Reports differ on Samsung capex plans

Jan. 6, 2009 – Media reports suggest Samsung is chopping its chip investment plans by nearly 50%, but the company says it’s not so — at least, not yet.

Days ago the Korea Times, citing “a high-ranking Samsung source,” reported that the company is mulling a >50% reduction in 2009 semiconductor capex to 2T-3T won (roughly US $1.5B-$2.3B), far below its 2008 spending of 6.2T won (~$5B), which was below earlier plans of ~7T won (~$5.5B), due to overcapacity, rising inventories, slumping demand, and still-slumping chip prices. Total Samsung investments are expected to drop to 7T-8T won ($5.5B-$6.4B) from last year’s ~10T won (~$8B), according to another Samsung source.

The paper, which added that Hynix Semiconductor also has trimmed its 2009 capex plans in half (to 1T won/~$800M), noted that memory chip production is standardized and about 70% of memory firms’ costs are fixed, so cutting production won’t help as much; nevertheless Hynix has cut DRAM output by 20%-30% in the past month, and Japan’s Elpida is postponing its China plant startup to 2011.

However, reports of a capex cut may be premature if not erroneous. Chu-Woo-sik, Samsung’s EVP of investor relations, told Reuters that not only has no decision been made about 2009 investments, but “even if we had a plan it would be contingent on different economic scenarios that will be possible during this year.”

If Samsung does follow through on its reported cutback plans, that could actually help competitors by taking some pressure off, notes Digitimes, citing “unnamed DRAM makers” who point out that the firm’s capex surpassed the average in 2007-2008, and the new 2009 levels would be more in line with everyone else. “This implies that a consensus toward refining capital and improving operational efficiency has been reached among memory makers,” the paper notes.


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