Selling off assets for cash to buck trends
Amid a forecast that global semiconductor facility investment will return to a decline for the first time in four years, Samsung Electronics made the largest facility investment ever in the first half of this year. The Korean semiconductor giant is not only investing in research and development (R&D) but securing financial resources for large-scale mergers and acquisitions, so much attention is being paid to Samsung Electronics’ future investments.
According to Japan’s Nikkei on Aug. 20 (local time), the investment volume of the world’s top 10 semiconductor companies in 2023 has reached US$122 billion, down 16 percent from a year earlier.
This marked the first time since 2019 that major semiconductor companies have seen a year-on-year decline in facility investments. The decline was the largest in the past decade. This is because a semiconductor recession caused inventories to pile up at a frightening rate, and the combined investment of the 10 chipmakers hit a record high of US$146.1 billion in 2022.
Samsung Electronics, on the other hand, significantly increased its investment by bucking the trend. According to the company’s semi-annual report, its facility investments in the first half of this year reached 25.2593 trillion won, up about 24.7 percent from 20.2519 trillion in the same period last year. Of this amount, 92 percent was invested in semiconductors. Research and development expenses were also 13.0777 trillion won, up 13.1 percent from 12.1771 trillion won in the first half of 2022.
In the first half of this year alone, Samsung’s semiconductor division lost a whopping 9 trillion won. However, the crisis has not stopped the company from investing aggressively.
Recently, Samsung Electronics has been selling off its stakes in other companies to secure more cash. It recently sold part of its stake in Dutch semiconductor equipment maker ASML to raise three trillion won in cash. In February, it announced a short-term borrowing of 20 trillion won from Samsung Display.
Its overseas subsidiaries are also sending money to its headquarters in Korea. In the first half of this year, Samsung’s overseas subsidiaries sent 21.8457 trillion won to the headquarters. In the first half of 2022, the amount was only 13.78 billion won, a 158-fold increase.
Industry insiders believe that Samsung will use the money to invest in equipment for semiconductor super-wide gaps with other chipmakers and big mergers and acquisitions (M&As).
Previously announced big deals are also expected to become more visible. In its earnings call in January 2021, Samsung said it would pursue meaningful M&As in the next three years. That deadline is January 2024 and no news has arrived yet. However, the Korean chipmaker has been raising money in various ways this year, so a rough blueprint is expected to come out by the end of the year.