|Samsung leader Lee Jae-yong arrives at a court in Seoul in this file photo. Reuters-Yonhap|
Given cash abundance, Samsung doesn't need financial backing
By Kim Yoo-chul
While some civic groups are questioning the logic of possibly releasing Samsung leader Lee Jae-yong from prison on parole on Aug. 15, Korea's National Liberation Day, in other circles, support for his parole is clearly gaining momentum.
Several industry executives are calling for the Samsung vice chairman's release, as all of the group's "key strategic decisions" related to the conglomerate's sustainability have been put on hold in his absence. In the meantime, Samsung has been facing huge challenges maintaining its position at the top of the global mobile and semiconductor industries, amidst competition with rivals in the U.S. and China.
In a call to investors upon announcing the company's second-quarter earnings results, a senior Samsung executive said they've been keeping an eye on chances for acquisitions.
The executive's remarks reflect the fact that the company is looking for opportunities for acquisitions in the areas of artificial intelligence (AI), fifth-generation (5G) broadband cellular technology and automotive part industries, and are nothing new. But because Samsung Electronics' core and long-time indisputable strengths lie in semiconductor manufacturing, investors are betting on the possibility of Samsung acquiring U.S.-based automotive semiconductor firms. However, the decisions to do so could only come after Lee's release.
"Samsung Electronics is still interested in acquiring some shares or all of the shares of NXP Semiconductor," a senior industry executive told The Korea Times by telephone, Thursday.
Unlike semiconductors for use in AI devices, smartphones, computers and servers, automotive chips have thinner margins. But with the rapid advent of driverless vehicles ― and the timing of their mass availability coming in 2024 ― automotive chips will be much more profitable.
Compared to its growth potential, Samsung Electronics' presence in that segment is small. Plus, with the market for conventional DRAM and NAND chips becoming saturated as it falls under control of "rational players," Samsung is being asked to make bolder moves as the leader in another semiconductor segment, say sources.
On a related note, NXP said that the demand for automotive chips will be on a growth trajectory in the medium to long term. After releasing its better-than-expected second-quarter earnings, it told investors that this year will be stronger than expected.
"The basic principle of Samsung's M&A strategy is to find targets that will help it gain a further upper hand in businesses it has strengths in, and to figure out how to see steep rises in terms of both market share and profit following an acquisition," the executive added.
Expectations are that Samsung will announce major investments and M&A projects after Lee's release, as bold strategic decisions and massive M&A deals are issues only the group owner can decide. Korea's conglomerates are controlled by owner families, which means their CEOs aren't in a position to make strategic decisions to envision the corporate future, as they play a role closer to chief operating officers.
NXP had been mentioned a few years ago as being "on Samsung's shopping list," but that deal was called off when NXP agreed to be acquired by U.S.-based mobile chipset giant Qualcomm. The $4.4 billion mega deal eventually fell through when China didn't approve it.
"Given Samsung's cash abundance, Samsung has no issues in terms of financing if it wants to acquire or invest in NXP. But the point is that the potential mega deal is subject to receiving approval from antitrust regulators in major countries, which is truly a time-consuming process," another executive familiar with the issue said.
During the call, Samsung Electronics said that, as its business paradigm is changing rapidly and competition is becoming fiercer, strategic M&As are being "executed and required" for corporate sustainability.
Lee Jong-ho, the chief of Seoul National University's semiconductor lab, said, "Samsung is doing well in the memory chip business. However, the logic chip business remains unprofitable."