Samsung may cut expenses as Apple shops elsewhere for chips

Thu Jan 24, 2013 3:56pm EST
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By Miyoung Kim

SEOUL (Reuters) - Samsung Electronics Co, due to report record earnings on Friday, may cut capital spending by as much as a fifth this year - a first reduction since the global financial crisis - as demand for computer chips weakens and rival Apple Inc looks set to buy fewer of its microprocessors used in the iPhone and iPad.

The South Korean firm, one of the technology industry's most aggressive spenders, has already seen Apple scale back buying Samsung flat screens and memory chips. Analysts predict the world's biggest maker of TVs, smartphones and DRAM memory chips could trim annual capex by 4-20 percent after investing a record 25 trillion won ($23.5 billion) last year.

By comparison, Taiwan's TSMC raised its capital spending to $9 billion this year, aimed in part at winning Apple orders away from Samsung.

"There are two key factors to watch in Samsung's earnings - capex plans and any guidance on smartphone sales, for this quarter or for all of 2013," said Jin Sunghye, an analyst at KTB Securities. "With a bleak PC sales outlook and growing prospects that Apple won't increase its chip purchases, Samsung is very likely to take a disciplined capacity expansion approach."

Samsung, valued at $220 billion, has said October-December operating profit will likely be a record 8.8 trillion won ($8.3 billion), up 89 percent from a year ago.

Quarterly revenue is expected to have risen around 19 percent to 56.2 trillion won ($52.7 billion) - around $565 million a day - and just behind Apple's $54.5 billion.

Samsung declined to comment on its capex plan.

SEASONAL BLIP   Continued...

The new Samsung Galaxy Note II tablet device is pictured during Samsung Mobile Unpacked 2012 event in Berlin's Tempodrom hall ahead of the start of the IFA consumer electronics fair in Berlin, August 29, 2012. REUTERS/Pawel Kopczynski