The News: Samsung recently announced it plans to invest $230 billion over a 20-year period to build the world’s largest semiconductor manufacturing base in South Korea’s Gyeonggi province, which is near Seoul, by 2042. See more from Yahoo! News here.
Samsung is Investing in New Chip Making Cluster for Future Growth
Analyst Take: Samsung’s announcement of its investment in a new chip-making cluster in South Korea is not a surprise. We continue to see Samsung and other major vendors make investments abroad, (e.g. the U.S., Latin America, India., etc.) and in their home countries for many reasons. The global pandemic taught us that there are serious kinks in the front and back end of the IT supply chain and all stakeholders are seeking ways of mitigating those risks. In fact, of the top priorities for boards for 2023 are peppered with items such as economic conditions, geopolitical considerations, supply chain, cybersecurity data privacy and much more.
Another highly visible reason are geopolitical risks associated with China. The country continues to saber rattle, telegraphing its punch that it intends to unify or annex Taiwan in the future, which many believe will happen by 2025 or sooner. Thus, to counterbalance the threat, the United States, Japan, India, and others are trying to line themselves up to the next center of gravity of outsourced manufacturing and innovation in the future, which has also manifested in a war on talent. Thus, besides announcing the new chip cluster, Samsung (like others) is also seeking to recruit talent from key rivals such as TSMC, Apple and Qualcomm, which are similar actions taken from China — moves I expect to accelerate in the future.
Ultimately, Samsung is expanding its presence in advanced semiconductors in anticipation that demand will soar in the coming years with the adoption of 5G wireless networks, artificial intelligence, self-driving cars, rechargeable batteries, robotics, biotechnology, and much more. As mentioned, this is also a key strategy for South Korea as it seeks to grow and solidify itself as one of the main innovation and technology powerhouses, similar to regional alliances.
Wrapping it up, this is an excellent move for Samsung as it is not only making long-term investments in key technologies that are expected to have high growth rates over the next several years, but also serves to continue to build a more defensible moat for itself and South Korea as key alliances and rivals continue to make similar investments.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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