Samsung wins multi-billion-dollar camera module deal from Tesla

Samsung Electro-Mechanics Co., the electronic components unit of Samsung Group, has won a multi-billion-dollar deal to supply camera modules to Tesla Inc. for most of the US company’s electric vehicles.

The South Korean company beat other bidders, including crosstown rival LG Innotek Co. and Taiwan’s Primax Electronics Ltd., to clinch the deal estimated at between 4 trillion won and 5 trillion won ($3.2 billion-$4 billion), according to people familiar with the matter on Wednesday.

The deal marks Samsung Electro-Mechanics’ single largest contract ever, comfortably placing it as the largest supplier of camera modules for Tesla.

Over the next few years, Samsung will be supplying its latest camera modules to be installed on Tesla's Model 3 sedan, Model S sedan, Model X SUV and Model Y crossover as well as electric trucks such as the Cybertruck and the Tesla Semi, the sources said.

The components to be supplied this time will be Samsung’s version 4.0 camera modules with 5 million pixels, which show five times clearer images than the company’s previous 3.0 modules.

Samsung plans to mass produce the latest camera modules from as early as July, according to the sources.

Camera modules have become essential as automakers push for higher levels of autonomous driving. Tesla, the world’s largest EV maker, is leading the charge with its electric vehicles.

An electric vehicle usually carries seven to eight camera modules, up from just two in 2020. An advanced electric car is often equipped with 12 camera modules.

According to an industry estimate, vehicle camera module shipments are expected to rise to 230 million units globally this year, up 35% from last year, and are forecast to grow at an average annual rate of 30% until 2025.

LEAD OVER RIVAL LG

Samsung Electro-Mechanics is already a key supplier of camera modules to Tesla, but has lagged LG Innotek in terms of volume.

Until last year, up to 70% of Tesla camera modules were supplied by LG Innotek, while the remaining 30% were supplied by Samsung.

With the latest deal, Samsung will become Tesla’s largest supplier, accounting for nearly 80%, while LG will assume the remaining 20%, industry officials said.

Samsung Electro-Mechanics, a latecomer, entered the vehicle camera module market in 2010.

The company, which also makes camera modules for Samsung Electronics Co.'s Galaxy line of smartphones, received orders worth a total of 490 billion won last year.

Since 2020, the components maker has focused on more profitable vehicle camera modules as prices for smartphone camera modules have been falling amid a mobile phone market slowdown. Last year, the prices of smartphone camera modules fell 35.4% from the previous year.

CLOSER TIES WITH TESLA

Analysts expect the latest mega-deal to increase the company’s profits as Tesla has vowed to significantly ramp up EV production.

The latest deal is also expected to strengthen Samsung Group’s partnership with Tesla as the US company is aggressively expanding its autonomous EV lineup.

In September of last year, Samsung Electronics’ foundry business beat Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chip contract manufacturer, to win orders from Tesla for its next-generation autonomous vehicle chips.

Samsung Electronics has also been supplying its system chips to Volkswagen AG since last November.

Samsung SDI Co., a battery maker, is supplying its batteries to Rivian Automotive Inc., another US EV maker, from early this year.

Write to Ji-Eun Jeong at jeong@hankyung.com
In-Soo Nam edited this article.