What does the company do?
Samsung Electronics is the world’s largest maker of memory chips. It has come a long way since its inception in 1969, producing transistor radios and black and white television sets. Nowadays, its mainstays are market-leading semiconductor chips, OLED screen panels and mobile phones. It enjoys a wide moat for its businesses, as its technology prowess, scale and continuous investment in leading-edge technology all pose formidable barriers to entry for rivals.
Why do we like the investment?
Together with the broader technology industry, Samsung Electronics has weathered a challenging 2019 as unpredictable behaviour from large data centre customers created an oversupply situation in its core memory chip products. The Manager, nevertheless, continues to like the group, as demand is recovering and the business is set to benefit from numerous long-term growth drivers. In particular, the roll-out of 5G networks globally will spur more ubiquitous use of artificial intelligence (AI) while also boosting demand for more complex chips. Smartphones are becoming increasingly more powerful but at the same time, consumers are demanding better power efficiency and smaller devices that fit into pockets. Samsung Electronics is a global market leader in memory-chip technology, and in the most advanced and thin smartphone display screens that can save precious real estate for additional handset features. This provides a great supply chain network for Samsung’s own smartphones and makes it a tier-one supplier to its largest handset competitors.
Samsung has used its competitive advantages to build a large warchest over the years that enables it to acquire businesses, innovate for the future and support an attractive shareholder returns policy. The Fund owns the preference shares, which trade at a discount to the ordinary shares and pay a higher dividend.
In which year did we first invest?
Where is their head office?
Suwon, South Korea