By Kim Yoo-chul
Samsung Electronics will strengthen its partnership with Hyundai Motor to enhance its automotive chip solution business, according to company officials.
The move by the electronics giant is part of its attempt to reduce reliance on conventional memory chips and diversify its business portfolio.
"The automotive chip solution business is a blue ocean. As automotive chips, which will mostly be logic chips for controlling entire computing systems, require high-quality safety conditions, we can't push the business in a short time. But, with the help of Hyundai Motors, Samsung will cut its reliance on conventional memory chips," said a senior researcher at one of Samsung's local factories.
Samsung will focus on automotive navigation and entertainment systems, as its chip technology isn't yet developed enough to supply logic chips for vehicles.
"Basically, supplying logic chips to major car companies is Samsung's long-term goal. But storage devices for cars are getting better," said the researcher.
Samsung plans to expand the sale of its embedded multi-media cards (eMMCs) and embedded multi-chip packages (eMCPs) to Hyundai vehicles based on the solid corporate partnership.
The two segments are storage solutions based on a flash-type memory chip technology, which are widely used in mobile devices.
"Hyundai has partnered with Samsung on various automotive chip solutions supported by the government. Such collaboration can be strengthened, depending upon the situation," said a Hyundai Motor spokesman.
He said "smart keys" and "around view" solutions are two products of the Samsung-Hyundai partnership so far.
Smart keys allow drivers to initiate and cut off power to a vehicle, while around view solutions allow drivers to see details of roads and obstacles from a different viewing angle.
Samsung earlier said that it is focusing on the automotive chip business, as it is a new but lucrative area, considering the rising production of electric vehicles by leading automakers.
Market experts said that as the global memory chip industry gradually grows it is no surprise that Samsung Electronics, the biggest chip supplier in the world, is gradually moving toward automotive chips.
Further, Samsung is hungry for a new cash cow in the chip-making business that can replace conventional memory chips, they said.
Yoo Jin-ho of Woori Investment & Securities said the automotive chip business is the market that major chipmakers can't afford to lose, as customers today look for something new in vehicles such as more entertainment features and greater connectivity to the Internet.
"It's like an expanded smartphone on wheels," he said.
Yoo also said that the booming partnership with Samsung will also help Hyundai save on costs in procuring automotive chips from existing major suppliers including Freescale/Bosch and Infineon.
In 2010, Hyundai spent 1.22 trillion won to purchase automotive chips, and that amount has risen to over 3 trillion won as of the end of last year, according to estimates by local brokerages.
"Hyundai Motor is reviewing the possibility of buying a chip designer for easier development of in-vehicle logic chips," said an official at Hyundai by telephone.
"This is why Samsung is mulling the possibility of entering the electric vehicle market. Electric and hybrid cars use high-end semiconductors. This is truly a win-win deal," said Lee Kun-woo at Woori Investment.
Samsung is now being pressured to address issues about improving the production yields of its logic chips before launching its automotive chip business, as its logic chip division has been struggling to expand its client base beyond Apple's and Samsung's handset divisions.
Automotive chips are used to operate motors that power electronic control units. A vehicle uses some 200 semiconductors including logic chips, micro-control units and sensors.
Data from the Ministry of Knowledge Economy estimated that by 2015, electronic materials will soon make up 40 percent of each car, of which 30 percent will be semiconductors, thanks to new trends toward convergence between cars and information technology.