As its core semiconductor and smartphone businesses slow down, South Korea’s Samsung Group has announced a broad investment into new areas. Those areas include artificial intelligence (AI), 5G mobile technology, electronic components for the automotive industry, and biopharmaceuticals.
Reuters notes, “The investment is also part of a bigger 180 trillion won three-year plan to create jobs and secure fresh revenue streams, providing the first hint of direction for Samsung since group heir Jay Y. Lee was released from jail in February on a suspended sentence following a conviction for bribery. He is appealing the conviction.”
Greg Roh, an analyst with Hyundai Motor Securities, told Reuters, “The total investment size is not surprising. But Samsung can be more active in M&As to do better at AI or 5G, when Lee is fully back to his business.”
The company indicates it spent nine months deciding on the investment strategy. It indicates it expects that AI will drive transformation and 5G telecommunications will “create new opportunities in autonomous driving, the Internet of Things (IoT) and robotics.”
As such, it expects to increase the number of AI researchers to 1,000 across its global AI Centers and aggressively invest in 5G chipsets and related technology. “Samsung aims to become a leader in electronics components for future cars such as system-on-chips for autonomous driving, utilizing its leadership in semiconductors, telecommunications and display technologies,” the company stated.
In the biopharma arena, Samsung notes that its contract manufacturing and biosimilar businesses have shown strong growth. It expects to continue heavy investment, which will include developing and manufacturing biosimilars for chronic and difficult-to-cure diseases.
“Separately,” the company states, “Samsung will increase its existing support of basic sciences to identify new growth opportunities, while widening the program to include areas of future technologies such as AI, 5G, IoT and biopharmaceuticals.”
The plan is to invest a total of KRW 180 trillion, or $160 billion US, over the next three years, including funding future growth businesses. This includes capital expenditures and R&D investment. Of the money, KRW 130 trillion ($116.7 billion) will be spent in South Korea.
The new investment is expected to create 40,000 new jobs over the next three years. That includes 20,000 additional new jobs over previous hiring plans. It also is expected to create about 700,000 indirect jobs in related industries and businesses.
As part of the investments, Samsung plans to expand its internal venture incubation program, C-Lab. It will support 500 projects, 300 external candidates and 200 internal projects, over the next five years.
And in a partnership with the South Korean government, Samsung will create and manage software education centers around South Korea, training 10,000 students and job candidates, and provide employment consulting services for the next five years.
The announcement came around the same time that Apple indicated it was contributing $350 billion into the U.S. economy over the next five years.
Although these sound like impressive investments, The Washington Post expressed some skepticism. “For both companies, however, these impressive-sounding numbers are somewhat routine. Samsung had capital expenditures of 43 trillion won last year to keep building its chip, display and phone factories. It shelled out a further 17 trillion won on R&D to develop the technologies for these factories. That’s 60 trillion won of spending. And 60 X 3 = 180. Most of the outlay will be at home. No surprise there, either. While Samsung has expanded overseas, South Korea is still host to most of its factories and research engineers. As for the 25 trillion won the company will spend on future technologies like AI, 5G, auto electronics and biopharma: again, no surprise. These areas are the future of global tech, so it makes sense to put money into them.”
A Product Manager with expertise in pharma marketing and sales operations