Samsung 124 Trillion · Hynix 8 Trillion... Companies Increasing 'Investment Ammunition'

Increase in Cash Assets of the Four Major Groups Samsung, SK, Hyundai Motor, and LG
Preparing to Secure Semiconductor and Battery Markets...Improvement in Financial Soundness Including Borrowings

[Image source=Yonhap News]

[Asia Economy Reporters Oh Hyung-gil and Lee Hye-young] Despite ongoing domestic and international economic uncertainties, Korean companies are steadily increasing their cash holdings. They are preparing investment funds to secure future market dominance while bracing for adverse factors such as the massive spread of the COVID-19 Omicron variant, rising raw material and logistics costs, and the Russia-Ukraine conflict. It is expected that they will actively invest to seize the returning semiconductor boom and the explosively growing battery market.

◇Loading M&A and Investment Ammunition= The cash holdings of major companies in the four major groups?Samsung, SK, Hyundai Motor, and LG?are on the rise. As of the end of last year, Samsung Electronics held cash assets worth 124.2067 trillion KRW, an increase of about 4 trillion KRW compared to the previous quarter.

Cash assets include cash, cash equivalents, and short-term financial instruments that can be used at any time within one year. Considering the rapidly changing management environment such as interest rate hikes, financial soundness has also improved. Samsung Electronics’ debt ratio fell from 7% in 2020 to 6% last year.

Hyundai Motor’s current assets, including cash assets, increased by 487.9 billion KRW compared to the end of the previous year, reaching 8.8565 trillion KRW. Its borrowings also rose by 17.9% year-on-year to 10.8 trillion KRW. SK Hynix’s cash assets expanded by 75%, from 4.95 trillion KRW in 2020 to 8.67 trillion KRW as of the end of last year. SK Innovation also secured 7.41 trillion KRW in cash equivalents as of the end of last year.

During the same period, LG Electronics held 6.0515 trillion KRW in cash equivalents, up 2.6%. LG Chem, through the IPO of LG Energy Solution, secured 2.5 trillion KRW and is in a net cash position without borrowings as of the end of January.

An industry insider explained, "As economic uncertainty grows, securing cash assets within companies has become an unwritten rule," adding, "Last year’s global quantitative easing has shifted to a tightening phase this year, so this is a preemptive measure to execute large-scale investments."

[Image source=Yonhap News]

◇Investment, More Investment: ‘All-Out Attack’ Starts= The International Monetary Fund (IMF) lowered its global economic growth forecast for this year by 0.5 percentage points from last year to 4.4%, anticipating a slight economic slowdown worldwide. Despite the gloomy outlook, Korean companies are expected to accelerate their investment pace. There is a prevailing sentiment that they cannot loosen the reins on investments that will determine market leadership and share competition.

Samsung Electronics and SK Hynix plan to make aggressive investments this year amid expected fierce competition among global semiconductor companies. Samsung Electronics invested 43.6 trillion KRW in semiconductor facilities last year, about 10.7 trillion KRW more than the 32.9 trillion KRW invested the year before.

Samsung Electronics will begin construction of its second foundry plant in the U.S. in the first half of this year, investing about 20 trillion KRW. As the ‘nano competition’ intensifies, infrastructure investments for introducing extreme ultraviolet (EUV) equipment and transitioning to advanced processes will continue. Earlier, Samsung Electronics announced a total investment of 171 trillion KRW in the system semiconductor sector by 2030.

SK Hynix will execute large-scale investments this year, visibly benefiting from its acquisition of Intel’s NAND division, aiming to expand its market share. SK Hynix invested 13.4 trillion KRW in facilities last year and is expected to invest around 17 trillion KRW this year. Investments will also accelerate in establishing factories and research and development (R&D) centers within the Yongin semiconductor cluster, where a total of 120 trillion KRW will be invested.

LG Electronics, which ranked first globally in home appliance sales last year, is also expected to continue investing in core business areas and the automotive electronics sector. LG Electronics invested about 3.6 trillion KRW last year. Hyundai Motor plans to invest 9.2 trillion KRW in the automotive sector this year, allocating 5 trillion KRW for capital expenditures (CAPEX) and 3.6 trillion KRW for R&D, competing in electric and hydrogen vehicles.

Investments in the battery and advanced materials sectors are also expected to be active. SK Innovation has confirmed a 6.5 trillion KRW investment plan for the battery sector this year. LG Chem plans to invest 4.1 trillion KRW this year, including 2.1 trillion KRW in petrochemicals and 1 trillion KRW in advanced materials.

This content was produced with the assistance of AI translation services.