billion) into the car battery business by 2020. The group secured investment funds by selling off the Chemical Business Division of Samsung SDI and equities in Samsung Fine Chemicals to the Lotte Group.
The same goes for the biotech sector, which has been emerging as a future growth engine for the group. Samsung BioEpis, an affiliate of Samsung C&T’s affiliate, will raise over 1 trillion won (US$860 million) in funds by being listed on the NASDAQ in the first half of next year, and with the funds, will push for massive R&D projects. The bio business necessitates an astronomical amount of money. Accordingly, Samsung C&T suggested its plan to raise huge funds, not through support from the group such as capital increase with consideration, but through an IPO.
There is a great possibility that the investment volume of Samsung Electronics, which absorbs more than a half of Samsung Group’s all facility investments, will fall from the previous year. “We executed the largest-ever investment amounting to 27 trillion won [US$23 billion], with its focus on semiconductors and displays. Some of the investment came from investment funds for next year,” said Lee Myung-jin, a managing director in charge of IR at Samsung Electronics, hinting at a possibility of lowering its investment next year in a conference call at the end of last month. Industrial experts analyzed that the tech giant may pare down its investment if and when its leading products such as memory semiconductors struggle in the market.
The semiconductor, biotech and battery sectors have relatively better conditions, since they received investment permissions from the group. Some manufacturing affiliates facing the dark clouds that presage rainy days are not making proper new investments, except for a minimum investment in maintenance.
In fact, Samsung Heavy Industries, which posted over 1 trillion won in losses this year has been making facility maintenance investments of 400 to 500 billion won (US$344 to $430 million) a year for years. Until the end of last year, the troubled shipbuilder reviewed a plan to build a shipyard in Southeast Asia and build small and mid-sized merchant ships there. But now, the company cannot even think about that. Capital impairment compelled Samsung Engineering to sell off its headquarters building. Now the company is not in a position to include investment execution in its business plan for 2016.
Samsung C&T, officially beginning as a newly integrated firm in September, is also showing a similar flow. According to general business practices in Korea, after the merger, the company should have informed employees of annual investment and sales plans and raised their morale after assembling a corporate vision team.
But it is said that the company has not shown such moves. Its cost-cutting efforts, which have continued since last year along with conservative investment, are already going to extremes such as a cut in night shifts. Samsung C&T is receiving applications for voluntary retirements, regardless of employees’ service years. In previous years, applications for voluntary retirements were available mostly for senior managers.