Samsung Electronics is expected to invest more than $30 billion in its semiconductor business for the first time this year to stabilize its memory chip production capacity and expand its contract manufacturing business.
The company said in October that it expected total investment in the semiconductor business to be 28.9 trillion won ($26.5 billion) in 2020, an increase of 28% over 2019 and an all-time high. One equipment manufacturer said it had drawn up a production capacity plan for 2021, which showed that investment in semiconductors would increase by 20 to 30 per cent over last year.
Samsung's semiconductor business had an operating margin of 27 per cent in the first three quarters of 2020, up from 12 per cent, including smartphones and mobile, and 8 per cent in consumer electronics.
Compared with competitors Hynix and other memory chip makers such as Micron (Micron Technology) of the US, Samsung has outstanding profit margins because of its strong cash flow, which allows Samsung to invest faster than its competitors, allowing it to make cash while keeping the market booming. It is also more flexible to negotiate price and delivery time with suppliers.
Samsung's main destination for increased investment this year will be its main Pyeongtaek campus near Seoul. Samsung will also continue to increase NAND flash memory capacity at its manufacturing plant in Xi'an, China, and expand production lines at its US plant in Austin.
Huawei's smartphone production fell after Huawei's ban, and its domestic competitors Vivo, Oppo and Xiaomi are all preparing to fill the gap in Huawei's market. Huawei's share of global shipments fell to 14.6 per cent in the first three months of September from 20.2 per cent in the previous quarter, while Xiaomi rose from 10.3 per cent to 13.1 per cent in the same period.
Before Huawei's ban in the United States, Samsung had already won a lot of memory orders from Chinese mobile phone manufacturers such as Xiaomi, and Huawei had previously ordered and hoarded goods from Samsung.
At the same time, American technology giants are investing more in data centers. According to public financial information, the parent companies of Amazon, Microsoft and Google, the three big data center operators in the United States, invested more than $50 billion in data centers in 2019 and are expected to increase by 30% in 2020. These companies' demand for processors that can handle large amounts of data at high speed and advanced DRAM will help consolidate Samsung's dominant position.