Input 2021.01.28 14:57 | Revision 2021.01.28 15:30
Samsung Electronics CFO “Cash piled up under M&A review”
11.6 trillion won in cash reserves as of the third quarter of last year
Prospects for the industry’s “powerful acquisition of semiconductor companies and investment in facilities”
This is the first time that Samsung Electronics officially announced a corporate M&A since it acquired Harman, an automobile electronics company in 2017. In the future, investment in semiconductor-related facilities is expected to increase further.
Yoon-ho Choi, CEO of Samsung Electronics’ Management Support Office, said at a corporate briefing (conference call) held after the 4Q 2020 earnings announcement on the 28th, “Samsung Electronics is strengthening its market leadership position in the existing industry and laying the foundation for sustainable growth in new businesses. He said, “For this, we will actively utilize the resources we have, expand strategic facility investment, and promote meaningful M&A.”
President Choi’s remarks on the day came in the process of explaining the shareholder return policy that has been underway for three years (2021-2023) from this year. In the investment industry, etc., Samsung Electronics has pointed out that there was no large-scale M&A during the last shareholder return policy period (2018-2020). Vice Chairman Lee Jae-yong’s judicial risk was passive in M&A. In addition, as Vice Chairman Lee was imprisoned on the 18th, it was predicted that investment and M&A would become more difficult.
Regarding this, President Choi said, “For the past three years, M&A target companies have been carefully reviewed and have been prepared in their own way.” There is a high possibility of realizing M&A.”
As of the third quarter of last year, Samsung Electronics has a total of 11.6 trillion won in cash. Even if 50% of the free cash flow (FCF) is used for dividends, the surplus is inevitably accumulated in cash without large-scale facility investment or M&A.
President Choi said, “In the past shareholder return policy period, M&A, etc. were not properly implemented, so the cash holdings increased,” he said. “Since the continuous increase in cash puts a burden on the company, aggressive facility investment and meaningful M&A will reduce the risk of cash holding. .
In September last year, US semiconductor company Nvidia announced that it would acquire ARM, a British semiconductor design company, for 40 billion dollars (about 44 trillion won), and in October last year, US semiconductor company AMD sold 35 billion dollars (about 39 trillion won) to its rival Xilinx. Said it would take over.
In the same month, SK Hynix also announced that it would acquire Intel’s NAND division for 9 billion dollars (about 10 trillion won). On the 14th, Qualcomm, which is competing in the communication chip market with Samsung Electronics, announced that it will acquire Nubia, a central processing unit (CPU) design company, for $1.4 billion (about 1,536.5 billion won).
Samsung Electronics is also planning to actively invest in semiconductor-related facilities. In particular, additional input of extreme ultraviolet (EUV) equipment and plant expansion are expected to close the gap with Taiwan’s TSMC, the world’s number one foundry. Moreover, TSMC has announced that it will invest more than 30 trillion won in foundries alone this year. Samsung Electronics is also inevitable for large-scale investment.
Foreign media also reported on Samsung Electronics’ US investment plan. On the 21st (local time), Bloomberg News said, “Samsung Electronics is investing more than 10 billion dollars (about 11 trillion won) to build a semiconductor plant in Texas, USA,” and said, “Samsung Electronics will manufacture up to 3nm chips in the future. “We are discussing to establish a possible factory in Austin.”
The Wall Street Journal also reported on the 22nd (local time) that “Samsung Electronics is considering investing 17 billion dollars (about 18 trillion won) to build a semiconductor plant in Arizona, Texas or New York.”
