Input 2021.02.18 17:35
Concerns about disruption in the plan for the #1 system semiconductor in 2030
“Restrictions on employment, political reasons”… “Effectiveness question”
According to Samsung Electronics on the 18th, as of the end of last year, Samsung Electronics’ net cash was a total of 104 trillion won. The stock market predicts that Samsung Electronics will spend about 35 trillion won on semiconductor equipment investment this year. It is about 20% higher than the previous year (28.900 billion won), but there is still room for cash.
Samsung Electronics plans to enter the M&A market, which has been stagnant, with plenty of cash. In a conference call held since the announcement of the fourth quarter results on January 28, Choi Yun-ho, president of Samsung Electronics’ management support office, said, “We have been very carefully reviewing the targets for M&A for the past three years, and we are in a state of preparation.” It is difficult to specify, but it is highly likely to carry out a meaningful M&A within this policy period (2021-2023).”
The largest M&A ever promoted by Samsung Electronics was Haman in 2016. At that time, 8 billion dollars, about 9 trillion won was invested. As of the end of last year, net cash holdings alone amounted to KRW 104 trillion, so the possibility of a larger scale cannot be excluded.
However, in less than a month, the situation changed rapidly. The Ministry of Justice notified the restriction of employment to Samsung Electronics Vice Chairman Lee Jae-yong, who was sentenced to imprisonment on the 16th for bribery charges. When employment is restricted, Vice-Chairman Lee cannot be involved in business activities. The Aggravated Punishment Act for Certain Economic Crimes stipulates that if a person is convicted of embezzlement or malpractice of 500 million won or more, he or she can work for a company related to the crime. In the case of imprisonment, it is applied for five years after the execution ends, and in the case of probation also applies for two years after the end of the period. However, it is not clearly determined whether or not employment restrictions apply to situations in which the brother is in progress.
For this reason, even among experts, prospects for Samsung Electronics’ M&A promotion are mixed. Dankook University economics professor Kim Tae-gi said, “Samsung Electronics’ M&A must have stopped as Vice Chairman Lee Jae-yong’s job restrictions have been added to the prison management,” he said. “M&A can proceed in any way,” said Park Young-beom, professor of economics at Hansung University. “Because the business environment of a company becomes increasingly uncertain, decision-making can be delayed and only the amount of reserves can increase.”
Although Samsung Electronics did not specifically disclose the target of M&A, it is believed that the industry is interested in the automotive semiconductor market as it has set a mid- to long-term goal of’No. 1 in system semiconductors in 2030′. Recently, as the supply of semiconductors for vehicles around the world is disrupting, voices for localization are also growing. Lee Byung-tae, a professor at KAIST Business School, predicted, “We will continue to invest in semiconductors, because system semiconductors and memory semiconductors, etc. must go one or two generations ahead of others to receive the proper price.”
Vehicle semiconductors are attracting attention because of their growth potential. Market research firm Startista predicts that the global automotive semiconductor market will grow from $45 billion last year to $175 billion in 2040. IHS Markit is also expected to increase significantly in the long run from this year on the back of the expansion of the electric vehicle market.
Vehicle semiconductors that control various functions in automobiles are one of the non-memory semiconductors. Non-memory (system) semiconductors are manufactured for the purpose of operations, inferences, etc. to process information, unlike memory semiconductors used for storing information. Although it is a high value-added industry with a large yield and market, it has the disadvantage of high entry barriers.
Major companies for Samsung Electronics’ M&A include NXP in the Netherlands, Infineon in Germany, Texas Instruments (TI) in the US, and ST Microelectronics in Switzerland. These are companies that currently dominate the global automotive semiconductor market. “Since automotive semiconductors are used indoors and outdoors and temperature fluctuates severely, reliable companies are leading the market,” said Kim Yangpaeng, a researcher at the Industrial Research Institute.
President Moon Jae-in also promised several times to support Samsung Electronics’ system semiconductors. President Moon said at the’System Semiconductor Vision Declaration Ceremony’ held at Samsung Electronics’ Hwaseong Plant in Gyeonggi-do in 2019, “Samsung Electronics has set a goal of becoming the global No. 1 in the foundry field by investing 133 trillion won by 2030.” We applaud and will actively help the government.”
Professor Kim Tae-gi said, “The government shouted for the first place in system semiconductors, but only Samsung Electronics can do this at the moment.” Professor Lee Byung-tae said, “The restriction on employment for Vice Chairman Lee Jae-yong is a double punishment,” he said. “The practical effect of the restriction on employment is questionable and political reasons are great.”