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Deputy Prime Minister and Minister of Economy and Finance Kim Dong-yeon (right) and Samsung Electronics Vice Chairman Lee Jae-yong shake hands after a meeting at a Samsung semiconductor plant in Pyeongtaek

The Samsung Group announced plans on Aug. 8 to invest 180 trillion won (US$161 billion) in equipment and R&D and hire 40,000 new employees over the next three years. The investment figures are up by around 20 percent from past ones.

On the afternoon of Aug. 8, Samsung issued a seven-page press release including its plans for 180 trillion won in investment, the hiring of 40,000 new employees, shared growth with partner companies, and the sharing of innovation capabilities. The announcement was originally scheduled to take place during an Aug. 6 “communication session” with Deputy Prime Minister and Minister of Economy and Finance Kim Dong-yeon, but was delayed after critics argued Kim’s visit to the chaebol to ask for investment could come across as “begging.”

Samsung develops early, middle and long term investment hiring plans every year, adjusting them based on interim review findings. In the case of the latest announcement, the company had been fine-tuning its investment and hiring plan while coordinating with the Ministry of Economy and Finance (MOEF) for several weeks beforehand.

In terms of concrete details, the plan has Samsung investing 180 trillion won over a three-year period from 2018 to 2020. The number includes both equipment investment and R&D costs for the group’s 60 or so affiliates. About 130 trillion won (US$116 billion) of it is to be invested domestically, while 25 trillion won (US$22.3 billion) is to go toward four “future growth projects” in artificial intelligence (AI), next-generation mobile communications (5G) equipment, bio, and automotive electronics components.

The three-year total of 180 trillion won in investments represents an increase of around 20 percent from investment over the past three years. Between 2015 and 2017, Samsung Electronics invested a total of 140.7 trillion won (US$125.7 billion) toward equipment and R&D: 40.3 trillion won (US$36.0 billion) in 2015, 40.2 trillion won (US$35.9 billion) in 2016, and 60.2 trillion won (US$53.8 billion) in 2017. Total investment is estimated at around 150 trillion won (US$134 billion) once the other affiliates are factored in.

The increase amounts to around 30 trillion won (US$27 billion) from the preceding three years, or an average of 10 trillion won (US$9 billion) a year.

Substantial investment is also predicted for bio efforts, which became a subject of controversy when Samsung requested to be allowed to raise prices during a communication session with the government. Samsung BioLogics previously invested around 1.4 trillion won (US$1.25 billion) over the past three years. A Samsung source explained that the amounts invested in the four areas would be “fluid” and “depend on the future market situation.” At an innovative growth strategy meeting the same day, Kim to “add bio and other recent leading projects to the eighth core leading projects receiving focused support.”

Samsung also plans to directly hire around 40,000 new employees over the next three years. In the past, the group hired around 9,000 new employees each year, with plans to bring on another 8,000 or so annually for the next three years for a total of 25,000. The new number, which is around 15,000 higher than the previous one, includes roughly 8,000 employees at partner company Samsung Electronics Service (Samsung SVC) that the company agreed in April to hire directly. The other additional hires are expected to number around 7,000 over three years, or an average of over 2,000 a year.

Samsung also plans to expand its in-house venture program to the outside and increase the scale of its industry-academia cooperation effort from 40 billion won (US$35.7 million) to 100 billion won (US$89.3 million) annually. To promote shared growth with partner companies, it plans to expand its partner company support fund to third-level subcontractors and increase the scale to 3 trillion won (US$2.7 billion) from its current 2.3 trillion won (US$2.1 billion).

Additional plans include 60 billion won (US$53.6 million) in investment over the next five years to support 2,500 companies in adopting smart factories, including small businesses that do not currently have transactions with Samsung.

Business world observers lauded the Samsung announcement as a “generous investment” that was “worthy of South Korea’s top-ranking group.” The 180 trillion won in investment from Samsung over the next three years is 100 trillion won (US$89 billion) more than the previous investment high set with the SK Group’s 80 trillion won (US$71 billion) over three years.

But some observers are saying the announcement failed to live up to hopes. The government and business world had been anticipating a record-breaking investment plan of over 100 trillion won a

year and historic measures for shared growth from Samsung.

“With Samsung Electronics investing 60 trillion won last year, we had been expecting it would increase that to around 100 trillion won a year this time,” said CEO Score chief executive Park Ju-gun.

“This doesn’t seem to be the unprecedented investment plan the market or government had hoped for,” he said.

A business world observers commented, “The investment is certainly an investment, but there are no new measures for shared growth – it’s mostly about expanding existing projects.”

“It feels like it really didn’t justify the hype,” the observer complained.

By Choi Hyun-june and Bang Jun-ho

Please direct comments or questions to [english@hani.co.kr]