Samsung says fully ready for M&As; silent on US foundry plant

Samsung Electronics Co. is well-geared up to chase M&A deals and expand its facilities over the next three years to make full use of its cash holding worth 104 trillion won ($93 billion), its chief financial officer said on Thursday. But the company's executives remained silent on media reports about heavy investment plans for its US foundry plant.

The remarks by Samsung Electronics President and CFO Choi Yoon-ho spurred market speculation that automotive chipmakers, including NXP Semiconductors, could become its targets. Back in 2019, market rumors arose that the South Korean chip giant might acquire NXP, of which Samsung uses chipsets for its Galaxy Note tablet computers.

“We will further solidify our leading position in the markets where we have been and build a foundation for sustainable growth in new businesses,” Choi said during a conference call after reporting solid fourth-quarter results.

“We will make full use of our resources to boost strategic investment in facilities and chase M&As over the next three years,” Choi said. “We have been reviewing (potential deals) and are fully ready now.”

Back in June 2019, Kang Inyup, head of Samsung Electronics’ system LSI business, said during a presentation for the company business that the company is “open to large-size M&A deals.” But at the time he declined to specify target companies, when asked about any interest in NXP, a Dutch-American automotive chip manufacturer.

REMOVED JUDICIAL UNCERTAINTY

Last year, M&A transactions involving semiconductor companies were worth $118 billion worldwide, including SK Hynix Inc.’s $9 billion purchase of Intel Corp.’s NAND memory chip business in an all-cash deal.

But Samsung Electronics has been mostly absent in the global M&A markets, since its $8 billion acquisition of Harman, a US electronics systems maker for automobiles, in 2016, Its recent purchase was the Israeli startup with multicamera technology, Corephotonics Ltd., sealed in 2019.

Last month, Samsung undertook leadership reshuffle, under which young executives were promoted to lead memory chip and foundry businesses. The shake-up spawned market chatter that the world's top memory chipmaker might tap into its huge cash reserves to pursue aggressive M&A deals, as it aims to become the top player in the non-memory foundry market.

Additionally, a recent court ruling against its Vice Chairman Jay. Y. Lee might remove judicial uncertainty over the technology giant. Between 2017 and 2020, its de-facto leader Lee had been embroiled in legal proceedings related to the impeachment of former president Park Geun-hye. Last week, he was sentenced to two and a half years in prison on bribery and embezzlement charges. Lee decided not to appeal the decision issued by the Seoul High Court, to which the Supreme Court sent the case back in 2019. He will likely serve the remaining one and a half years in prison, unless granted a presidential pardon.

Lee asked Samsung employees to fulfill the company's duty of making investments and creating jobs, regardless of his current situation, in a letter posted on the company’s website earlier this week.

FOUNDRY, MEMORY CHIP BUSINESSES

When asked about the reports that it was considering investing over $10 billion to build a new chip plant in the US, Han Seung-hoon, vice president of Samsung's foundry unit, said: “Nothing has been decided on our US investment. We always think about how to make better use of our production facilities.”

During the conference call, Samsung executives said the company will boost its foundry business for high-performance chips and 5G chipsets.

As for memory chips, they expect a price rebound, citing a drawdown in server DRAM inventories at its customers and rising demand for low-to-mid-end smartphones. But they declined to elaborate on the company's 2021 investment plans for the memory chip business, saying only: “We will keep pace with market demand.”

Earlier in the day, the tech giant announced the payout of a record 13.12 trillion won in dividends to shareholders and said it will spend 9.8 trillion won in dividend payments annually, or half of its estimated free cash flow, between 2021 and 2023.

Write to Jeong-soo Hwang and Su-bin Lee at hjs@hankyung.com
Yeonhee Kim edited this article