Dividends and Samsung Invests to Diversify Beyond Memory Production

In the Wall Street Journal, Samsung Electronics announced it would invest about $116 billion by 2030 to further diversify its semiconductor production beyond memory chips.

The more advanced chips used in smartphones, computers and self-driving cars increasingly need more horsepower as they integrate artificial intelligence and faster 5G networks.

Memory chips account for about 1/3 of the roughly $475 billion semiconductor industry. The competitors are Intel, Qualcomm, Nvidia and the most dominate player is TSMC or Taiwan Semiconductor Manufacturing Co. TSMC controls about half the market. Samsung represents 19% of the market. The issue is the prices for the two major types of chips that Samsung produces called DRAM and NAND have fallen 20% and that means they are no longer the cash cow Samsung had relied on.

The new investment in better chips requires heavy investment, with expensive equipment and large facilities, betting that customer demand will eventually come in the future. The race to manufacture the most cutting-edge semiconductors is generally thought to between TSMC, Samsung and Intel.

Linking to dividend paying stocks, sometimes the numbers in large organizations are hard to put in context as the headline Samsung to spend $116 billion on chips, remembering Samsung is a large conglomerate of companies in South Korea. The thing you should remember is the simple aspects to doing business – what is the margin? do they make a profit? can it continue?

There are more questions than answers, till the next time – to raising questions.

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