Tech firms accelerating automotive electronics business
[THE INVESTOR] LG Electronics, Google, Facebook, SAP and Qualcomm are slated to join the Frankfurt Motor Show that begins this week, in a move to capitalize on the growing trend of connected and electric cars.
The IT firms’ aggressive entry into the automotive industry comes in contrast to automakers’ move to skip traditional auto shows to attend consumer electronics events, reflecting the blurring of the lines between the two industries in an age of rapid technological fusion.
“This is a counterattack from IT firms,” said Richard Kim, principal research analyst IHS Markit in Seoul.
If there have been attacks from automakers at CES, it is now the IT firm’s turn, Kim added. He cited the Consumer Electronics Show held early this year in Las Vegas where BMW, Fiat Chrysler, Ford, Honda, Hyundai, Nissan, Toyota, Volkswagen and Bosch took center stage.
“As the auto industry is now viewed as the mobility industry, IT firms jumping into motor shows should not be considered abnormal,” Kim added.
Automobiles continue to become smarter and a growing proportion are electric.
Goldman Sachs predicted the global self-driving car market would grow 30-fold to reach $96 billion by 2025 from $3 billion in 2015. The global electric car market would also grow over 10 times to 3.8 million units from 340,000 units during the same period, according to IHS Markit.
“When the self-driving and electric car era begins -- and cars no longer run on combustion engines -- there will be a paradigm shift in leadership in the global auto industry,” said Cho Chul, a researcher at the Korea Institute for Industrial Economics & Trade.
Korean tech firms LG and Samsung are rushing to capitalize on the growth potential amid slowdown of their mainstays: smartphones and home appliances.
LG Electronics, which moved a step ahead of local rival Samsung in automotive electronics, is joining the Frankfurt Motor Show for the first time. It will showcase its car infotainment and advanced driver assist system technologies and electric car motor solutions alongside LG Chem, which will display its electric vehicle batteries.
LG, which has supplied driving motors, inverters and battery packs for the GM Bolt EV this year, is now seeking to acquire Austrian automobile parts company ZWK.
Samsung Electronics belatedly joined the race by acquiring US car audio firm Harman last year. The company plans to integrate its voice assistant Bixby into Harman’s infotainment system.
Cho said their moves in the auto industry will “accelerate in the future by creating synergies with their existing technologies -- chips, software, smartphones, displays and batteries.”
Samsung Electronics announced early this year its plan to supply the application processor Exynos for German automaker Audi’s car infotainment system. LG Display will meanwhile reportedly provide its organic light-emitting diode products to Audi and fellow German automakers Mercedes-Benz and Volkswagen. Samsung SDI and LG Chem now supply their batteries to most global electric vehicle makers. Samsung Electronics and LG Electronics are similarly seeking to integrate their smartphones into automobiles like Google and Apple’s in-vehicle operating systems, Android Auto and CarPlay, respectively.
The tech firms’ moves are seen by analysts as “inevitable” rather than opportunistic, as they still lack new growth engines following the boom of smartphones.
“The move into automotive electronics is seen as inevitable for Samsung and LG, facing mature markets in smartphones and home appliances,” said Kim Ji-san, an analyst at Kiwoom Securities.
Samsung’s smartphone business, which used to be its main cash cow, is now yielding to booming chips. The chip unit posted an operating profit of 8 trillion won ($7 billion), accounting for more than half of the conglomerate’s total 15 trillion won profits in the second quarter. Its smartphone unit posted 4 trillion won in business profit during the period.
Global smartphone shipments are predicted to see continued slow growth with a 3 percent rate this year and 2 percent rates over the following two years, according to Strategy Analytics. Global TV shipments are also predicted to hit a record low of 221 million units this year, compared to 248 million units in 2010, according to IHS Markit.
By Shin Ji-hye/The Korea Herald (firstname.lastname@example.org)