Samsung Elec shares boosted by expectation for undisturbed expansion in Lee void

[Graphics by Song Ji-yoon]

Shares in Samsung Electronics Co. on Monday received a lift upon report of a $10 billion expansion at its chip foundry in Austin, Texas, after a brief upset in the blue chip’s hot streak following the imprisonment of its chief who on the day decided against an appeal to finish his prison term of one and half years.

The stock added 3 percent to close Monday at 88,000 won ($81.2) as investors’ jitters over decision-making at the world’s top memory maker eased from anticipated expansion plan and Lee’s move from the prison to signal undisturbed management during his absence.

According to news report from Bloomberg citing sources, the Korean tech giant bought a plot of land measuring 1.04 million square meters near its Austin plant last October with plans to start construction this year. It is aiming to start mass producing 3-nanometer chips as early as 2023, the sources added in the report.

Samsung Electronics would not confirm the investment plans, saying it is “too early” to give an official statement.

The global semiconductor industry is facing an acute supply shortage triggered by explosive chip demand from IT devices during the pandemic-driven home office and entertainment trends, with Samsung Electronics unable to meet the chip supplies needed even for its flagship smartphones. Insiders say Samsung’s foundry business is struggling to meet the Exynos 2100 orders for the company’s own mobile unit. Production of Exynos 1080 for Chinese smartphone vendors is also running tight.

[Photo provided by Samsung Electronics Co.]

The global auto industry is on the brink of a temporary shutdown due to a shortage of chips. Ford Motor Co. shut down three of its plants in Brazil and suspended operation at its U.S. plant in Louisville, Kentucky after failing to secure enough automotive chips. General Motors Co. has managed to avoid shutdown by obtaining chips from TSMC.

GM has reportedly given internal orders to hoard a year’s supply of chips. The European Union has reached out to the Taiwanese government to secure chips. Mercedes-Benz, Audi, BMW and Renault are all scrambling to secure their chip orders.

Korean automakers Hyundai Motor Co. and Kia Corp. have avoided immediate shortages but are said to be intent on filling up their chip inventories to maximum levels.

Demand for chips has skyrocketed as online working and schooling became the new norm during the coronavirus pandemic.

“The chip shortage is widespread, affecting almost all chip offerings from mobile application processors, sensors and driver integrated circuits to 5nm and even the old 0.25 micrometer processes,” said Lee Jong-wook, analyst at Samsung Securities. “Orders have surged from Apple as well as Chinese phone makers Oppo, Vivo and Xiaomi.”

The chip shortage is more sharply felt in the auto industry. A single vehicle needs as many as 150 chips. But automotive chips are more difficult to make as they have to undergo customization and a rigorous certification process. This has made many foundries devote most of their lines to IT chips rather than automotive chips.

Major foundries have raised their unit prices or are planning to do so. DB Hitek, which makes chips for TV displays, said it would raise unit chip prices by as much as 20 percent this year. Taiwan’s UMC and VIS have already raised their prices.

Prices of controller chips that go into solid state drives used in PCs and laptops are projected to jump 20 percent this year, according to market research firm TrendForce.

Taiwan’s TSMC, which commands 54 percent of the world’s foundry market, announced it would spend up to $28 billion this year in facility investment, up 62 percent from the previous year. The move is seen as an attempt to widen the gap with Samsung Electronics, which trails at a distant second with a 17 percent share.

TSMC in May 2020 revealed plans to build a new 5nm plant in Arizona for $12 billion, with aims to go fully operational by 2024. In Japan, it is reportedly working closely with local equipment makers to build a plant in Kitakyushu.

Samsung Electronics will unveil its investment plans for the year when it confirms its fourth-quarter results on Thursday. The company spends an estimated 9 trillion to 10 trillion won in foundry facilities every year. Industry experts expect this year’s spending to stretch to 12 trillion won when including the Austin ramp-up.

Separately, Lee’s lawyer announced the de facto head of Samsung Group won’t appeal to the ruling on Jan. 18 that placed Lee back in prison for the bribery case related to impeached President Park Geun-hye.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]