Samsung, LG on alert over China's reported ban on foreign EV parts

The Korea Times

The Korea Times

Business

Sat, September 23, 2023 | 04:13

Tech

Samsung, LG on alert over China's reported ban on foreign EV parts

Posted : 2023-09-18 15:42

Updated : 2023-09-19 11:55

Samsung's automotive electronics technologies are on display at the company's pavilion at IAA Mobility 2023 in Munich, Sept. 4. Courtesy of Samsung Electronics

By Park Jae-hyuk

China's intensifying trade war with the U.S. and the European Union are feared to cause unexpected ripple effects for Samsung, LG and other automotive electronics makers here, according to trade experts, Monday.

On Sunday, the Yomiuri Shimbun, a Japanese newspaper, reported that Beijing issued a verbal order to Chinese electric vehicle (EV) manufacturers to reduce the use of imported electronic components, including semiconductors. The Japanese daily also wrote that a former Chinese industry and information technology minister called for setting targets for the proportion of domestically produced parts used in EVs, saying that EV makers may be subject to penalties if they fail to meet these targets.

In the global EV industry, America's Tesla and Qualcomm have led the application processor market, while Europe's Infineon and NXP have dominated the markets for automotive chips and sensors. Conventional components have been supplied mostly by German and Japanese manufacturers.

Against this backdrop, the U.S. and the EU have made continuous attempts to curb the growth of Chinese EV makers, through various trade regulations, including anti-subsidy tariffs.

The Chinese government's unofficial instruction has been, therefore, interpreted as a retaliatory measure against the U.S. and the EU, as well as their ally, Japan, which is intended to exclude their companies from the supply chain of the world's second-largest economy.

However, concerns are growing that China's latest measure could also hurt Samsung and LG, which have expanded their respective presence in the global automotive electronics market.

Both tech giants have carried out large-scale investments in the automotive electronics business, regarding the sector as a future growth engine.

Samsung Electronics has injected trillions of won every year into its application process and foundry businesses. Last month, the company's semiconductor division signed a strategic partnership with China's automotive memory chipmaker SemiDrive, in an apparent attempt to expand its presence in the Chinese EV market, beyond North America and Europe.

LG's subsidiaries have also focused on developing auto parts, including displays, camera modules, powertrains and in-car entertainment systems. During the first half of this year, LG Electronics' vehicle component solutions division generated 10 percent of the company's revenue.

"Samsung and LG have led the market through large-size investments, but if the Yomiuri Shimbun's report turns out to be true, they will not be able to avoid competition with Chinese companies," said Austin Chang, director of the Korea International Trade Association's (KITA) analysis and forecasting department. "Amid the growing export of Chinese EVs, the country's EV makers will add value to their products, if they hold the lead in the automotive electronics industry."

Korean automotive electronics makers, however, have maintained a cautious stance on the Japanese newspaper's report, which has not been verified yet.

"I'm skeptical that Chinese chipmakers have enough capacities to supply the entire automotive semiconductors needed to manufacture EVs in China," an industry official said on condition of anonymity. "Chinese batteries may replace foreign products, but it will be difficult for China to create a self-sufficient supply chain in the semiconductor sector."

pjh@koreatimes.co.kr