Samsung Elec plans "unprecedented" foundry invest Q4, uncertain about memory market

(Updated with corporate comments and additional information)

Samsung Electronics Co. Thursday indicated its capex for this year would be bumped up from last year’s $33 billion mostly to enhance foundry business amid murky memory market prospects after confirming income near at its 2018 heyday and best-ever revenue in the third quarter on strongest chip shipments.

The world’s largest chipmaker which spent 38.5 trillion won ($33 billion) on facility expansion last year, or 32.9 trillion won on chips, has already invested 33.5 trillion won as of September this year- 30 trillion won on chips.

It did not estimate this year’s capex as “it plans additional investment in the fourth quarter”, according to its press statement. The company plans a $17 billion foundry project in Texas, U.S., which it has yet to detail out.

Capital expenditure in the third quarter reached 10.2 trillion won, including 9.1 trillion won on semiconductors and 700 billion won on displays, up from 8.4 trillion won in the third quarter last year.

Spending mostly would go to enhance foundry as the chipmaker admitted to uncertainty in its mainstream memory market from next year and beyond.

It instead plans “unprecedented” investment to meet foundry customer needs by expanding lines in Pyeongtaek campus and adding a new fab in the U.S. as well as employing EUV processing with aim to nearly triple its foundry capacity by 2026.

Samsung Electronics confirmed a consolidated operating profit of 15.8 trillion won in the July-September period, up 25.87 percent from a quarter ago and 28.04 percent from a year earlier. It was its quarterly highest since 17. 6 trillion won in the third-quarter peak of a chip super cycle in 2018.

Sales was even better at record 74 trillion won, up 16.19 percent on quarter and 10.48 percent on year.

Chips sold 26.41 trillion won worth, generating an income of 10.06 trillion won or 64 percent of total third-quarter profit from operation.

Net profit also soared 27.6 percent on quarter and 31.33 percent on year to 12.3 trillion won.

Operating margin, which measures how much a profit a company makes on a dollar of sales, improved 1.6 percentage points on quarter to 21.4 percent.

Samsung Electronics shares finished Thursday 0.9 percent higher at 70,700 won.

As of the third quarter, memory chip market conditions including foreign exchange rate worked favorable, helping the company to achieve new record for quarterly bit shipment and second-highest revenue for DRAM, the company said.

Server demand continued to grow for DRAM, PC demand has also been robust, and mobile demand recovery has become more visible with new releases.

For NAND, demand for server SSDs recovered and that for high-capacity products was strong. Mobile demand remained solid on the launch of new models.

Samsung Electronics expected that server and PC demand to be robust next year. It also expected shipment growth in mobile.

The company plans to continue to expand 15-nanometer DRAM and 128 layer V-NAND amid new adopts of DDR5. It will also expand mass production of 14-nanometer DRAM and 176-later V-NAND and strengthen market competitiveness through cost reductions.

Its foundry business also saw improvement in earnings in the third quarter, posting record quarterly revenue on the back of growth in supply of key advanced process products.

[Photo by Park Hyung-ki]

In 2022, the company expected the foundry market to remain tight due to high silicon consumption for 5G in mobile ad strong GPU-led demand for HPCs.

Samsung Electronics’ display panel business reported 8.86 trillion won in consolidated revenue and 1.49 trillion won in operating profit for the third quarter. The company expected a favorable environment for OLED business in 2022 amid recovery in smartphone demand and increased adoption of 5G phones.

Its IT & mobile communications division posted 28.42 trillion won in consolidated revenue and 3.36 trillion won in operating profit in the third quarter. Smartphone sales increased from the previous quarter on the back of strong sales of flagship models Galaxy Z Fold3 and Galaxy Z Flip3.

The company plans to beef up foldable and other premium lineup next year as it sees foldable to join the mainstream in smartphone.

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