Samsung Electronics, the world's largest smartphone maker, said Wednesday that it will invest 53 billion won or some $48 million to acquire a 10 percent stake in Pantech, Korea's number three mobile phone manufacturer.
"Samsung Electronics accepted Pantech Vice Chairman Park Byeong-yeop's business proposal," said a spokesman for Samsung Electronics.
The investment will make Samsung Electronics Pantech's third-largest shareholder behind Qualcomm with 11.96 percent and the Korea Development Bank with 11.81 percent.
The spokesman said the deal aims to protect Samsung's clients for components.
Pantech is buying semiconductors, displays and other components for use in its popular Vega-branded smartphones from Samsung's key affiliates including Samsung SDI and Samsung Electronics.
Last year, Pantech bought 235 billion won worth of Samsung parts. Over the last five years, the purchases reached 811 billion won, according to officials from Samsung and Pantech.
The deal comes while Samsung is increasing its spending on balanced growth with local small- and medium-sized enterprise (SMEs) in accordance with President Park Geun-hye's drive for a "creative economy."
"Our vice chairman Park told shareholders that he will bring between 100 billion won and 200 billion won as new investment. With the Samsung investment, Pantech will expand its business territories to overseas markets," said Pantech.
While Pantech is recognized in Korea, where its sales trail only local rivals Samsung and LG, the firm has yet to achieve success overseas.
However, at this year's Mobile World Congress event in Spain, it caught the attention of the media with its Android-powered Vega 6 ― the world's largest full-HD smartphone, while its budget range including the Discover, available for $50 on contract in the US ― has received positive reviews.
"For fair competition and to create a healthy business eco-system, it's believed that Pantech should survive in the market and we think Samsung made the right decision," said an official at Samsung.
Samsung will just be a strategic investor and won't participate in Pantech's management.
Last year, Pantech reported 2.23 trillion won in revenue with an operating loss of 77 billion won.
"The money that comes from Samsung will be used to boost our brand awareness. Pantech is a small player. But we will remain a good challenger with competitive manufacturing technology," said a Pantech spokesman.
The Pantech deal follows Samsung's decision to invest in Sharp of Japan in March. Samsung acquired a 3.08 percent stake in Sharp for $112 million, allowing Samsung greater access to Sharp's TV-making patents.