Samsung 'slows' semiconductor investment to $33bn

Samsung's investments are 'slowing down', according to Gartner

Samsung has announced plans to invest $33bn in semiconductor factories between 2006 and 2012, but analyst firm Gartner has suggested that this actually signals a spending "slowdown".

According to Klaus Rinnen, Gartner's managing vice president, the Korean electronics giant's seven-year plan to invest in eight semiconductor fabrication lines at its Hwaseong plant actually represents a likely reduction in capital expenditure as a proportion of revenue.

Rinnen pointed out that, although Samsung is planning to invest " headline-grabbing amounts", a deeper analysis shows that this is "not the earth-shattering announcement it might appear to be".

The analyst added that Samsung's capital-expenditure/semiconductor-revenue ratio will probably be lower during this period than during the previous seven years.

During 2002-2005, Samsung invested an average of $4.57bn a year, very similar to the $4.5bn a year that industry leader Intel has invested during the same period.

Samsung's new plans increase the yearly average marginally, to $4.7bn, but this represents a smaller proportion of Samsung's projected semiconductor revenue.

Furthermore, Gartner's semiconductor industry data shows that, during 2006-2012, Samsung's capital-expenditure/semiconductor-revenue ratio will move closer to the industry average.

For the past seven years, it has been 10 percentage points above the average. The analyst firm forecasts that during the next seven years it will decline to just two percentage points above the average.

"Despite the impressively high level of planned investment, Samsung's rate of investment compared with the industry average is slowing," said Rinnen.

"We believe this means that Samsung will not be able to grow as aggressively as it has in the past seven years. The company is maturing as a semiconductor player, and the slowdown in investment is a natural step in its evolution in the marketplace."

According to Gartner, all players in the semiconductor industry should recognise that Samsung is entering the "mature phase of its evolution in the industry".

Although these impressive investment plans highlight the Korean firm's strong commitment to semi-conduction, they are unlikely to enable Samsung to challenge Intel for the number one position, Gartner predicted.