Samsung Electronics mulls major acquisitions in coming years

 

A Samsung flag is seen at the tech giant's headquarters in southern Seoul / Yonhap

Chipmaker logs greatest second quarter earnings on solid chip business

By Kim Bo-eun

Samsung Electronics indicated Thursday that it will push for large-scale acquisitions in the coming years, in a preemptive move to strengthen its core competitiveness in the post-COVID-19 pandemic world.

However, the tech giant didn't specify any current targets, though an earlier consensus is that it will seek to purchase companies with a competitive edge in the foundry-focused business.

"It is difficult to specify the time of the Thể thao given various internal and external uncertainties, but as we unveiled in January, we are positive about pushing forward with a significant-scale M&A within the next three years," Samsung Electronics Executive Vice President Ben Suh told investors during a conference call to announce second quarter earnings results.

Suh stressed the company has been preparing extensively for this. According to the executive, the technology behemoth has not limited its target areas; but industry officials say Samsung has no options but to explore chances that will strengthen its core strengths. Its corporate competiveness lies in semiconductors and mobile devices.

Thursday's affirmation by Samsung toward "large M&As" comes at a time when its rivals such as TSMC and Intel are stepping up their game. Its last major deal was the $8 billion acquisition of U.S. connected car systems provider Harman in 2016. Attention has grown over possible deals as Samsung is in need of new growth engines and has accumulated sufficient internal cash reserves to enable it to make major acquisitions.

Samsung also said it is confident about the competitiveness of its chip technology, as competition intensifies with rival firms, with Micron mass producing a 176-layer NAND.

"Samsung has secured competitiveness in 128-layer single stacks," senior vice president Han Jin-man told investors. "The game is no longer about who makes the highest number of stacks or a high number of layers, the key point is efficiency in stack height and cost competitiveness."

In a rare remark, foundry business executive Han Seung-hoon told investors Samsung aims to mass produce second-generation foundry chips using three-nanometer all-around-gate (GAA) processing technology by the end of 2023.

The chipmaker also remained positive in terms of its extreme ultraviolet (EUV) lithography equipment application know-how. EUV lithography enables more precise and efficient production of semiconductors in smaller scales of around the 5-nanometer node size and below.

"The adoption of EUV equipment has become a trend in the memory industry," Han said. "But what is more important than purchasing the equipment and applying it to production lines is setting up an ecosystem and accumulating and internalizing know-how to maximize synergy.

He said Samsung began to set up an ecosystem with EUV suppliers in the mid-2000s, adding the company will mass produce 14 nanometer DRAMs using EUV on five layers in the latter half of the year.

Regarding its smartphone business, Samsung said it will place a priority on popularizing foldable phones, which have so far been a premium segment taking up a minute portion of its sales.
Samsung plans to unveil new Z fold and Z flip models at its "Unpacked" event scheduled for Aug. 11. Prices are expected to be slashed by about 20 percent compared to previous models. This has raised concerns about the new models having poorer specifications.

Questions have also arisen over how the smartphone vendor will be able to defend profitability with lower price tags on premium phones. Samsung said it would actively promote the new foldable models to expand sales to achieve economies of scale and secure profitability through optimizing product design.

Samsung said its plant in India was unaffected by the COVID-19 situation there, as it took precautionary measures such as shutting down parts of its production line. Its Vietnam factory's production was affected by a nationwide lockdown, but the company said operations will be normalized by the end of this month.

Samsung reported 63.67 trillion won in sales in the second quarter, up 20.21 percent from a year ago, and the highest-ever Q2 figure. The tech giant's operating profit came to 12.57 trillion won, a 54.26 percent growth year-on-year. Samsung's performance was driven by higher prices for chips, increased chip shipments and greater cost competitiveness, the company said.