2019 marks the 50th anniversary for Samsung Electronics. Popularly known as Apple’s arch rival in the smartphone segment, the South Korean conglomerate is among the best-known names in the Consumer Electronics space and one of the most valued brands in the world.
Here’s how Samsung Electronics Co. Ltd. is advancing in different business segments, and why it might be a good idea to consider it as an investment.
Shifting focus towards non-memory chips. With the 15.9% market share, Samsung Electronics topped the list of semiconductor vendors in 2018. This was primarily led by a booming DRAM market. The worldwide semiconductor revenue totaled $476.7 billion in 2018, a 13.4% increase from 2017 as per a Gartner report. Memory strengthened its position as the largest semiconductor category, accounting for 34.8% of total semiconductor revenue. During 2018, Samsung posted KRW 86.3 trillion as revenue for its Semiconductor business.
The memory chip market is known to be volatile and 2019 is expected to be see weaker memory market due to inventory adjustments. To reduce its reliance on memory semiconductors while maintaining its edge, and to enhance its competitiveness in System LSI and Foundry businesses, Samsung announced an investment of KRW 133 trillion ($116 billion) by 2030. This is backed by its plans to create 15,000 jobs in R&D and production to bolster its technological prowess. Samsung plans to pitch itself against dominant players such as Taiwan Semiconductor Manufacturing in foundry or contract chip manufacturing and Qualcomm in mobile processing chips.
The company is already working on developing chips that would power AI-enabled devices and self-driving cars. The artificial intelligence chip market is projected to reach $91.18 billion by 2025, registering a CAGR of 45.2% from 2019 to 2025.
Samsung continues to dominate the smartphones market. During Q1 2019, Samsung sold 72 million units, and held 21% of the market. Samsung’s global shipments during 2018 were 291.8 million units. In recent years, both Samsung and Apple have felt the heat from growing competition, especially Chinese players. The company is focusing on innovative, highly sophisticated and user-friendly products to combat the same. While the release of the much talked about foldable mobile by Samsung dubbed as Galaxy Fold has been postponed, there is news of a patent for an electronic device with ‘expandable display area’ has emerged. Sticking to its commitment to bring 5G to its customers, Samsung Galaxy S10 5G will be available from June 17 onwards to AT&T business customers and 5G developers involved in AT&T developer program.
Working towards its vision of ‘Connected Living a reality.’ Back in early 2018, Samsung announced a bold vision to make all devices that it sells each year, which is about half a billion devices, connected and intelligent. The process began with introducing the consolidated SmartThings app that unified Samsung’s IoT platforms, and introduction of SmartThings Cloud. During a short span of time, the SmartThings ecosystem has grown significantly with the number of registered SmartThings users growing by 220%. The number of app installs has increased 61% while number of partners participating in this ecosystem gone up by 44%.
The global consumer electronics market is expected to reach $1.78 trillion by 2024, growing at a CAGR of slightly above 6% between 2018 and 2024. Currently, Samsung is the worldwide leader in TVs while in refrigerators and front-load washers, it leads the U.S. market.
Digital Cockpit. Samsung and HARMAN are working to bring the best-connected car experience to its customers. HARMAN believes, “With AI, IoT and the cloud, we know we have just scratched the surface of what is possible in automotive.” The opportunity in the connected car space is huge with the global connected car market estimated to reach $225.16 billion by 2025, growing at a CAGR of 17.1% from 2018 to 2025. Samsung completed the acquisition of HARMAN in 2017 to accelerate growth in automotive and connected technologies. One of the recent partnerships of HARMAN is that with Fiat Chrysler Automobiles N.V. (FCA). Fiat will be utilizing HARMAN and Google technologies to deliver a new “ecosystem” that will be featured on all new FCA vehicles worldwide by 2022.
To execute its vision across business segments, Samsung is spending on research and development and investing in advanced technologies. In August 2018, Samsung unveiled its plans to invest KRW 25 trillion ($21 billion) over the next three years in areas of artificial intelligence, 5G, automotive electronic components and biopharmaceuticals. The investment is a part of Samsung’s KRW 180 trillion plan to create jobs and ignite revenue streams over the next three years. Samsung is making major strides in bringing 5G connectivity. It became the world’s first company to receive Federal Communications Commission’s approval on its commercial 5G equipment. Over the last five years, Samsung NEXT and the Samsung Strategy and Innovation Center (SSIC) have invested in more than 20 AI-related startups. It now has a network of seven Global AI Centers. Samsung ranks among the largest non-U.S. spender on research and development and is the second largest patent holder with 5,850 patents in 2018.
Samsung is getting ready for the next 50 years.
The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.