July 23, 2007 – A former CEO of Samsung Electronics thinks the firm should be more aggressively targeting international mergers and acquisitions in order to regain momentum, and should start with a prime candidate: US chipmaker AMD.
The Korea Times cites the Korean-language Maeil Business Daily, quoting Chin Dae-je as saying the Korean chipmaking giant has “fail[ed to] find future growth engines,” and that “bold M&As can be a solution.”
Chin, who joined Samsung in 1985 from IBM, served as South Korea’s Minister of Information and Communication from 2003-2006, and now runs VC firm Skylake Incuvest, thinks that it’s “not too late” to acquire AMD, but that Samsung lacks a “responsible leader who is willing to challenge a new business sector.”
Such a combination is technically feasible — with a $11 billion cash reserve, Samsung, which desires growth outside its memory chip and mobile-phone businesses, could easily afford AMD, which offers nonmemory technology but has taken a financial beating in a brutal price war with Intel, the Korea Times pointed out.
Shadowing any potential deal is the spectre of distaste for international M&A activity among Korea’s “chaebol” conglomerates, causing the nation to “become a backwater of the global M&A boom this year,” the paper notes, pointing out that even conservative Japan has seen a rise in international M&A dealings.
“We have experienced a failure of an international acquisition so we are taking a conservative stance in M&As,” said Chu Woo-sik, chief of investors relations team, said during a press conference on July 13, quoted by the Korea Times. “We are still conservative regarding this matter.”
Partly the cause of this pessimism is the last time Samsung tried a big M&A — a 1997 purchase of then-global No.6 PC seller AST Researchers for $547 million, which two years later turned into an embarrassing $12.5 million sale to a US investor. Also, Samsung has few foreign executives though >80% of Samsung’s revenues come from outside Korea; many official documents are still done in Chinese, not English; and Samsung is famously averse to labor unions, the paper noted.