Tencent technology news on August 11, the outside world has high expectations for the next action of South Korea’s Samsung Electronics Company, because the company’s de facto leader Li Zaili f will be released on parole this week. During Li zairi’s imprisonment for involvement in the bribery scandal of former President Park Geun hye, many key decisions involving major investment and future growth in the chip foundry business had to be shelved.
Although Li still faces many restrictions after Li’s release, such as how to restore the title of vice president, these restrictions may be relaxed, and the possibility of the president’s pardon of Li has not been completely ruled out. However, with its leaders out of prison, Samsung should be able to resolve these outstanding challenges.
The novel coronavirus pneumonia minister Park Beom-kye said that this is the main reason why the government decided to allow Lee to parole on F, so that the biggest Korean conglomerate could take key actions in the economic uncertainty brought by the new crown pneumonia epidemic. Samsung’s market value accounts for 30% of the total market value of Korean companies, and its corporate tax accounts for 20% of the total corporate tax in Korea, employing 300000 workers in Korea.
The release of Li zairi triggered accusations of “preferential treatment”. This has put more pressure on Li zairi to prove that it is really necessary to release himself. Novel coronavirus pneumonia is being urged to focus on solving four key tasks, including the shortage of Moderna new crown vaccine currently being received in Korea, investing in the future competitiveness of SamSung group, implementing new strategies for sluggish mobile phone business, and adopting strategic measures to enhance the chip manufacturing business based on OEM contracts.
New crown vaccine supply
The novel coronavirus pneumonia F faces is to ensure that Korea gets the stable supply of Moderna’s new crown pneumonia vaccine, and Samsung’s pharmaceutical subsidiary Samsung Biologics is one of the manufacturers of the vaccine. South Korea is experiencing a shortage of Moderna vaccine supply because the U.S. biotechnology company is expected to postpone shipment plans this month.
As Samsung bio began to produce Moderna vaccine at its plant in South Korea in the third quarter, more and more politicians called on Li zairi f to play an “important” role in ensuring that the vaccine produced in South Korea can be distributed to South Koreans.
Song young Gil, leader of the Democratic Party of Korea, said: “we cannot protest against the unilateral control of vaccine supply by a multinational pharmaceutical company, which makes our people very frustrated.” The ruling party leader said that Li zairi f would be able to play a role in solving the shortage of vaccine supply. “We need active consultation between Moderna and Samsung biology so that the vaccine produced by Moderna in South Korea can be used here.”.
Pending investment decisions
With the release of Li zairi F, Samsung is expected to accelerate investment and adjust its future strategy to make the group’s business more sustainable in the post epidemic era. Although Samsung Electronics has long maintained a leading position in the memory chip business, investors asked the technology giant to show an upgraded blueprint to give the business a greater advantage over its competitors.
In 2019, Lee F announced a huge investment plan of Samsung’s 133 trillion won (US $155 billion 770 million) before the moon Jae in order to expand the world’s largest memory chip manufacturer’s influence in the non memory area. However, two years later, Samsung seems to have made little progress in this regard. Since Li LIF’s imprisonment, the memory focused chip giant has fallen into a headless situation, unable to enter the huge processor chipset market as planned.
However, with Li’s parole, Samsung is increasingly expected to have a more balanced chip portfolio business. Now, look at the second quarter results, you will find how unbalanced Samsung’s current portfolio is. Among the 8.2 trillion won (about US $71) operating profit realized by the semiconductor business in the second quarter of this year, the operating profit of the company’s processor chipset and OEM department is estimated to be between 200 billion won and 300 billion won (US $173 million to US $260 million), accounting for less than 2%.
Meanwhile, the operating profit of memory business was 6.9 trillion won (about US $6 billion), accounting for 80% of the profit of the whole chip business. The latest financial report shows that compared with two years ago, Samsung’s dependence on traditional memory business has further increased, making non memory business continue to be a marginal source of revenue. Samsung executives commented: “indeed, due to the lack of leadership, the company has lost the motivation to enter the non memory market.”
Although Samsung’s system LSI and foundry business, which are responsible for processor and custom chip manufacturing services, redouble their efforts to launch new exynos and iscocell products and technologies, these efforts are limited to the relatively small mobile processor market, while its U.S. competitor Intel dominates the larger and higher cost central processor market.
