Samsung Electronics to Form Auto Team in Search of Growth Driver

Samsung Electronics Co Ltd said on Wednesday it will create a team to develop automotive-related businesses, as it searches for a new profit driver while struggles at its smartphone division deepen.

Samsung, in a statement, said the team will work outside of existing divisions to grow sales of car components, with initial focus on in-car entertainment, satellite navigation and autonomous driving technologies. The team will also work with other technology arms of the Samsung Group.

Investors and analysts have increasingly called on Samsung to leverage its strength in fields such as chips and displays to tap demand from carmakers seeking increasingly sophisticated technologies for their vehicles.

Meanwhile, market estimates suggest profit from smartphones - Samsung's former cashcow - is set fall in 2015 for the second consecutive year, putting pressure on the manufacturer to find new profit drivers.

US patent filings data compiled by Thomson Reuters IP & Sciences showed increasing efforts by the world's top smartphone maker and its affiliates to push into the rapidly growing market for automotive components, software and services that is worth around $500 billion (roughly Rs. 33,43,011 crores).

Samsung Electronics and affiliates such as battery producer Samsung SDI Co Ltd and electronic components maker Samsung Electro-Mechanics Co Ltd can become major forces in automotive technology by combining offerings into a single platform, investors and analysts said.

But they point out that it could take several years before Samsung Electronics sees meaningful earnings contribution from car-related sales. Product cycles in the car industry often last several years and require more rigorous safety standards than consumer electronics.

SK Securities analyst Kim Young-woo said while Samsung Electronics is moving in the right direction, Samsung Group as a whole needs to combine key component-making operations under a single umbrella in order to succeed.

"Now that Samsung Electronics rolled up its sleeves, there needs to be a move to consolidate all the different parts into one," Kim said.

© Thomson Reuters 2015