Samsung, the South Korean consumer electronic giant has announced it is to invest $160 billion on advanced technologies as it looks for new revenue growth areas.
Among those areas targeted for investment are AI, 5G, technology for the automotive sector and biopharmaceuticals.
This has been the first time Samsung has named specific areas for investment, implying it is placing more emphasis than in the past on new businesses. But it also highlighted that its core smartphone and chip businesses are flagging.
The announcement comes just days after Samsung reported weaker than expected results for the second quarter. It highlighted the slow sales of smartphones due to disappointing sales in the high-end Galaxy S9.
Samsung warned that weak sales would continue into the second half of the year due, they said, to pricing issues and new products from its competitors.
After several years of buoyant sales, the market for smartphones has begun to mature and for a while Samsung’s strong showing in semiconductor sales had made up any shortfalls. 80% of Samsung profits come from semiconductor.
But with a continued global slowdown in phone sales this has become increasingly difficult to maintain. What’s more Samsung has taken a real hit with the competition from the Chinese company Huawei.
Samsung, as well as Apple have failed to introduce compelling new features to boost sales. And consumers are now wary of the price of new phones. The price difference between ‘good enough’ and ‘premium’ is now huge and off-putting. Couple this with the high-quality of budget phones then Samsung has a real problem.
Its answer is to double down on manufacturing. According to Samsung the bulk of the investment, some $130 billion will be invested in manufacturing plants and external start-ups. The investment in semiconductor and displays, Samsung said, will create ‘up to 40,000 jobs.’
$22 billion will go into pure R&D for AI, components for 5G and cars and in biopharmaceuticals through its contract drug manufacturer Samsung BioLogics.
Samsung still remains the world’s leading manufacturer of smartphones and chips and while shipments fell by 10.8% during the last quarter it still has a market share of 20.6%.
Its investment in 5G chipsets is seen as a move to become the leader in the market. Samsung says it sees 5G as a chance to transform its network equipment division into a major player that can compete with the likes of Ericsson, Huawei and Nokia.