Samsung Elec falls behind in M&A investment amid legal battles

2020.11.16 14:11:03 | 2020.11.16 15:47:10

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Samsung Electronics Co. is falling behind its global peers that are bulking up through ambitious M&As as legal challenges frustrate its management decisions.

The world’s chip industry struck $115 billion worth of mergers and acquisitions as of early November this year, surpassing the previous annual record of $107.7 billion in 2015, according to a study compiled by Maeil Business Newspaper.

The M&A streak began in July when Analog Devices Inc. acquired Maxim Integrated Products Inc. for $21 billion. This was followed by Nvidia’s $40 billion takeover of British chip design house ARM, the biggest acquisition in the chip industry’s history.

October saw three more mega deals. Korea’s No. 2 memory chip maker SK Hynix Inc. bought Intel’s NAND business in a $9 billion all-cash deal. Advanced Micro Devices (AMD) acquired Xilinx, the leading player in field-programmable gate arrays (FPGAs), in an all-stock transaction valued at $35 billion.

Samsung Electronics, meanwhile, has shied away from major deals since its 2016 acquisition of U.S. car infotainment and audio company Harman International Industries Inc. for $8 billion.

The biggest threat to Samsung’s management has been legal risks involving the owner family.

Jay Y. Lee, vice chairman of Samsung Electronics and son of the late Samsung Group chairman, is currently facing two trials on allegations of bribery and fraud to facilitate the managerial succession.

One trial involves the controversial 2015 merger of two Samsung affiliates that attempted to help the heir-apparent consolidate power over the group’s crown jewel Samsung Electronics. The other relates to Lee’s role in a bribery scandal involving the impeached President Park Geun-hye to gain government approval for the 2015 merger. He served jail time for a year over the latter case but was released in February 2018 after the appeals court suspended his sentence.

The ongoing legal battles raise the risks of a leadership vacuum at a time when Samsung faces growing competition at home and abroad.

Taiwan Semiconductor Manufacturing Co., the world’s biggest contract producer of semiconductors, last week announced a plan to spend $3.5 billion to build a new U.S. manufacturing site in Arizona.

Local rival SK Hynix is also making inroads on the NAND front. The Intel deal would put SK Hynix’s combined share at 20 percent and lift its global NAND ranking from No. 5 to No. 2, trailing Samsung’s 35.9 percent.

Small players are also gaining ground. U.S. chipmaker Micron Technology last week raised the bar for the memory industry as it started shipment of the world’s first 176-layer 3D NAND flash memory.

Meanwhile Samsung Electronics has been extending its hot streak in the stock market. It closed last Friday reaching a historic high of 63,200 won ($57). On Monday, it finished 4.91 percent higher from the previous session at 66,300 won.

By Lee Jong-hyuk and Kim Hyo-jin

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