According to the data of Market Research Institute counterpoint research, in the mobile AP market, Samsung’s market share decreased from 14% in the first quarter of 2020 to 9% in the same period this year, which is directly related to Samsung’s decline in the smartphone market. Statista’s data also shows that in the OEM field, Samsung ranks second with 18%, second only to TSMC’s 56%. To gain a foothold in the non memory field, Samsung needs to erode the market share of TSMC and Intel.
According to insiders, Lee’s release will speed up Samsung’s decision to make major investments in this field, although his business activities will not be as active as before. In addition to the $18 billion plan to build a foundry in the United States, Samsung is expected to announce a large-scale acquisition, which may change the order of the non memory market. Before Li LIF’s imprisonment, there were rumors that Samsung was reviewing acquisition targets, including automobile chip manufacturers such as NXP in the Netherlands or Xilinx, an American 5g chip developer.
Kim Yang Paeng, senior researcher at the Korea Institute of industrial economics, said: “there was no major investment announcement during Li LIF’s imprisonment, but Samsung seems to be committed to its vision of non memory business in various ways. The company has the potential to further strengthen its non memory business by using EUV’s cutting-edge technology and integration with memory solutions and image sensors to strengthen its existing logic chip business“
During Li LIF’s imprisonment, Samsung Electronics remained silent on how to use its record 2.09 million Korean billion (about US $181.9 billion) cash reserves, but now the company is “very close” to making key decisions on investing in semiconductor manufacturing facilities in the United States and improving its business competitiveness by acquiring companies in new growth industries, which may be AI 5g or auto parts companies. Samsung’s last large-scale M & a transaction was in 2016, when it spent $8 billion to acquire Harman, an American networked automotive system provider. Li Zaixin led the acquisition.
Samsung’s electric vehicle battery manufacturing department is also facing a major decision on whether to invest in the United States. At present, its competitors are establishing manufacturing plants in the United States and working with American automobile manufacturers to win long-term customers.
Mobile business transformation strategy
Samsung’s smartphone business also felt the crisis because it accounted for the largest part of Samsung Group’s profits. Although Samsung is still the world’s largest smartphone supplier, the market has matured. As Chinese suppliers increase competition, they pose a strong challenge to the most famous brand in South Korea, and the uncertainty is becoming increasingly obvious.
Samsung management began investigating the mobile department in April to find problems and design solutions. Due to the pressure to cut costs, Samsung’s “purchasing power” to design, manufacture and supply products to the company from parts suppliers and original development manufacturers (ODM) is considered to have weakened.
Samsung’s only visible smartphone strategy is to popularize high-end models, focusing on foldable phones. Samsung released the new models of Galaxy Z fold and Galaxy Z flip at the press conference on August 11. It is expected that the prices of these two models will be significantly reduced to expand the user base of high-end equipment. However, it is unclear whether this will help Samsung attract more foldable mobile phone users, as the price is expected to fall to the lower limit of $1000.
The strong performance of new Chinese manufacturers such as Xiaomi is threatening Samsung’s position as the largest smartphone manufacturer by shipments. In June this year, Xiaomi surpassed Samsung in global smartphone sales. In addition to Xiaomi surpassing Samsung in shipments, Samsung’s market share is also being robbed by Chinese competitors.
In terms of market share, apple ranks second among the global smartphone enterprises, has a strong brand influence, and a large number of fans like its complex design. At the same time, Samsung is caught between apple and Chinese manufacturers, who are currently providing a range of high-quality and low-cost smartphones from economical to high-end folding phones at a more affordable price.
Promote chip OEM business
Samsung also faces competition with powerful companies such as TSMC in the OEM business. TSMC will invest US $128 billion in chip manufacturing facilities by 2024. In May this year, Intel announced plans to invest $20 billion to build two foundry plants in Arizona after its CEO pat Gelsinger took charge of the company. Intel also seems to be considering the possibility of acquiring the existing OEM business.
Samsung has not yet reached a final decision on where to build a foundry in the United States. The company will invest 19 trillion won (about US $16.45 billion) in the factory. According to Samsung sources, Texas is the first choice to expand its new OEM production line.
Kim Dae Jong, a professor at Sejong University in South Korea, said: “so far, Samsung executives are considered to have established the competitiveness of the group. Management experts can only focus on short-term performance, which explains why the existence of the boss is so important, because the boss focuses on long-term competitiveness. “（ Tencent Technology (reviser / Jinlu)