Samsung seeks $1B bond to expand Texas processor plant

Posted:
in General Discussion edited January 2014


Samsung is in talks with banks to acquire $1 billion to fund an expansion at its facility in Austin, Texas that is said to be the source of A5 processors powering the iPad 2 and iPhone 4S, and could possibly be the factory responsible for Apple's next generation A6 chip bound for the rumored iPad 3.



The South Korean electronics maker revealed on Monday that it will issue its first overseas bond since 1997 to fund an expansion at its Austin plant that produces processors used in mobile devices, including those used in many of Apple's mobile products, reports Businessweek.



According to spokesman James Chung, Samsung has filed proposals to multiple banks to borrow up to $1 billion in five-year maturity bonds issued by the company's U.S. arm.



The company's logic-chip business, which currently oversees the production of Apple's A4 and A5 processors that power the iPhone and iPad lines of mobile devices, may double spending to 8 trillion won (about $6.95 billion) in 2012. It is unclear whether the boost in manufacturing capability is for the company's own mobile devices or to handle demand for an as yet unannounced chip that will power the rumored next generation iPad.



Samsung's Austin plant reached maximum capacity in October 2011, just as smartphone shipments saw a year-to-year increase of 44 percent according to Strategy Analytics Inc.





Samsung's Austin, Texas Plant | Source: Samsung







The South Korean company's handsets are seen as direct competition with Apple's iPhone business and posted record earnings earlier this month, with profits hitting $4.5 billion in the December quarter riding on an estimated 32 million smartphone sales.



As of Sept. 30, 2011, Samsung had over $19.2 billion in cash and equivalents according to Bloomberg. An estimate from Korea Investment & Securities Co. says the company's operating profit most likely doubled in 2011 and may grow 82 percent in 2012.



Apple and Samsung have been tangled in a worldwide patent dispute since April 2011 when the Cupertino, Calif., company filed a suit alleging the South Korean company blatantly copied the look and feel of the iPhone and iPad. Most recently the Galaxy phone and tablet maker was denied a preliminary injunction against the iPhone 4S in Italy.



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Comments

  • tallest skiltallest skil Posts: 40,277member
    All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.
  • pedromartinspedromartins Posts: 1,333member
    Quote:
    Originally Posted by Tallest Skil View Post


    All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.



    can't you do anything about it?



    i'm here because i wan't something about apple, not about the current copycats and microsoft. they don't matter.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by Tallest Skil View Post


    All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.



    AI has always written stories that involve Apple even if it's about competitors to Apple. Samsung just happens to be one that has set it self up in the last year to be more directly compared.
  • alienzedalienzed Posts: 393member
    Has 19 billion in cash, wants to borrow 1 billion from banks... can someone explain this to me?
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by pedromartins View Post


    i'm here because i wan't something about apple, not about the current copycats and microsoft. they don't matter.



    The title of the article was a give away. I guess you could have avoided the story after you read the title.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by alienzed View Post


    Has 19 billion in cash, wants to borrow 1 billion from banks... can someone explain this to me?



    A couple ideas:



    1) More money is better than less money.



    2) Samsung can make more interest on its cash holdings than it would have to pay in interest for the loan.
  • monstrositymonstrosity Posts: 2,075member
    I enjoy hearing about samsung and google and etc
  • kwoot27kwoot27 Posts: 30member
    Quote:
    Originally Posted by alienzed View Post


    Has 19 billion in cash, wants to borrow 1 billion from banks... can someone explain this to me?



    It might have something to do with the cost of borrowing is less then interest paid.
  • ungenioungenio Posts: 49member
    Samsung may not build any more of Apples' SoC because of their legal battles. Is this their way to force Apple to keep the contract, to avoid the bad publicity of americans losing their jobs if Samsung is forced to close the fabric?
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by kwoot27 View Post


    It might have something to do with the cost of borrowing is less then interest paid.



    It might also be because Samsung doesn't have enough cash in the US. It's like Apple, they ≈$100B in cash as of the end of the calendar year but most of that is held outside the US.
  • sixnahalffeetsixnahalffeet Posts: 99member
    Quote:
    Originally Posted by Tallest Skil View Post


    All right. That's it. This is now SamsungInsider. I'm calling it early. Yes, there's ONE reference to Apple in this story, but it's not like we haven't seen the signs. Eventually there won't be any references.



