Thu, Jul 07, 2016 - Page 10 News List

Samsung set to increase spending

Bloomberg

After ending a two-year smartphone slide with the Galaxy S7, Samsung Electronics Co could be about to hike capital spending to sustain a revival across the company.

At least US$5 billion more worth of investment is headed to the display and semiconductor businesses to help Samsung ride out bumps in the phone market, according to a survey of analyst estimates.

Such a move reflects new optimism about the company after the success of the Galaxy S7.

Samsung’s rise into an electronics behemoth has been fueled by the ability to get its memory chips and displays, often the most expensive components, into devices made by others.

With the South Korean company said to be in talks to supply Apple Inc with next-generation organic light-emitting diode (OLED) screens and bring out its own phones with bendable screens, Samsung can use its cash pile of more than US$60 billion to extend its lead on rivals.

“Samsung’s smartphone business has finally had a soft landing after a bumpy ride,” said Chung Chang-won, an analyst at Nomura Holdings Inc in Seoul.

Samsung will probably boost spending on memory and displays, which “are poised for a sudden rise as the next growth drivers,” Chung said.

With growth in the global smartphone market evaporating, Samsung needs to build up its other major businesses as competitors bring out new products in an attempt to spark growth.

“The mobile business is holding up well, but it’s still questionable whether this trend will be sustained over the coming quarters with more new devices in the pipeline from rivals,” Yuanta Securities Co analyst Lee Jae-yun said.

Samsung had almost US$23 billion of capital spending last year, the fourth straight year that capex topped US$20 billion, according to data compiled by Bloomberg.

The company in April said that it spent 4.6 trillion won (US$3.95 billion) in the first quarter and annual spending could increase slightly.

OLED is one such example, with Samsung championing the screens as thinner, brighter and less taxing on the battery compared with LCD. By using the technology in its own Galaxy range, Samsung has become the biggest producer for mobile devices.

The company might introduce two new smartphones with bendable OLED screens as soon as next year, a move that could spark sales of components to rivals, people familiar with the matter said last month.

Samsung has also held talks to be the exclusive supplier of displays for future iPhones, people familiar with that matter have said.

Delivering such products requires new plants, factory upgrades and equipment, and the company might need to spend as much as 15 trillion won just on OLED, according to HI Investment & Securities Co.

It has got money in the bank: Its hoard of cash and short-term investments has been growing steadily in the past years to reach more than 70 trillion won at the end of March.

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