CES-Samsung says open to mobile chip M&A, sees foundry deals

* Focus on growing foundry, non-memory chip business

* Open to M&A, will seek alliances for expansion

* Sees more chip outsourcing deals from fab-light clients

By Miyoung Kim

LAS VEGAS, Jan 7 (BestGrowthStock) – Samsung Electronics Co
(005930.KS: 005930.KS, 005930.KS, 005930.KS) is open to acquisitions to grab a bigger share of
the booming mobile processor market, and is expecting to win
more chip manufacturing deals in the next two to three years.

The South Korean company is the world’s biggest maker of
memory chips but it lags far behind in the non-memory chip
processor business dominated by the likes of Qualcomm (QCOM.O: QCOM.O, QCOM.O, QCOM.O),
Texas Instruments (TXN.N: TXN.N, TXN.N, TXN.N) and Broadcom (BRCM.O: BRCM.O, BRCM.O, BRCM.O).

“We constantly study the market and try to determine what’s
the best … and there’s absolutely no reason why we want to
avoid doing M&A,” Wong Yiwan, vice president of Samsung’s
system chip business, told Reuters in an interview in Las Vegas
at the Consumer Electronics Show.

“By the same token, we do other things that actually
complement what we do … clearly things like partnership. It’s
very difficult for one company to do everything.”

No.1 mobile chip producer Qualcomm announced a $3.2 billion
deal this week to buy Atheros Communications Inc (ATHR.O: ATHR.O, ATHR.O, ATHR.O), a
key producer of chips used for Wi-Fi and bluetooth, showing its
desire to become a stronger player in supplying chips for
smartphones and tablets. [ID:nN05263201]

Cash-rich Samsung had been reportedly interested in buying
Infineon’s (IFXGn.DE: IFXGn.DE, IFXGn.DE, IFXGn.DE) wireless chip unit, which Intel (INTC.O: INTC.O, INTC.O, INTC.O)
snapped up instead for $1.7 billion last year.

Its system chips division saw strong growth last year,
driven by robust demand for mobile processors and image
sensors, but an organic-growth approach kept its global share
in an exploding mobile chip market at around 3 percent,
according to research firm iSuppli.

The business also represents around 20 percent of Samsung’s
overall semiconductor business. Its mainstay memory chip
operation, ranked the world’s largest, earned 20 trillion won
in revenue in the first nine months of 2010.

While still small in comparison, the division is expected
to help offset weakening growth in memory chip demand, helped
by rising popularity of smartphones, tablets and Internet TVs.

MORE FOUNDRY DEALS

Wong also expects to secure more outsourcing deals for chip
manufacture in coming years, as belt-tightening companies shed
capital-intensive investment in chip-making facilities.

Samsung said last month it had won a deal from Japan’s
Toshiba Corp (6502.T: 6502.T, 6502.T, 6502.T) to produce system chips, as the Japanese
firm seeks to reduce its non-memory chip exposure.
[ID:nSGE6BM0BE]

“Our foundry business is doing very good. Many companies
are adopting fab-light strategy. So demand for foundry service
support has become stronger, and we actually benefit from
that,” Wong said.

“Clearly, expansion in foundry is our major focus … so
the next two, three years, you’ll probably see more
relationships being set up between our company and other
companies on the foundry side.”

Samsung trails Taiwan’s TSMC (2330.TW: 2330.TW, 2330.TW, 2330.TW) and UMC (2303.TW: 2303.TW, 2303.TW, 2303.TW),
the world’s the two biggest foundry chipmakers, but its
aggressive investment plan is improving its ability to churn
out large numbers of high-performance chips at low cost.

Revenue from foundry chipmakers, which produce chips on
behalf of fabless companies such as Texas Instruments (TXN.N: TXN.N, TXN.N, TXN.N),
Qualcomm (QCOM.O: QCOM.O, QCOM.O, QCOM.O) and Nvidia (NVDA.O: NVDA.O, NVDA.O, NVDA.O), is estimated to have
grown by 42 percent in 2010 to $28.9 billion and reach $33.7
billion in 2011, according to research firm iSuppli.

(For more stories from the CES, click on [ID:nN03289143])

(Reporting by Miyoung Kim; Editing by Bernard Orr)