Record 2,450 trillion won investment announced; 2,100 trillion won earmarked for semiconductors

Yongin national complex to be accelerated; new Gwangju cluster planned

Samsung has rarely tapped external markets for capex funding

Operating cash flow seen as sufficient; net profit expected to top 300 trillion won this year

Cash holdings projected to exceed 900 trillion won by end-2028

Samsung Electronics Chairman Lee Jae-yong presents the company's investment plan at a national briefing on three major mega-projects, held at Cheong Wa Dae and presided over by President Lee Jae-myung on June 29. [Yonhap]
Samsung Electronics Chairman Lee Jae-yong presents the company's investment plan at a national briefing on three major mega-projects, held at Cheong Wa Dae and presided over by President Lee Jae-myung on June 29. [Yonhap]

After Samsung Electronics announced a record 2,450 trillion won ($1,580 billion) investment plan through 2040, attention has turned to how the company intends to execute its capital expenditure program. A simple breakdown shows the chipmaker would need to spend roughly 160 trillion won a year over the next 15 years.

Analysts say the decision to commit 2,100 trillion won to semiconductors alone reflects an internal conviction that the memory chip industry has effectively broken free of its historically cyclical nature.

Because Samsung Electronics rarely raises external financing for capital expenditure, the plan signals the company believes its operating cash flow alone will be sufficient to fund the massive outlay.

Estimates from the securities industry support that view. Samsung's cash and cash equivalents stood at 73 trillion won at the end of the first quarter, and some analysts project that figure will surpass 900 trillion won by 2028 — roughly two and a half years from now.

Based on the "2026–2040 Domestic Investment Vision" Samsung announced on June 29, the average annual investment works out to 163 trillion won, according to industry sources.

About 2,100 trillion won will go toward semiconductor investment. Samsung plans to put 1,650 trillion won into existing semiconductor complexes, including the Yongin Advanced System Semiconductor National Industrial Complex, and will build a new 400 trillion won cluster in Gwangju. An additional 56 trillion won will fund a cutting-edge HBM fabrication facility in Cheonan and Onyang.

Samsung accelerated its investment timeline and identified new sites as a supply shortage deepened amid an explosion in demand for AI semiconductors. The Yongin national complex had originally been planned to house six fabrication plants by 2047, but that target has been moved up by seven years to 2040. The company aims to begin civil construction immediately, with the goal of breaking ground on the first Yongin fab in 2028.

Samsung Electronics Chairman Lee Jae-yong, speaking June 29 at a national briefing on South Korea's three major mega-projects held at Cheong Wa Dae, said the AI era is transforming the technology paradigm "at an unimaginable speed" and that "the market's view is that even aggressive investment by chipmakers falls short of meeting explosive demand."

The sheer scale of the investment has raised questions about whether Samsung can sustain its capital expenditure program through cash flow alone. The company has historically avoided external financing for investment purposes.

Its chief semiconductor rival, SK hynix, has consistently raised cash by issuing both domestic corporate bonds and dollar-denominated bonds, and on July 10 plans to list American depositary receipts on the Nasdaq to raise up to 45 trillion won.

Samsung, by contrast, has rarely tapped external markets since its US subsidiary issued $1 billion in bonds in 2012. The company relies solely on bank borrowings, which kept its consolidated debt ratio at just 30 percent at the end of the first quarter.

The 2,450 trillion won investment is also widely expected to be funded entirely from Samsung's own cash reserves — a bet that semiconductor demand will keep rising for years to come.

Samsung Electronics Vice Chairman Jeon Young-hyun said at a separate national briefing on June 30 that "semiconductor demand is expected to grow enormously," adding that the company's fab operations — which began in Giheung and Hwaseong — are nearing completion at the Pyeongtaek plant, and that preparations for the phase after the Yongin national complex are also being brought forward.

Sustaining that level of investment through 2040 will require a steady inflow of cash. For now, funding is not a concern. Securities analysts expect semiconductor demand to hold up on the back of AI spending by global technology giants, with memory demand set to grow further as AI agents — already attracting heavy investment — give way to the emerging physical AI market.

Net profit, the primary source of operating cash flow, is expected to grow each year. Samsung is projected to post net profit of more than 300 trillion won this year alone. Even after accounting for capital expenditure, the company's cash and cash equivalents are expected to reach around 200 trillion won by year-end — a sharp increase from 58 trillion won at the end of last year, according to securities industry estimates.

If the trend continues, net profit in the 400 trillion won range is forecast for next year and the year after. Recent brokerage reports suggest Samsung's cash and cash equivalents could reach as much as 900 trillion won by the end of 2028.

Ryu Young-ho, an analyst at NH Investment & Securities, said the announcement "reconfirmed that memory chips are a core resource of the AI era and require a medium-to-long-term investment plan." He added that while markets have expressed concern about a sharp supply increase from the expanded investment, "this project appears to be preparation for medium-to-long-term demand rather than a short-term measure."


jeongwan@heraldcorp.com