SEOUL: Samsung Electronics has turned cautious on spending for the first time since the global financial crisis, keeping its annual investment plan unchanged at 2012 levels, as demand for computer chips wanes and the smartphone market slows.
Samsung, one of the industry’s most aggressive spenders, has ramped up capital expenditure every year since 2004 except 2009 to meet soaring demand for its array of consumer electronics and mobile devices. It sold a record 700,000 smartphones a day in the last quarter.
But with the personal computer market shrinking for the first time in 11 years, the global smartphone market growing more slowly, and Apple moving to buy fewer of Samsung’s microprocessors used in the iPhone and iPad, the South Korean IT giant is now forced to keep a lid on spending.
“Overall its earnings momentum remains intact, and smartphone shipments will continue to grow even in the traditionally weak first quarter, as Samsung’s got a broader product line-up and Apple appears to be struggling in pushing iPhone volumes aggressively,” said Lee Se-chul, a Seoul-based analyst at Meritz Securities.
Samsung, which reported a record quarterly and annual profit on Friday, said it would keep 2013 capital expenditure unchanged from 2012.
“The key word for us in investment in 2013 is flexibility. We’ll decide as the market demand dictates,” Robert Yi, head of Samsung’s investor relations, told analysts.
Data from the company shows Samsung started to slow down planned investment in the last quarter.
Samsung said it spent 4.4 trillion won in October-December, pushing its 2012 investment to a record 23 trillion won ($21.5 billion). But the company said in October that it was on course to spend 25 trillion won in 2012.
Analysts had expected a 4-20 per cent cut in Samsung’s 2013 capital spending.
By contrast, Taiwanese rival TSMC is planning to raise its capital expenditure to $9 billion this year, aimed in part at winning Apple orders away from Samsung.
Shares in Samsung fell 2.1 per cent as of 0250 GMT, lagging a 1.1 per cent decline in the wider market. Samsung had poured money into factories to boost production of chips and panels used in Apple products and its Galaxy range devices, pushing its operating profit to 8.84 trillion won in the last quarter. The 89 per cent increase from a year earlier was in line with its earlier estimate.
Profit at its mobile devices division, which makes phones, tablets and cameras, more than doubled to 5.44 trillion won in the quarter from a year earlier, lifted by a broader offering of smartphones -from the very cheap to the very expensive.
The division accounted for 62 per cent of Samsung’s overall fourth-quarter profit, up from 55 per cent a year earlier.
Samsung is also seeing strong sales of its Note phablet, which analysts expect to help Samsung get through any seasonal weakness better than rivals.
Samsung, which doesn’t provide a breakdown of smartphone sales, is estimated to have sold around 63 million smartphones in the last quarter, including 15 million Galaxy S IIIs and 7 million Note IIs.