Samsung announced last week it would spend 26 trillion won (about 22.5 billion USD) this year on its chip, flat screen and R&D.
According to financial times, Samsung’s investment budget will be bigger than those of Intel, IBM and Sony combined.
The chairman Lee Kun-hee said in a ceremony at its new chip plant in Hwasung “Although the global economy is still uncertain and business conditions are expected to change rapidly, we have to increase investment and hire more people to take global business opportunities.”
Samsung has a good track record in betting on risky investments before.
Yet the current global economic situation is quite different from the past. We would assume that Samsung knows demand on the consumer side is dwindling worldwide for now and it would seem very unlikely that the U.S. would go on a debt-fuelled consumption binge. There is policy tightening all over the world, stimuli impacts fading. Where do they see a rise in demand for their chips and LCDs rising? Does Samsung see demand would rise in a certain area where we hope it doesn’t happen?
As for new business investment, again they know they need to go beyond a fast follower strategy and have invested in it accordingly for some time, yet they haven’t seen any fruitful outcome. As the chairman Lee admits, they have a long way to go in their new business undertaking.
On the other side of the coin, it would be a real progress for the Korean high tech sector if SMEs come up with the innovation and the Korean government provides them with incentives and infrastructure to take risks in new endeavor in a meaningful sense.
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