According to reports, Samsung is considering acquiring NXP Semiconductors, Renesas Electronics or Texas Instruments (TI) to strengthen its position in the automotive chip field. “Korea Times” stated that for the same reason, the company intends to buy Infineon Technologies. The group sees these companies as potential purchase targets because they are a leader in the field of electronic auto parts. The company hopes to see greater market growth potential, so it is expected to become a more important auto parts manufacturer.
Which automotive chip manufacturer will Samsung pursue?
Samsung’s cash and equivalent assets at the end of the third quarter of 2020 totaled 116.2 trillion won (104.1 billion U.S. dollars). With so much capital, it can purchase Infineon, Renesas and NXP separately without having to bear additional debt. However, the company needs to negotiate payment terms to acquire Texas Instruments, which is currently valued at $155.9 billion. Since Samsung has the ability to buy one or more automotive chip providers, the question is which one is best for its goals. Based on past evidence, the conglomerate may regard NXP and TI as the most attractive acquisition targets. An insider in the financial industry who asked not to be named told the Korean Business News that the electronics giant had investigated the acquisition of the two companies in 2019. The company also made an offer for NXP in 2016, but failed due to Qualcomm’s ultimately failed acquisition offer.
Having said that, it will benefit from the protection of any leading chip supplier in the automotive industry. If Samsung acquires NXP, it will gain control of its market-leading infotainment center technology. On the other hand, TI has a large number of automotive power management circuit products. Renesas has a large number of automotive microcontroller units (MCU). Infineon also holds many patents for telematics, motor control, electric drive systems and advanced driver assistance system (ADAS) components. Samsung will also acquire an important share of the automotive semiconductor market by acquiring NXP (21%), Infineon (19%), Renesas (15%) or TI (14%). The financial attractiveness of the companies listed above easily outweighs any concerns about the current global shortage of automotive electronic parts. As of this writing, Korean companies have not expressed their intention to acquire any specific companies.
Why Samsung hopes to occupy a larger share of the automotive chip market?
Samsung hopes to become a major player in the automotive chip business to ensure its long-term success. In releasing its financial results for the fourth quarter of 2020, the company mentioned that expanding its technology and manufacturing resources is a recent priority. It has recently completed the design of a new 4nm product and is developing a 3nm node. It is also building a new plant in Pyeongtaek, South Korea to expand production capacity. However, Samsung also said that it is developing its business through some strategic acquisitions. In recent months, the company has also become increasingly interested in the automotive sector. It has reached an agreement with electric vehicle (EV) giant Tesla to manufacture its 5nm ADAS components. In addition, it also provides advanced chips for Audi and BMW to optimize the functions and telematics systems of their fleets.
For Samsung, acquiring a leading manufacturer of electronic auto parts is the next step in its development. Since electrification and self-driving car platforms have become more and more popular, this is also a smart business move. Because these innovations require a higher number of semiconductors per unit, their increasing popularity is rapidly expanding the market. The research group Gartner predicts that by 2024, the price of chips for personal transportation will reach $1,000, higher than the $400 in 2018. By taking advantage of the market segments that have entered the boom period, Samsung will be well served. Buying NXP, Renesas Electronics or TI will enable it to build a huge footprint in the market without having to spend years on expensive R&D and promotion. It will promote its foundry business by acquiring a number of specialized wafer fabs. These advantages and its recent announcements indicate that Samsung may issue a game-changing merger announcement at a relatively early time.