Further Investment Uncertain
Samsung Electronics Co. and LG Electronics Inc. have executed more than 70 percent of their investment plans for this year.
According to the business community on Dec. 2, Samsung Electronics spent 22.3 trillion won (US$19.88 billion) on its facilities as of the end of third quarter. The figure is about 70.11 percent of the 31.8 trillion won (US$28.34 billion) set aside for this year. By sector, semiconductor accounted for 17.87 trillion won (US$15.92 billion), followed by display with 2.43 trillion won (US$2.16 billion) and other facilities with 2 trillion won (US$1.78 billion).
LG Electronics has budgeted 4.78 trillion won (US$4.26 billion) in total for investment this year. Of the total, the company has executed 3.46 trillion won (US$3.08 billion) or 72.35 percent so far. LG Electronics spent the most on vehicle components. It invested 1.72 trillion won (US$1.54 billion) in VC production facilities and research and development (R&D), followed by other infrastructure investment, such as building, land and mechanical equipment, with 1.46 trillion won (US$1.3 billion), home appliance & air solution (H&A) division with 1.17 trillion won (US$1.05 billion), home and entertainment (H&E) division in charge of TV business with 226.6 billion won (US$201.96 million), mobile communications (MC) division in charge of cellphone business with 117.2 billion won (US$104.46 million) and business to business (B2B) with 82.4 billion won (US$73.44 million).
Considering the two companies’ investment plans, there are still 30 percent of investments left in the fourth quarter but it is still unclear whether they will actually execute the investment. This is because they need to take a conservative investment approach as the global business environment is getting worse due to the fixation of slow growth, rise in interest rates and aftermath of trade war between the United States and China. The worst outlook for the manufacturing industry is also the burden with the largest amount of investments having been executed in recent years. Therefore, companies are mostly trying not to make the excessive investment next year.
In particular, Samsung Electronics is forecast to close its purse until the second half of next year when the market conditions get better again as the semiconductor boom entered a downward cycle in the fourth quarter.
During a Q4 earnings conference call, Samsung Electronics said, “We will push ahead with the extension of the Pyeongtaek plant, which is part of this year’s investment plans, as scheduled. We are considering the conversion of the line 16 of NAND production facilities to DRAM, instead of utilization of the upper level at the Pyeongtaek plant, next year considering investment efficiency.”
In regard to next year’s investment plans, LG Electronics said, “The future investment plans by sector can be decided and vary depending on the confirmation of next year’s business plans.”