Samsung Electronics-loan

▲ Samsung's Pyeongtaek campus in Pyeongtaek, 70 kilometers south of Seoul, is seen in this photo provided by Samsung Electronics Co. on Sept. 7, 2022. (PHOTO NOT FOR SALE) (Yonhap)

▲ This file photo, taken Aug. 10, 2021, shows the corporate logo of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

Samsung Electronics-loan

Samsung Electronics to borrow more than US$15 bln from display unit for investment

SEOUL, Feb. 15 (Yonhap) -- Samsung Electronics plans to borrow more than US$15 billion from its display-making subsidiary to secure operational costs, the company has said.

The South Korean tech giant said in a regulatory filing on Tuesday that it will borrow 20 trillion won (US$15.78 billion) from Samsung Display at an interest rate of 4.6 percent to "secure working capital."

The loan matures Aug. 16, 2025, and amounts to 10.35 percent of Samsung Electronics' equity capital as of at the end of 2021.

Samsung Electronics holds an 85 percent stake in Samsung Display.

The move is widely interpreted as the world's largest memory chip maker's unwavering commitment to its investment drive, even as smaller rivals, like SK hynix and Micron Technology, moved to cut back on spending in the industry's down cycle.

Samsung's fourth-quarter profit shrank 69 percent from a year earlier to an eight-year low of 4.3 trillion won as the global economic slowdown hurt the sales of electronic devices and semiconductors that power them.

"The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown," the company said last month.

Samsung's chip business, which took up around 56 percent of the tech company's total profit a year ago, was hit hard as semiconductor buyers slashed spending amid growing inventory and a supply glut drove down chip prices.

The chip business saw its profit drop a whopping 96.9 percent from a year earlier.

"Overall memory demand weakened as customers continued to adjust their inventories amid deepening uncertainties in the external environment," Samsung said.

Samsung's operating profit for this year is forecast to fall short of 20 trillion won due to the global economic slowdown and chip downturn.

Last year, the tech giant made 43.37 trillion won in operating profit and invested a record 53.1 trillion won in infrastructure, 90 percent of which was spent on semiconductor facilities.

For all the eternal challenges, Samsung said it will not reduce investment.

While unfavorable market conditions are expected to persist, "on the flip side, this is a great opportunity for us to prepare for the future," Kim Jae-june, executive vice president at Samsung's memory business, said during an earnings call last month.

Samsung will "continue to make the infrastructure investments that are necessary to respond to mid-to-long term demand, and to secure the essential clean rooms that we would need to do that. So in conclusion, this year's (capital expenditures) plan is expected to be similar to previous years," he said.

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