For Sustainable Growth
Samsung Electronics Co. invested more than 16.8 trillion won (US$15.53 billion) in research and development (R&D) in 2017. The company’s cashable assets still remain at the 30 trillion won (US$27.74 billion) level but the figure has decreased about 1.5 trillion won (US$1.39 billion) compared to a year earlier due to its successive large-scale investments in facilities and shareholder-friendly policy measures.
According to industry sources on March 5, Samsung Electronics spent a total of 16.8 trillion won (US$15.54 billion) in R&D last year. The figure increased 2.01 trillion won (US$1.86 billion), or 13.59 percent, from a year ago.
Out of the 16.8 trillion won (US$15.54 billion), the company capitalized 447.5 billion won (US$413.78 million), or 2.66 percent, of the development costs. Development costs are an intangible asset. Samsung Electronics considers technical feasibility and future economic benefits when capitalizing development costs. In short, the company capitalized the result of R&D that can create revenues by making use of it in business. Samsung Electronics’ capitalization from its development costs amounted to 681 billion won (US$629.68 million won) in 2016.
Moreover, Samsung Electronics has kept its cashable assets at the 30 trillion won (US$27.74 billion) level. The current amount of the company’s cash and cashable assets comes to 30.55 trillion won (US$28.24 billion), down 1.57 trillion won (US$1.45 billion), or 4.88 percent, from a year earlier. More specifically, the amount of savings and cash are 30.51 trillion won (US$28.21 billion) and 37.5 billion won (US$34.67 million), respectively.
In addition, the amount of its short-term financial products which mature relatively fast dropped 5.69 percent on-year to 49.45 trillion won (US$45.72 billion), while that of short-term available-for-sale financial assets which can be sold in a year also fell 12.29 percent to 3.19 trillion won (US$2.95 billion).
Samsung Electronics’ net profits reached a record high at 42.19 trillion won (US$39.01 billion) last year. However, the company made the largest investment of 43 trillion won (US$39.76 billion) in facilities alone last year, continuously making an aggressive investment, despite its biggest ever revenues.
Samsung Electronics also repurchased 9.2 trillion won (US$8.51 billion) worth of its treasury stocks and paid 5.8 trillion won (US$5.36 billion) worth of dividends to shareholders. With the shareholder-friendly management policy, the company’s liquidity declined.
An official from the business industry said, “Samsung Electronics has decided to return at least 50 percent of its free cash flow (FCF) to shareholders for three years starting from this year. Therefore, the company now has the structure that is impossible to have enough cash for a while, though its profits grow.”
Meanwhile, the current amount of Samsung Electronics’ total assets, including capital and debts, are 301.75 trillion won (US$279.01 billion), surpassing the 300 trillion won (US$277.39 billion) mark for the first time in 50 years since the company’s founding.