12.2 Tril. Won Set Aside for Q4
Samsung Electronics announced on Oct. 31 that its investment for this year is 29 trillion won, close to last year’s, and the investment includes 23.3 trillion won in the semiconductor sector and 2.9 trillion won in the display sector. It also said that most of its capital expenditures for the fourth quarter of this year will go to infrastructures in the memory chip industry. Samsung Electronics made a total investment of 16.8 trillion won in the first three quarters of this year and the amount is planned to increase by 12.2 trillion won in the fourth quarter.
The operating profit of the company’s semiconductor business unit was 3.05 trillion won in Q3, the lowest since Q2, 2016. In addition, the business unit’s operating profit-to-sales ratio fell below 20 percent in three years in that quarter. Samsung Electronics’ aggressive investment plan for the rest of this year is contrary to the stance of SK Hynix, which recently reported the lowest earnings in 13 quarters and said that its investment is likely to decrease along with DRAM and NAND flash production next year.
Samsung Electronics’ aggressive plan is based on its confidence in its technological strength in the semiconductor sector. “10 nm-class DRAM products will account for approximately 80 percent at the end of this year and 1y nm-class will become the mainstream in H1, 2020,” it explained, adding, “1y nm-class products are being produced as scheduled and the output can be stably increased by means of new EUV lithography equipment.” Its second manufacturing plant in Xi’an, China is scheduled to be put into operation early next year and its second manufacturing plant in Pyeongtaek, South Korea will be opened next year. The plants are likely to produce NAND flash and DRAM products, respectively.
The global semiconductor demand is expected to soar next year with Apple about to release 5G smartphones and 5G services predicted to expand in the United States, Japan, etc. Intel is planning to release the Ice Lake server CPU in H2, 2020 and the new CPU is forecast to boost cloud service providers’ DRAM and SSD demand.
Samsung Electronics is likely to concentrate its investment on the system-on-chip industry next year. TSMC, the largest foundry in the world, recently announced a plan to increase its annual investment by 50 percent to US$15 billion next year and multiple companies in the industry are likely to follow suit. At present, Samsung Electronics and the Taiwanese company are the only two foundries using EUV exposure equipment-based 7 nm-class process technologies and an increase in investment is indispensable for Samsung Electronics to take the lead in the global foundry market in 2030. In addition, Samsung Electronics currently has sufficient investment resources. Its cashable assets increased by more than 5.6 trillion won quarter on quarter to about 104.99 trillion won in Q3 this year.