Samsung Electronics, one of the leading makers of memory chips, now has $200 billion in annual revenue, putting it on par with Apple, the most valuable company in history, and $100 billion in cash flow.
Since His release from prison in August, Mr Lee has wanted Samsung to dominate the most sophisticated logic chip industry. If Mr Lee has his way, Samsung will go head to head with chip-making giants such as TSMC and Intel and turn the logic chip industry into one of the world's most strategic.
On Oct 7, Samsung Electronics confirmed that it will mass-produce the world's most advanced microprocessor with a three-nanometer "Gate-all-around" architecture by 2022. Samsung has also announced that it will mass-produce 2-nanometer chips by 2025, and expects capital expenditure of $37 billion across all its businesses this year. Samsung's new customers this year include Nvidia and Tesla.
Semiconductors have always been at the top of Samsung's business chain. Historically, Samsung electronics has focused on memory chips, with 44 percent of the global DRAM market and 36 percent of NAND devices. The memory-chip business generates more than 20% of Samsung's revenue and nearly half of its operating profit. According to Samsung itself, a diversified business model that allows internal innovation while providing stability has benefited its internal ecosystem, giving it the ability to cross business cycles.
Bring & have spent Samsung's total revenue and operating profit ratio
But Samsung's growth has hidden dangers. While its dividend has more than doubled Samsung's market value in two years, from 22 per cent of net profit in 2018 to 78 per cent in 2020, Apple has almost tripled in the same period. Strong prospects for semiconductors and low cyclicality in memory chips have not yet translated into fatter valuations. Despite a sharp rise at the end of 2020, Samsung Electronics' market value has fallen 13 percent since the start of 2021, a period when New York's high-tech Nasdaq index and peer global chipmakers have risen.
Bring & have spent Over the years, Samsung (red) compares with its peers (blue) in the capital markets
To turn the tables, Mr Lee is determined to bet on cutting-edge logic chips in an effort to win over the fast-growing and lucrative non-memory chip market, which accounts for about 70 per cent of the $550bn global semiconductor market. Mr Lee clearly wants to speed up the transformation of Samsung, which is using its r&d prowess, such as its advanced chip architecture, to take some risks in the next era of logic chips. Samsung's future focus will be on logic chips and more research and development costs, according to CLSA.