    Samsung Insider 2013 lead stories:

    "Copy Apple"

    "Copy anyone else successfull"

    repeat

    .....





    (not a whole lot else to report on)
  • cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by alienzed View Post


    Has 19 billion in cash, wants to borrow 1 billion from banks... can someone explain this to me?



    It's often cheaper to spend someone else's money.



    The 5-year Treasury bond is yielding 0.782%. Meanwhile a junk bond ETF is yielding nearly eight percent.



    Let's say you wanted to buy a house and you actually had enough cash. Well, the interest for a 15-year fixed mortgage is 3.22%. Meanwhile the S&P 500's average annual return (calculated since the 1950s) is 11%.



    You're better off getting a loan for your house; your down payment would need to be large enough to avoid PMI but the rest of your cash would be more productive in other investments. Plus, you can write off mortgage interest come tax time. Sure, you will need to pay some taxes on the interest or dividends earned from your investments, but these are generally taxed at a lower rate than wages.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by alienzed View Post


    Has 19 billion in cash, wants to borrow 1 billion from banks... can someone explain this to me?



    They're using this a means to adjust their capital structure. Companies do it all the time.



    It's also possible that they have some big plans for their cash.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by SolipsismX View Post


    A couple ideas:



    1) More money is better than less money.



    2) Samsung can make more interest on its cash holdings than it would have to pay in interest for the loan.



    (1) is a truism, but if (2) were true, consider that Samsung could make more money for its shareholders by financial engineering, i.e., levering up to the hilt, rather then producing and selling stuff.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by cvaldes1831 View Post


    It's often cheaper to spend someone else's money.



    The 5-year Treasury bond is yielding 0.782%. Meanwhile a junk bond ETF is yielding nearly eight percent.



    Let's say you wanted to buy a house and you actually had enough cash. Well, the interest for a 15-year fixed mortgage is 3.22%. Meanwhile the S&P 500's average annual return (calculated since the 1950s) is 11%.



    You're better off getting a loan for your house; your down payment would need to be large enough to avoid PMI but the rest of your cash would be more productive in other investments. Plus, you can write off mortgage interest come tax time. Sure, you will need to pay some taxes on the interest or dividends earned from your investments, but these are generally taxed at a lower rate than wages.



    See above. It's not so simple. You have to be highly confident that (a) your home value will continue to rise, and (b) you can get high returns on the alternative investment.



    Both are pretty strong assumptions, as history would tell us. It can be a fools' game to borrow at one level of risk and lend at another (unless you're a bank, but even then......)
  • hellacoolhellacool Posts: 759member
    I'm glad a foreign company is investing in America and providing jobs to Americans. I thought everyone was outsourcing to China.
  • audio_insideaudio_inside Posts: 24member
    Samsung is the fab for A5 chips? How did I miss that?



    This adds a whole new level of irony to the Apple/Samsung patent/marketing battles.
  • cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by anantksundaram View Post


    See above. It's not so simple. You have to be highly confident that (a) your home value will continue to rise, and (b) you can get high returns on the alternative investment.



    Both are pretty strong assumptions, as history would tell us. It can be a fools' game to borrow at one level of risk and lend at another (unless you're a bank, but even then......)



    Of course it's not simple. That said, if you have a diversified investment portfolio and spread the risks, there's a decent likelihood of increasing your wealth over the long term.



    Today, I don't tell anyone that real estate is a good investment and heck, I live in Silicon Valley where the market is pretty resilient because engineers are in high demand, regardless of what the current unemployment rate is. (No, I am not an engineer.)



    A house is a home and there are a lot of emotional attachments that come into play versus buying a bunch of SPY, IWM or QQQ.



    But my point stands: it is often cheaper to use someone else's money than your own. You just have to run the numbers, assess the risk, and decide if it's worth it.
  • cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by audio_inside View Post


    Samsung is the fab for A5 chips? How did I miss that?



    This adds a whole new level of irony to the Apple/Samsung patent/marketing battles.



    Well, if you didn't know that, you've really been asleep at the wheel.



    Samsung has manufactured every single CPU in Apple's iOS devices since the original iPhone in 2007.
  • 845032845032 Posts: 76member
    Samsung's answer to Apple

    : It's time to manufacture your products in U.S.A. I'm ready for that.
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