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By Kim Yoo-chul
Samsung Electronics Vice Chairman Lee Jae-yong has picked components for self-driving smart cars as one of the next growth engines.
Analysts and company officials say that the move is a step in the right direction as it will help pick up the slack from the slowing mobile business.
The choice of the smart car business also reflects the need to offset growing investor concerns over the company's sustainable growth.
"Samsung Chairman Lee Kun-hee helped grow the company into the global player it is with the semiconductor business. And Vice Chairman Lee picked the smart car business as a future growth driver for the company," a senior vice president (SVP) at Samsung said.
Samsung Electronics said the automotive division led by Park Jong-hwan who serves as executive vice president (EVP) will develop components to be used in smart cars.
Samsung is expected to compete with Apple and Google in the race to develop parts for self-driving vehicles.
Samsung plans to use its expertise in computer chip manufacturing and consumer displays.
It will create a separate team tasked to develop entertainment, autonomous driving and satellite navigation components.
Close collaboration with other Samsung tech units such as its battery affiliate Samsung SDI and the components unit of Samsung Electro-Mechanics (Samsung Electro) will also follow.
"Here's why. All global tech leaders from Apple, Microsoft, Google to leading car manufacturers are investing more in smart car businesses with some of them are already testing self-driving technology," the Samsung executive said.
They need in-vehicle systems, memory chips, displays and sensors to power car infotainment systems, he said.
"We can handle that as it is the world's top and most trustable component supplier," he said.
Samsung's decision to jump into the automotive parts industry reflects Vice Chairman Lee's management style ― he prefers to use his global networks for new businesses.
"Vice Chairman Lee is the international face of Samsung. Fluent in Japanese and English, he prefers to use his strong global networks to help Samsung gain fresh momentum," another Samsung SVP said. "Making most of the global networks makes sense, given moves by tech companies for collaboration in futuristic business projects
For example, microprocessor chips are a crucial element for autonomous driving cars. The world's top memory supplier, Samsung, signed an agreement with Audi to jointly develop automotive chips. Samsung will supply LPDDR4 DRAM chips with 20-nanometer tech and 10-nano eMMC 5.1 flash chips to Audi.
"Given by SDI's car clients from BMW, Chrysler, Ford and some others, this makes good business sense. With cars getting smarter each year, the need for chips and advanced electronics is becoming a priority for car manufacturers," Lee Ka-keun at IBK Securities said.
Competition, collaboration
Gartner said the automotive semiconductor market will grow to $32.7 billion in revenue in 2016 and the automotive memory market will hit $1.5 billion in 2016.
Samsung will compete with LG Electronics for market share in the smart car business as LG affiliates are teamed up ahead of Samsung for that market.
A smart car or connected vehicle will have parts and software connecting finance, telecommunications, energy and transportation technology, benefitting industries such as memory chips and displays.
"This is why the new Samsung team will be led by its device solution unit, not its consumer electronics unit. It wants to sell more automotive chips to Google and Apple cars," analyst Lee said.
Samsung is expected to collaborate with Google, Microsoft, SAP, Oracle, IBM and other computing techs.
As Samsung is the strongest backer for the Google Android platform, it will compete with Apple in smart cars next, said officials.
"Samsung has already been collaborating with Google as Google is the frontrunner for that trend. Inside a Google-initiated alliance for smart cars, Samsung may clearly see its new future," another Samsung executive said.
Apple, which introduced its "Car Play" system with Ferrari in a motor show in Geneva, March 2013, plans to introduce its first autonomous cars by 2020.
Investors and analysts believe that Samsung can become a major force in the car business.
"I don't rule out the possibility that Samsung will create its own smart cars," an official said.
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