Samsung to Pump $22.3B Into AI, 5G, New Tech

South Korea's Samsung will invest 25 trillion Won ($22.3 billion) in technologies including artificial intelligence (AI) and 5G as it tries to fend off the challenge from international rivals and address investor concern about its long-term prospects. (See Nokia, Samsung Miss Out as Three UK Gives 5G Job to Huawei and Apple's $1 Trillion Luxury Prison.)

The three-year investment plan, announced shortly after Samsung Electronics Co. Ltd. (Korea: SEC) reported its first sequential decline in quarterly profits, will also target automotive electronics components and biopharmaceuticals, said the company in a statement.

It forms part of a broader strategy under which the Samsung group will invest KRW180 trillion ($160.7 billion) in total over the next three years in capital expenditure and research and development.

With KRW130 trillion ($116 billion) of that figure to be spent in South Korea, Samsung plans to create another 40,000 jobs in the next three years -- 20,000 more than under previous recruitment plans. It expects this to "induce" another 700,000 jobs in related South Korean industries and businesses.

In the field of AI, which is becoming a priority for nearly every technology company on the planet, Samsung said its aim was to increase its number of AI researchers to about 1,000 globally. The company did not indicate how many of its 320,671 employees (as of December 2017) are currently involved in AI.

Samsung is also determined to take a leading position in the 5G next-generation communications standard, where it faces competition from US chipmakers like Intel Corp. (Nasdaq: INTC) and Qualcomm Inc. (Nasdaq: QCOM). Under its latest plans, it is to channel more spending into its manufacturing hubs, including its facility in Pyeontaek, and increase investments in the production of memory chips, non-memory equipment and advanced manufacturing equipment. (See A 5G Device Timeline for 2018 & Beyond and 5G Will Arrive in South Korea in March 2019.)

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The new strategy will entail an overhaul of Samsung's internal venture incubation program, said the company. Set up in 2012, the C-Lab program will henceforth support external startups as well internal projects. Samsung's target is to provide support for 300 external candidates and 200 internal projects in the next five years.

On the education front, the company is setting up a number of software education centers in South Korea, offering training and "employment consulting" to about 10,000 students and job candidates.

Samsung financing will be extended to a larger number of subcontractors, with KRW4 trillion ($3.6 billion) to be made available in total through supplier support programs. A new KRW110 billion ($98.2 million) fund, to be set up with the South Korea government, will provide funding for as many as 2,500 small and midsized enterprises for the next five years.

The announcement has had little impact on Samsung's share price but should be welcomed by investors worried about the lack of strategic direction since the conviction of group heir Jay Lee on bribery charges last year. (See Samsung Boss Gets 5 Years in Scandal Trial .)

Jay Lee, the vice chairman of Samsung Electronics, is appealing that conviction after being released from jail in February with a suspended sentence.

Today's update comes after the company reported an operating profit of KRW14.87 trillion ($13.3 billion) for its second quarter, down 5% sequentially but up 6% year-on-year. Sales were down 4%, to KRW58.48 trillion ($52.2 billion), compared with the year-earlier period. The weak performance was largely blamed on lackluster smartphone sales.

Samsung's share price has fallen about 8% in South Korea so far this year.

— Iain Morris, International Editor, Light Reading

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