'Samsung could acquire automobile chip firm'

Samsung Electronics' in-vehicle systems / Captured from Samsung Electronics

By Baek Byung-yeul

Samsung Electronics' possible move to acquire firms involved in the automotive semiconductor business seems to be rational given that cars will require a lot more chips and artificial intelligence (AI) technologies to become more autonomous over the next decades, according to Jim Handy, a U.S.-based analyst working for Objective Analysis.

There has been speculation that the Korean tech giant may try to acquire companies in the automotive semiconductor business, such as NXP, Texas Instruments, Renesas or Infineon.

The chip industry analyst said acquiring one of them could be a comprehensible move as the importance of the automotive chip business has been increasingly highlighted because global carmakers are struggling with an unprecedented shortage of chips for cars, which has caused them to suspend production.

The chip shortage issue stems from semiconductor companies prioritizing chips for IT devices and home appliances, which have been in strong demand since the COVID-19 outbreak.

The analyst said Samsung may decide to acquire firms involved in the automotive chip business from the long-term perspective.

"Right now the automotive semiconductor market is doing very well mostly because of a short-term shortage of foundry capacity. Samsung doesn't usually invest with a short-term view, so let's consider the long term," Handy told The Korea Times during a recent email interview.

"Over the next decade, automobiles will become autonomous (self-driving) and will require a lot of artificial intelligence (AI). Today most self-driving cars use graphics processing unit (GPU) chips from Nvidia for their AI. Although these chips were designed to process graphics, they perform AI calculations much faster and cheaper than standard Intel CPUs. They are also expensive," he said.

From that standpoint, companies specializing in AI technology will also be on the shopping list for Samsung.

"There are very many small firms that are trying to develop AI chips that are less costly than Nvidia's GPUs, as well as some research efforts in large firms like Intel and IBM. Samsung and SK hynix have also presented papers at technical conferences about AI chips that their research teams are investigating. None of these is an obvious target for an acquisition. Very few of the tiny AI-focused companies are publicly traded, so Samsung may acquire them without anyone learning about it until after the deal has been closed," he said.

Handy noted it is difficult to say Samsung's attempt to acquire another company would be the wisest plan as the firm has traditionally focused on improving its internal competitiveness rather than taking the M&A route to leverage its business capability.

"It's really unusual for Samsung to acquire other companies. This appears to be something that conflicts with the company's corporate culture. Samsung usually grows its business internally, without acquiring other firms," the analyst said.

Given Samsung's corporate culture, which tries to focus on improving its internal competence, he added "it would be much more likely that Samsung would produce semiconductors that compete against these companies' products and take the market away from them."

"From my perspective it would be surprising for Samsung to acquire a company like NXP or Infineon, or any other current leader in automotive semiconductors," Handy said.

"This is neither a good nor a bad thing. Samsung does extremely well without acquiring other companies, and other companies like Broadcom or Avago do extremely well by acquiring as many firms as they can," he further noted.

Samsung Electronics' in-vehicle systems / Captured from Samsung Electronics

Samsung's M&A bids recently surfaced as its chief financial officer revealed that the company will seek opportunities in an effort to find new growth engines.

"For the last few years, we have been evaluating possible M&A opportunities very carefully and have made significant progress in terms of preparation," Samsung Electronics CFO Choi Yoon-ho told investors during a conference call, Jan. 28.

Choi's remark was the first time for Samsung to officially clarify its M&A plan since the tech giant completed the acquisition of U.S. automotive electronics firm Harman in 2017. Samsung has enough financial capacity to execute merger deals as the tech giant's cash-equivalent assets as of the third quarter of 2020 stood at 116.2 trillion won ($104.3 billion).

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