What is all this worry about orders? Am I missing something here? I don't think so.
Samsung ups capital spending on strength of first-half sales
A service of Semiconductor Business News, CMP Media Inc.
Story posted 6:30 p.m. EST/3:30 p.m., PST, 8/18/99
By Anthony Cataldo
TOKYO ( ChipWire/EET) -- Samsung Electronics Co.'s jump in revenues and profits for the first half of the year have given the company the confidence to boost capital spending this year to $1.8 billion, an 80% increase over its original plan, a Samsung spokeswoman said.
For the first half of the year ended June 30, Samsung's net profit soared nearly eightfold vs. the same period last year, to $1.16 billion, while total sales increased 15% to $10.5 billion (see Aug. 16 story). The Korean market accounted for the largest increase in sales, the company said.
In semiconductors, the company credited an increase in the profitability and sales of its memory products, particularly for DRAM and flash. Despite the depressed spot market prices of DRAM during the first half, the company focused on long-term contracts with customers and charged $2 to $3 more than open-market pricing. The company expects demand will continue to rise as a result of the historical uptick in demand for PCs in the latter half of the year, the spokeswoman said.
Sales of flash memory, which has been in short supply, jumped as products such as MP3 players become more popular with South Korean consumers, the spokeswoman added.
Initial shipments of Code Division Multiple Access (CDMA) handsets to South American countries, such as Chile, Venezuela and Brazil, where the company operates a wireless handset factory, also helped sales. Demand for multimedia and home appliances, such as TVs and computers, has also shown improvement.
Samsung credited its two-year restructuring effort for the turnaround. These measures included buying back loans, cutting operational costs, contracting out employees and selling off a little less than 10 unprofitable or non-strategic businesses to outside companies or through management buyouts. The most notable was the sale of Samsung's power device business to Fairchild last year.
"It was profitable, but we didn't think it would be a leading business in the future," the spokeswoman said.
Because of the higher sales and restructuring measures taken, Samsung's debt-to-equity ratio, which had become a key barometer of the financial health of South Korean chaebols during the Asian financial crisis, fell to 114%. At the end of 1998, the company's debt-to-equity ratio was 198%, according to th company.
Samsung has taken the good news as a cue to increase its capital spending, which includes investments for plant and equipment for both semiconductors and LCDs, for at least the second time since the beginning of the year.
Originally, the company had planned to spend $1 billion, but stronger demand and a $100 million investment by Intel Corp. for Rambus DRAM production in January pushed the total investment up to $1.2 billion. With the latest financial report, the company has decided to boost spending another $600 million to $1.8 billion, the spokeswoman said.
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