Insight: Better late than never? Samsung IT arms push into autos

Samsung Electro-Mechanics

29/10/2015 21:00

* Samsung group electric car/parts patent filings up since 
2010 
    * Rivals including LG Electronics already securing big 
contracts 
    * Auto software, components market worth $500 bln -analyst 
    * Autonomous driving to cost $6,500 per vehicle at launch 
-analyst 
 
    By Se Young Lee 
    SEOUL, Oct 30 (Reuters) - Samsung Electronics  005930.KS  
and group companies are trying a belated push into the business 
of supplying technology to car makers, while rivals are already 
sewing up lucrative deals with an industry that is notoriously 
difficult to break into.  
    Data compiled by Thomson Reuters IP & Science shows the 
world's top smartphone maker and other Samsung Group  SAGR.UL  
tech affiliates are ramping up research and development for auto 
technology, with two-thirds of their combined 1,804 U.S. patent 
filings related to electric vehicles and electric components for 
cars coming since 2010.  
    The analysis did not include filings made after 2013 due to 
a lag between filing and publication. 
    They haven't yet landed significant business, and Samsung 
Group declined to comment on strategy, but the lure is obvious. 
    Automakers already incorporate or are developing 
technologies to enhance safety and provide better smartphone 
connectivity and entertainment systems, creating an opening for 
tech companies to break into a market for software, services and 
components that is worth around $500 billion, ABI Research 
analyst Dominique Bonte said. 
    "There are two trends: the car becomes a connected software 
device, and the entire mobile and ICT ecosystem is getting very 
interested in playing a part in that evolution," Bonte said. 
    That is particularly welcome as demand for smartphones, TVs 
and computers slows, but Samsung is arriving late at a party 
where some of the best partners are already taken. 
    Cross-town rival LG Electronics Inc  066570.KS  announced a 
major supply agreement with General Motors  GM.N  in October, 
sending LG's shares surging, while U.S. chipmaker Nvidia Corp, 
known for graphics processors that power games consoles and 
laptops, says its chips will be in more than 30 million cars in 
the next three to four years.  urn:newsml:reuters.com:*:nL1N12G0SD urn:newsml:reuters.com:*:nL2N0XE11L 
    Unlike Apple  APPL.O  and Google  GOOGL.O , there is no 
clear sign yet that Samsung is developing its own autonomous 
driving technology. 
    IHS analyst Danny Kim said Samsung Group does not yet have a 
unified, group-wide approach to building its supplier presence 
in the industry. 
    "Samsung needs a serious commitment to drive the synergies 
between all competent organisations within Samsung Group," he 
said. 
    A decade after selling its debt-laden carmaking unit to 
Renault  RENA.PA , Samsung Group in 2010 announced its second 
foray into the auto industry, identifying car batteries as one 
of its five growth businesses. 
    Its Samsung SDI Co Ltd  006400.KS  is now the world's No. 6 
electric car battery maker, counting BMW  BMWG.DE , Chrysler 
 FCHA.MI  and Volkswagen among its clients. 
     
    IN THE HUNT 
    Other parts of the Samsung empire are now in the hunt. 
    Samsung patent filings show a wide range of technologies 
including a drowsy-driving detection system, an alert system for 
break-in attempts and a transparent display for directions and 
traffic information. 
    Samsung Electro-Mechanics Co Ltd  009150.KS  recently formed 
a dedicated team to sell components such as camera modules to 
new auto clients and says it would consider acquisitions to 
boost car-related businesses. 
    Samsung Display has also cited the auto industry as a 
potential growth area and has been testing its organic 
light-emitting diode (OLED) displays with BMW and auto parts 
maker Continental  CONG.DE .  urn:newsml:reuters.com:*:nL4N0V520U 
    The growth prospects are mouthwatering. 
    Nvidia says its autos revenue was $148 million for the first 
half of this fiscal year, nearly doubling in a year. 
    Consulting firm McKinsey said in a 2014 report that revenue 
from hardware, software and services for connectivity-enabled 
cars could grow to 180 billion euros ($200 billion) by 2020 from 
an estimated 30 billion euros in 2014. 
    Carmakers may spend an additional $6,500 per car when they 
launch fully autonomous vehicles, the Boston Consulting Group 
said in a report this year. 
    Analysts say the supply relationships built by SDI could be 
expanded by bundling parts and services from other Samsung arms. 
    Samsung insiders acknowledge, however, that it may take 
several years before tech arms other than Samsung SDI generate 
significant auto-related sales. 
    Product development cycles in the auto industry are far 
longer than in consumer electronics, and carmakers are cautious 
about adding suppliers without a track record. It took the 
better part of a decade for Nvidia to gain acceptance as a 
global supplier, while LG worked with GM for nearly a decade 
before it got its supply contract for the Chrevrolet 
Bolt. urn:newsml:reuters.com:*:nL2N0XE11L 
    Samsung Electronics could still catch up by taking the 
one-stop-shop approach, similar to that of LG Electronics, by 
working with sister companies to combine offerings such as 
batteries, chips, sensors and software such as the Tizen 
operating system into a single package, analysts say. 
    ABI's Bonte said Samsung could also speed things up by 
acquiring established players such as Japan's Renesas 
Electronics Corp  6723.T , which researcher Gartner says was the 
world's top auto semiconductor maker last year, with $3.1 
billion in revenue. 
    "It's important for a supplier to be able to sell not just 
one single component but provide that entire platform," he said. 
 ($1 = 0.9003 euros) 
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
Samsung's push into vehicle technology    http://link.reuters.com/xat85w 
Samsung Elec unveils $9.9 bln buyback as Q3 profit rebounds    
 urn:newsml:reuters.com:*:nL3N12Q11G 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Reporting by Vincent Lee; Additional reporting by Sohee Kim; 
Editing by Tony Munroe and Will Waterman) 
 ((vincentsy.lee@thomsonreuters.com; +822 3704 5646; Reuters 
Messaging: vincentsy.lee.thomsonreuters.com@reuters.net; follow 
me on Twitter @Rover829)) 
 
Keywords: SAMSUNG GROUP AUTOS/