Seoul - Samsung Group, which includes Samsung Electronics,
said on Tuesday it is raising its 2012 investment to a record $41.4bn,
underscoring the widening gulf between the dominant South Korean conglomerate
and its faltering competitors.
Best known for making massive investments in new
technologies ahead of rivals, Samsung is now banking on logic chips and OLED
displays to repeat its roaring success in flash chips, computer memory chips
and LCD flat-screens, even as a gloomy global economic and IT spending outlook
forces its peers to be conservative in spending.
Samsung Group, South Korea’s biggest business group, did not
provide a breakdown of the 47.8 trillion won investment. But analysts have
widely expected it to raise investment in mobile chips and next-generation OLED
(organic light emitting diode) flat-screen displays.
“Samsung’s got strong cash flow to make bold bets in new
technologies,” Lee Sun-tae, an analyst at NH Investment & Securities. “No
other IT company can beat it in terms of investment and that’s how Samsung
finds new revenue sources ahead of rivals and widen s its gap.”
The group also said on Tuesday it would add a record 26 000
employees this year, up from last year’s 25 000, at a time when tens of
thousands of jobs in the financial industry are being cut globally due to
continuing turmoil in markets. Samsung now employs around 350 000 in total.
The investments will be in everything from building
factories to research and development activities to doing mergers and
acquisitions and hiring.
System chips vs memory chips
Of the total investment, capital spending will amount to 31
trillion won, up 11% from a year ago, Samsung said in a statement.
Some 25 trillion won, or 80% of the capital spending, will
be from Samsung Electronics, the world’s biggest technology firm by revenue,
and its display unit, mainly to boost capacity of system chips and OLEDs, said
Investment in system chips such as mobile processors and
sensors used in smartphones, tablets, and cameras is likely to exceed spending
on its bread-and-butter memory chips for the first time, reaching 7.5 trillion
won, or some 1 trillion won higher than investment in memory chips, they
Investment in OLED is likely to rise to 7 trillion won from
last year’s some 5 trillion won, and the rest will be spent on LCDs,
rechargeable batteries and LEDs, they said.
Samsung Electronics makes mobile processors to power Apple’s
iPhone and iPad as well as its own Galaxy line of mobile products. Its display
unit, Samsung Mobile Display, is also a near monopolistic supplier of OLED
displays, which are mainly used in high-end mobile gadgets and are set to
become dominant in TV screens to replace LCD.
OLED display revenues are expected to exceed $20bn by 2018
to account for 16% of the total display industry, up from the current 4%,
according to research firm DisplaySearch.
The record investment plan comes after Samsung Electronics
said on Monday its US unit was planning to sell around $1bn in bonds, its first
major overseas debt sale in more than a decade, to fund its chip plant
Samsung didn’t detail whether the funds will be used to
expand capacity at Austin, Texas, its sole and biggest overseas chip plant,
which makes chips for Apple products.
Samsung normally finances its investment with internal cash
and had around 22 trillion won in cash as of end-September. It is set to report
a record 5.2 trillion won in fourth-quarter operating profit next week,
according to its preliminary results.
Diverges from key riv
The record spending, which is up 12% from last year’s 42.8
trillion won, comes as its key home rival LG Group cut its 2012 investment by
some $3bn amid an uncertain global business outlook. LG Electronics
and LG Display are part of the LG Group, LG Display, which vies with Samsung
for the title of the top flat-screen maker globally and is also aggressively
expanding into OLED, plans around 4 trillion won investment this year, little
changed from last year and just around half of the budget Samsung is likely to
spend on flat screens this year
Major Japanese firms - Sony, Toshiba, Hitachi and Sharp -
are planning to invest a combined ¥1.3 trillion in the current fiscal year to
end-March, smaller than Samsung Group’s capital spending of 27.9 trillion won
Samsung Group comprises around 80 companies. Its business
portfolios expand from financial, construction and shipbuilding to medical
services and consumer electronics and total revenues account for some 20% of
South Korea’s 1 200 trillion won GDP.
Shares in Samsung Electronics, Asia’s biggest technology
firm by market value, ended up 0.6% on Tuesday, lagging a 1.8% rise in the
broader market. Samsung, which now has a market value of about $144bn, gained
11.5% last year.
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