Samsung Elec, SK hynix, LG Elec up Capex, R&D spending in H1

[Source: Samsung Electronics Co.]

South Korean chip and finished electronics majors kept up solid investments in research & development (R&D) and facility expansion in the first half as they sustained global leadership in chip, smartphone, and TV market, but whether they will continue with aggressive spending in the second half is uncertain due to high costs.

According to a half-year business report disclosed by Samsung Electronics Co. on Wednesday, the company spent 12.18 trillion won ($9.3 billion) in R&D – mainly in chips and smartphones – in the January-June period, up 10.8 percent from the same period a year ago.

Thanks to the aggressive R&D investment, Samsung Electronics has registered 4,630 patents in Korea and 4,170 in the United States.

The world’s No. 1 memory chip maker also spent 20.25 trillion won in capital expenditures in the first six months of this year, of which about 80 percent, or 17.56 trillion won, was spent on semiconductor facilities.

DRAM No. 2 SK hynix Inc. spent 9.6 trillion won to upgrade its facilities in the January-June period, surging from 6.9 trillion won in the same period a year ago. Its R&D spending also increased by more than 400 billion won to 2.4 trillion won over the cited period.

Capex spent by Korean electronics major LG Electronics Inc. in the first half reached 4.57 trillion won versus 3.18 trillion won in the period last year, according to its regulatory filing. Its R&D spending amounted to 1.98 trillion won.

Whether the Korean chip and electronics giants would continue with strong spending in expansion and R&D in the second half is uncertain amid surging logistics and raw materials costs.

[Source: SK hynix Inc.]

The cost of raw materials and components purchased by Samsung Electronics in the first half rose more than 50 percent and of logistics 40 percent. The average purchase price of mobile application processors surged 58 percent, camera modules 10 percent, and flexible printed circuit boards 19 percent over the cited period.

LG Electronics also had to pay about 40 percent more for copper price than a year ago, 22 percent for steel, and 20.3 percent for resin.

Until first half, Samsung Electronics has fared well in defending its leadership.

According to its half-year business report, Samsung Electronics accounted for 22.6 percent in the global smartphone market in the January-June period, up 2.5 percentage point from the same period last year. It has maintained top global smartphone seller position for 11 years.

The smartphone industry is projected to contract this year from last year due to the prolonged Russia-Ukraine war and worsening inflation. Strategy Analytics forecast global smartphone sales to fall to 1.3 billion units this year, down from last year’s 1.36 billion units.

Samsung Electronics Galaxy Z Flip 4 and Z Fold 4. [Photo by Yonhap]

Samsung Electronics plans to provide various and competitive smartphone products from budget to premium devices.

Roh Tae-moon, president and head of mobile eXperience (MX) business at Samsung Electronics also projected the global mobile phone market to contract up to 8 percent this year versus the earlier expectation of 4~5 percent growth.

Samsung Electronics’ DRAM memory chips commanded 43.5 percent in the entire global memory chip market share in the first half, up 0.6 percentage point from last year’s 42.9 percent, the report showed. The company’s presence in global TV market, however, declined 1.1 percentage point to 31.6 percent over the same period on weakening global demand for TVs amid lingering instability in the supply chain and geopolitical risk.

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