Expansion Strategy
Samsung Electronics, which has recently kicked off its own automotive electronic component business, will aggressively launch M&A attempts in order to close the gap in the market in one burst.
This is because it is the most efficient to acquire companies that already have technical and sales capacities in a bid to catch up with leaders in each sector in a short time, such as German auto supplier Bosch, Japanese automotive semiconductor maker Renesas Electronics, LG Electronics’ “telematics,” a core part of autonomous vehicles, and Japan Display Inc.’s automotive displays. In particular, Samsung Electronics has a considerable technology gap with Google and Apple in the autonomous vehicle sector. Therefore, the company is likely to seek all-out M&As.
Which companies will be in Samsung Electronics’ “shopping list” now? Economic industry sources believe that Samsung is most likely to imitate its competitor Apple. With Samsung’s “fast follower” strategy, which is its specialty, the company will narrow the technology gap.
In fact, Apple aggressively took over relevant companies this year while working on its Titan smart car project. According to Samsung Securities Co., there were five M&A deals announced in the last six months alone.
In April, Apple bought Israeli 3-D object modeling and face recognition technology company LinX Computational Imaging Ltd. for the price of US$2 million (2.36 billion won). This company has the technology to take high-resolution pictures even in the dark and turn them into 3D models.
In May, Apple acquired Coherent Navigation, a company that develops high-integrity GPS. In order to produce autonomous cars that recognize geographic features and avoid jam-packed roads, the company needs an ultra-precision GPS technology with error ranges of less than 10 centimeters, according to experts.
In addition, Apple purchased Mapsense, a San Francisco startup that builds tools for analyzing and visualizing location data, at US$30 million (35.45 billion won) in September while taking over Perceptio, an artificial intelligence startup, in October.
Moreover, the company acquired VocaLink, an U.K.-based startup that has the technology to analyze human voices by computer systems. It is said that the acquisition is the groundwork to develop cars with computer systems that can communicate with drivers.
Samsung Electronics is also likely to seek M&As with companies in the semiconductor sector, which is the strength of the company. Currently, there are about 200 semiconductor components used in automobiles, including electronic control units and sensors that can measure inside and outside temperature, pressure and speed of the car. The market has enough potential for growth to be estimated at US$36.4 billion (43.01 trillion won) in 2018. Samsung lags behind global leaders in semiconductors used in smartphones, computers, servers and automobiles. An official from the business industry said, “The automotive semiconductor market is a multiple low-volume market and has high barriers to entry to the market. Accordingly, Samsung is highly likely to actively pursue M&As.”