Samsung Electronics Co. and LG Electronics Inc., the two largest home appliance and information technology (IT) firms in South Korea, continue to show a high sales increase of more than 20 percent in automotive electronics. With competition intensifying in their core businesses, such as semiconductor, display and television, this new growth business is expected to assume growing importance.
The two companies’ sales of auto components, including automotive electronic systems, are forecast to grow in a double digit this year compared to last year, according to industry sources on April 7. The two firms enjoyed a sales increase of more than 20 percent last year.
In fact, Samsung Electronics’ business report said Harman posted 8.84 trillion won (US$7.77 billion) in consolidated sales last year, up 24.5 percent from a year ago. Sales of LG Electronics’ vehicle component solutions (VS) also grew as much as 28.4 percent to 4.29 trillion won (US$3.77 billion).
Currently, Samsung Electronics’ Harman and LG Electronics’ VS businesses account for only 3.6 percent and 7 percent of their total sales, respectively. So, it is hard to expect profitability yet. However, they practically have a greater impact on the companies’ growth as they can create a synergy with their related businesses and subsidiaries, including semiconductor, display and battery.
In this regard, market research firm IHS Markit forecasted that the global auto semiconductor market would grow from US$34 billion (38.69 trillion won) in 2018 to US$55.30 billion (62.93 trillion won) in 2022. The global electric vehicle (EV) battery market is expected to grow 63 percent to 155 GWh this year from 95 GWh a year earlier, according to a recent report released by EnergyTrend, a research division of global market research firm TrendForce.
However, governments around the world are already paying attention to the automotive electronics market and there has been speculation that the two companies may push into the complete car market. An official from the industry said, “How the two firms overcome protectionism, secure confidence from clients and establish infrastructure for electric and autonomous vehicles will be the key to a sustainable growth.”
Meanwhile, Samsung Electronics announced its tentative results for the first quarter of this year on April 5. It said it posted 52 trillion won (US$45.69 billion) in consolidated sales and 6.20 trillion won (US$5.45 billion) in operating profit. LG Electronics also announced on the same day that it had sales of 14.92 trillion won (US$13.11 billion) and operating profit of 899.60 billion won (US$790.51 million) in the first quarter. Samsung Electronics’ operating profit plunged a whopping 60.4 percent from the same period a year ago. LG Electronics saw its operating profit drop 18.8 percent from a year earlier when it posted the second highest-ever results with 1.11 trillion won (US$973.46 million). Bu the figure represented a 1,088.4 percent increase from 75.70 billion won (US$66.52 million) at the previous quarter when it recorded an “earnings shock.”