Depth report

　　

The good performance of Samsung Electronics is mainly due to the support of the semiconductor memory business. There is a view that with the expansion of demand for smart phones and data centers, this outstanding performance will continue for a long time. Despite the adverse conditions such as smartphone quality problems and the arrest of the head, Samsung’s main business has maintained its outstanding performance.

The number of Galaxy S8 reservations has surpassed that of S7

    The Samsung Galaxy S8 will be available for pre-sale in South Korea on April 7 and will be available for sale in South Korea, the United States and Canada on April 21, which played a key role in Samsung Electronics' exit from the Note 7 incident.

 　 The Samsung S8 has been very popular in the market since its release. Some analysts and investors said that the sales of the S8 in the first year will set a new record for Samsung. Koh Dong-jin said: “Although it’s a bit early now, judging from the number of bookings in multiple markets around the world, the popularity of the Sanxin S8 is higher than expected.”

 　 He said that Samsung S8 will be the safest mobile phone to date. It has implemented strict safety measures to avoid accidents caused by battery failure like Note 7.

    Koh Dong-jin also said that the company expects to use S8 to strive for recovery in the Chinese market. Due to fierce competition, Samsung has been squeezed into the top five Chinese smartphone manufacturers. Samsung's goal is to regain market share in China, even if it takes time.

Demand for smartphones expands

 　 The operating profit of Samsung’s semiconductor division is likely to exceed the 4.95 trillion won in the previous quarter (October-December 2016), setting a new single-quarter record. Many securities analysts in South Korea predict that the semiconductor sector will continue to grow from April to June, and profits from July to September will reach 7 to 8 trillion won.

 　 It is the market conditions of semiconductors that support the increase in Samsung's revenue. According to data from the World Semiconductor Market Statistics Organization (WSTS), the semiconductor market is expected to reach US$346.1 billion in 2017, a record high.

 　 The increase in demand in the semiconductor market and the downturn in the market alternately occur. The changes in the market are affected by the "silicon cycle" and fluctuate greatly. Previously it was considered a cycle every 4 years. The current good market began around the end of 2012, but Samsung’s senior executives predicted on the 7th that “should continue until 2018.”

 　 Some experts pointed out that it has entered the "super cycle" of long-term expansion of semiconductor demand. In addition to the continuous expansion of the market for smartphones and data centers, new demand for the "Internet of Things" has also been generated, the sense of short supply is strengthened, and the unit price of products is rising.

Cultivating new business is the key

 　 The prices of representative memories such as DRAM and NAND memory cards have gradually increased since the summer of 2016, and their prices are currently at their highest levels in about 1.5 to 3 years. Samsung, which ranks first in the world in both DRAM and NAND fields, enjoys a very positive super cycle.

 　 From July to September 2013, Samsung set an overall operating profit record for a single quarter, with a profit of 10.16 trillion won. At that time, the "IT and mobile division", which was dominated by the smartphone business, was Samsung's main profit pillar, and most of its profits were made by smartphones. However, Samsung's smartphone business was severely damaged due to the fire accident that occurred in the summer of 2016. Whether it can restore trust through the new flagship model that will be launched on April 21 has become the focus.

    In 2016, Samsung conducted an initial public offering (IPO) of the pharmaceutical manufacturer Samsung BioLogics (Samsung BioLogics) and spent US$8 billion on the acquisition of Harman International, a large US auto parts company. It is hoped that the two will be cultivated as new pillars following the semiconductor and other businesses. The acquisition of Harman International was personally directed by Samsung’s de facto leader and vice chairman Lee Jae-yong.

 　 According to the analysis of the current good performance, a relevant person from Samsung stated that "the results of the measures taken 2 to 3 years ago are showing." At present, Lee Jae-yong is being prosecuted for bribery and is unable to act as the first-line commander. Samsung's measures to cultivate new businesses through large-scale mergers and acquisitions (M&A) and other means may be affected. The semiconductor boom will come to an end sooner or later. If it fails to establish a profitable foundation to get rid of relying on semiconductors, Samsung may fall into a sluggish performance.

M&A is just a reprieve

 The recent trial of Lee Jae-yong also put Samsung's mergers and acquisitions into a state of suspension. Last year, Jae-yong Lee’s M&A strategy reached its peak. Samsung spent US$8 billion to acquire Harman International, a US audio and auto parts manufacturer. This became the largest M&A in Samsung Electronics’ history (US$8 billion to create a history) Record, this also shows that Samsung Electronics is not keen on mergers and acquisitions in history).

 Obviously, Samsung Electronics’ major M&A case requires Lee Jae-yong’s approval. Lee Jae-yong is currently undergoing a trial in a Korean court on charges of bribing Park Geun-hye and Choi Sun-sil’s interests of US$40 million, which will also affect the operation of Samsung’s merger and acquisition machinery. .

 Park Ju-gun, an analyst at a South Korean market research company, said that Samsung Electronics will continue to implement the planned investment projects, but in the absence of Li Zaiyong, Samsung's new acquisition plan may be suspended for a period of time.

 The analyst said that in the M&A market, technology companies need to make short-term and mid-term M&A plans. Samsung may have formulated mid- to long-term plans and is searching for acquisition targets, but now lacks leaders to make the final decision. The analyst also said that Samsung Electronics may participate in the merger and acquisition of Toshiba's flash memory business if it were not for Lee Jae-yong's trial.

 In the field of flash memory, Samsung Electronics is the industry leader, and Toshiba is the second largest in the world, with a market share of 20%. As Toshiba's high-quality asset flash memory business, it has attracted the attention of global technology giants. Apple, Foxconn Group, Japan's Softbank, South Korea's SK Semiconductor, Broadcom, Micron Technology and other companies are planning to acquire this business. It is said that the bid price is even It far exceeded the expectations of Toshiba executives (the original maximum expected value was US$18 billion, but the Foxconn Group actually quoted US$27 billion).

 If Samsung Electronics can successfully acquire Toshiba's flash memory business, its leading position in the flash memory chip market will also be consolidated. According to reports, Samsung Electronics still made a huge investment plan this year (which may also include foreign mergers and acquisitions and investment in shares), of which the investment scale of the semiconductor business is as high as 12.6 billion US dollars. However, Samsung Electronics' detailed investment plan for this year has not yet been completed.