Samsung to keep Intel at bay with investments

Despite Samsung’s historic rise to become the world’s largest semiconductor company, bypassing Intel in terms of revenue in the second quarter of this year, Samsung Electronics has “no time” to remain complacent over its latest achievement, according to officials, Monday.

Samsung is feeling a sense of crisis as all its core decisions have been put on hold because of the absence of the group owner, Samsung leader Lee Jae-yong, who is now in prison regarding his role in a bribery scandal involving the impeached President Park Geunhye.

During a recent conference call to investors upon announcing its second-quarter earnings reports, a Samsung executive said the company is prepared to pursue larger acquisition deals over the next few years. While they didn’t specify any items on their “shopping lists,” analysts say Samsung will keep an eye on foundry-focused entities and those related to vehicle components.

As of the first quarter of this year, Samsung’s cash and cash-equivalent assets reached 209 trillion won. However, other than its acquisition of Harman, no deals have been made since Lee was put behind bars.

“Decisions such as those involving major investments will likely speed up once Samsung’s chief is released from prison,” an industry official said. Samsung Electronics introduced its plan for massive investments in the United States focusing on expanding its foundry business during a meeting in the White House. While the states of Texas, New York and Arizona are viewed as viable candidates for Samsung’s new foundry factory, sources said the final decision will be made after the Lee’s release from prison, possibly on Aug. 15, National Liberation Day — if he is granted a presidential pardon.

“Paid executives can’t make major decisions. Only the owner family has the authority and responsibility to make critical decisions,” a senior Samsung executive said, Monday.

Citing data, the Wall Street Journal reported Samsung rose to the position of the world’s top semiconductor company after outperforming Intel from April to June. Samsung confirmed this. The South Korean technology behemoth reported $19.7 billion in sales for the latest quarter, while Intel reported $19.6 billion.

In terms of operating profit, Samsung beat Intel as it reported $6.02 billion, compared with the U.S. company’s $5.55 billion.

Competition in the semiconductor industry is intensifying, with Intel unveiling plans recently to invest $20 billion in setting up two foundries in Arizona to serve customers in the U.S. and Europe, after CEO Pat Gelsinger took the helm of the firm. Intel is big in investing in the foundry business to boost its profit margin amid its struggles, taking into consideration the profitability of Taiwan’s TSMC, which only produces chips for third parties. Intel said it projects the foundry market could be worth as much as $100 billion in 2025.

Sources said Intel was in talks for a possible acquisition of Global Foundries, AMD’s former chip business. Global Foundries is the fourth-largest foundry business globally, accounting for 7 percent of the total foundry business by sales.

Samsung is also battling with its primary foundry competitor TSMC, which is pouring $128 billion into facility investments through 2024. Political sources here said Lee will likely be released on parole marking Korea’s National Liberation Day on Aug. 15. The Ministry of Justice’s committee will hold a meeting on Aug. 9, where the decision will be reviewed.

The chip business currently takes up the largest percentage of Samsung’s sales and operating profit as of the second quarter, followed by its smartphone business. But industry views are that Samsung’s mobile business has reached the limits of its growth.