Samsung Electronics plans to borrow more than $15 billion from its display-making subsidiary to secure operational costs, the company has said.
The South Korean tech giant said in a regulatory filing that it will borrow 20 trillion won ($15.78 billion) from Samsung Display at an interest rate of 4.6 per cent to “secure working capital.”
The loan matures August 16, 2025, and amounts to 10.35 per cent of Samsung Electronics’ equity capital as of at the end of 2021, reports Yonhap news agency.
Samsung Electronics holds an 85 percent stake in Samsung Display.
The move is widely interpreted as the world’s largest memory chip maker’s unwavering commitment to its investment drive, even as smaller rivals, like SK hynix and Micron Technology, moved to cut back on spending in the industry’s down cycle.
Samsung’s fourth-quarter profit shrank 69 per cent from a year earlier to an eight-year low of 4.3 trillion won as the global economic slowdown hurt the sales of electronic devices and semiconductors that power them.
“The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown,” the company said last month.
Samsung’s chip business, which took up around 56 per cent of the tech company’s total profit a year ago, was hit hard as semiconductor buyers slashed spending amid growing inventory and a supply glut drove down chip prices.
The chip business saw its profit drop a whopping 96.9 per cent from a year earlier.
“Overall memory demand weakened as customers continued to adjust their inventories amid deepening uncertainties in the external environment,” Samsung said.
Samsung’s operating profit for this year is forecast to fall short of 20 trillion won due to the global economic slowdown and chip downturn.
Last year, the tech giant made 43.37 trillion won in operating profit and invested a record 53.1 trillion won in infrastructure, 90 per cent of which was spent on semiconductor facilities.
For all the eternal challenges, Samsung said it will not reduce investment.
–IANS
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