By Kim Yoo-chul
Samsung Electronics is buying a stake in Chinese electric vehicle and battery maker BYD.
“Samsung reached an agreement to directly invest in BYD, which means that we will purchase a stake in the Chinese company,” the company said Friday. “Further details will be announced soon.”
The company said the agreement will help Samsung strengthen its electric vehicle component and smartphone parts businesses.
“But the agreement doesn’t mean Samsung Electronics will be participating in the management of BYD,” it said.
Officials say Samsung Electronics’ investment in BYD will be 500 billion won, or 3 billion yuan, about a 4 percent stake in BYD.
The agreement comes as Samsung’s battery unit ― Samsung SDI ― was excluded from a list of certified electric vehicle suppliers by Beijing.
Officials say the exclusion has shown that the protectionist threat from China is real because Beijing is preparing several measures to boost its local electric vehicle companies.
Therefore, the investment decision could be a key factor in Samsung SDI obtaining battery certification in the fifth certification round, in August. Samsung Electronics is the biggest shareholder in Samsung SDI, with 19.58 percent.
“The investment will help BYD develop its next-generation battery technology and also be beneficial for Samsung to expand its electric vehicle component business in China without policy risks,” an official said.
BYD, which counts Berkshire Hathaway as a shareholder, said earlier it was planning to raise up to $2.4 billion, or some 15 billion yuan, to expand capacity and produce batteries for coming advanced electric vehicles.
BYD is one of the Chinese automakers that has been busy selling shares to raise money for research and development to meet Beijing’s toughened emissions standards. SAIC Motor said it plans to raise as much as 15 billion yuan through a private share sale to develop its own brands and new-energy vehicles.
Meanwhile, as the smartphone sector slows, the investment shows Samsung’s aggressiveness to find new businesses to utilize its manufacturing capability.
“The smartphone business is no longer a hot category,” said a senior fund manager from a U.S.-based investment bank in Seoul that has invested millions of dollars in Samsung Electronics. “Therefore, Samsung Electronics is looking for the next promising business supplying batteries and components to leading electric vehicle manufacturers.”
The official said: “Another interesting point is that Samsung wants to supply its batteries exclusively to BYD, just like Tesla’s reliance on Japan’s Panasonic.”
He said the deal will be beneficial to Samsung given the dominant market share of BYD in the Chinese electric vehicle market.
BYD became the world’s biggest electric vehicle producer ― by sales ― last year, followed by Tesla and Nissan of Japan. It sold 61,772 electric vehicles.
“Samsung Electronics has ambitions to actively participate in the electric vehicle component supply chain,” Morgan Stanley analyst Shawn Kim said. “It built its automotive components team in December 2015 in the process of developing advanced technologies related to autonomous driving and infotainment. We see significant long-term growth opportunities that could benefit its semiconductor, display and consumer electronics division.”