Samsung announces record spend on factories, R&D

Samsung is set to spend a huge, record 26 trillion South Korean Won (KRW) – $22.9 billion USD – on manufacturing and R&D this year to bolster its position amidst the improving global market, and further cement its position in the memory and LCD display industries.

It is going to splash out the majority of its KRW26 trillion stash on manufacturing facilities, allocating KRW18 trillion in total. KRW11 trillion will go into its chip business, where the company will build its first new chip factory since 2005 while also updating and improving equipment in its other factories. Samsung will be KRW5 trillion on its LCD displays, with another new factory – its first since 2008. Its new facilities will be built native in South Korea.

Leftovers will be spent on its other projects including TVs, mobile phone handsets and electronic appliances. There are no reports from Samsung that it plans to build new factories for any of the above. 8 trillion won is expected to be invested in research and development spending.

Samsung’s plans to expand its operations show that it is confident not just in the global market but in itself. However, investors may not take the same view. According to the Wall Street Journal, Samsung shares fell just over three percent after the announcement.

Greg Roh, an analyst at HMC Investment Securities, told the WSJ: “There’s a bit of showmanship to this announcement.”

“This can be interpreted as Samsung telling equipment makers ‘I’ll buy a lot of your stuff do don’t sell to anyone else,’ while threatening their competitors, telling them to get out of the business on their own accord.”

Previously Samsung’s largest yearly spend was 107 trillion won back in 2006. Whether its efforts to dominate its markets will pay off this year remain to be seen, but one thing is for sure, Samsung is confident about it.