Hyundai favors LG, leaves Samsung

The Korea Times

The Korea Times

Business

Sun, October 1, 2023 | 15:13

Tech

Hyundai favors LG, leaves Samsung

Posted : 2016-04-04 16:39

Updated : 2016-04-04 19:01

An unnamed worker lowers an engine into a car being assembled at Hyundai Motor's manufacturing line in Chennai, India, last week. / Yonhap

Country's top automaker fears Samsung's reentry in vehicles market

By Kim Yoo-chul

Hyundai Motor Group's partnership with LG Group's technology affiliates is further strengthening, pushing LG's chief local rival Samsung to a secondary position in the promising and growing automotive industry.

Both LG and Samsung announced that they will increase their investments in electronic parts for the automotive industry with a specific focus on autonomous vehicles.

Such a strategy shift is in accordance with LG and Samsung's plans to find new revenue streams by cutting their heavy reliance on conventional business-to-consumer (B2C) models, which are highly competitive and have thin margins.

However, Hyundai Motor apparently favors LG affiliates over Samsung in jointly developing new automotive products, according to officials who are familiar with the issue, Monday.

Hyundai Motor recently signed a contract with LG Chem on joint promotion of eco-friendly vehicles. This is the fourth such agreement, following similar deals struck in 2012, 2013 and 2014.

LG along with Samsung are making a somewhat aggressive push into the carmaking industry, as automotive computer systems and sensors become more sophisticated.

LG Chem supplies its batteries to Hyundai Motor with LG Display and LG Electronics selling displays, navigation, audio systems and other in-vehicle infotainment systems, according to LG officials.

"LG affiliates were the primary suppliers for components to be used in Hyundai Motors' recent Ioniq electric vehicle," said an executive at one LG technology affiliate, wishing to be unidentified. "This one-sided love partnership is expected to continue."

No Samsung?

Hyundai Motor is said to purchase automotive chips only from Samsung Electronics, as LG Electronics had dropped its chip-making business two decades ago.

Like LG, Samsung is also upbeat about the auto-related business.

Samsung and its tech affiliates are ramping up R&D for auto technology, with two-thirds of their combined 1,804 U.S. patent filings since 2010 related to electric vehicles (EVs) and electric components for cars.

Specifically, Samsung Electronics could supply automotive chips and components for infotainment systems, while Samsung Electro-Mechanics, Samsung SDI and Samsung Display could supply motors, batteries and displays.

Officials say Hyundai's preference for LG is partly due to LG's aggressive pricing strategy, meaning that LG-supplied vehicle components are cheaper than Samsung's.

But some say Hyundai Motor's inclination toward LG is due to growing fears of Samsung's reentry in the vehicle market.

"If Samsung reenters the automotive market, then it greatly threatens Hyundai Motor," said the executive. "Given the ongoing trend of major consumer electronics companies joining the race for autonomous vehicles, Hyundai Motors is worrying that any shared information could help Samsung develop technologies faster than expected."

Samsung launched a new team last December to handle automotive businesses. The team has increased its staff to 20 members from four.

"Samsung will eventually begin producing smart vehicles. It is just a matter of time. Cars are becoming larger smartphones. Samsung can handle and generate profits as it has been doing well to jump into the market with on-time delivery, output commitment and better pricing in its target businesses," said a local fund manager who owns millions of dollars in stocks for Samsung affiliates.

"I think this is why Hyundai Motor is reluctant to expand its partnership with Samsung in the automotive industry. For Hyundai Motor, Samsung could become a threatening force in the next stage."

yckim@ktimes.com