Samsung on lookout for M&As; auto chipmakers among prime targets

Samsung Electronics Co., sitting on a cash pile of more than 100 trillion won ($90 billion), is actively pursuing mergers and acquisitions, with some automotive chipmakers touted as prime targets.

For Samsung watchers, the question now is not if but when the tech giant will finally re-enter the M&A market since its $8 billion acquisition of Harman, a US electronics systems maker for automobiles, in 2016.

Analysts say the time is ripe given its ample cash reserves, and if Samsung is looking for a mega-deal, its primary M&A targets will be automotive chipmakers – key players in the era of future mobility.

The company currently holds 116 trillion won in cashable assets. Its net cash assets, excluding liabilities, stand at 104 trillion won.

According to market research firm Gartner, about $1,000 worth of semiconductor chips will be used to make a smart car in 2024 from a mere $400 worth of chips per car in 2018.

With the rising popularity of smart cars such as autonomous driving vehicles and electric cars, chips are used in a growing number of applications, including driver assistance systems, navigation control, Wi-Fi, Bluetooth, video displays and computerized engines.

The latest models have between 200 and 400 chips per vehicle on average, and the number is forecast to rise above 2,000 once Level 3 self-driving cars hit the road.

Even now, global automakers are struggling to secure such chips for their latest models amid widespread shortages as car sales bounced back sooner than expected in the second half of last year.

“By 2030, about 300 million new electric cars will roll out every year. Suppose a car needs at least 3 application processor (AP) chips, that translates into as many as 1 billion such chips annually,” said Park Jae-geun, a materials engineering professor at Hanyang University.

“Drivers’ interest in self-driving cars will take off soon. If (Samsung) acquires an automotive chipmaker now, it will be at an advantage over its rivals.”

NXP, TEXAS INSTRUMENTS, RENESAS SEEN AMONG TARGETS

Names of some automotive chipmakers have already been swirling in the market as potential M&A targets for Samsung.

Market speculation has been rampant for years that Dutch-American firm NXP Semiconductors N.V. is among Samsung’s top M&A targets as the Korean company uses the Dutch firm’s chipsets for its Galaxy Note tablet computers.

An investment banking source recently said that Samsung conducted due diligence on NXP and US tech firm Texas Instruments Inc. in 2019 for a possible acquisition.

NXP, which has proven technology in the automotive AP chip and infotainment segments, would create synergy with Harman if Samsung takes it over.

Texas Instruments specializes in the design and manufacture of auto semiconductors and various integrated circuits.

Another company that is widely mentioned in the market is Japan’s Renesas Electronics Corp., a global leader in microcontroller unit (MCU) production, a key component that represents 30% of global automotive chip sales.

Renesas and NXP each take up about a third of the global MCU market.

READY TO ACT

An acquisition of any of the three companies will cost Samsung heavily.

Texas Instruments’ market capitalization stands at 173 trillion won, while the market caps of NXP and Renesas are 51.2 trillion won and 22.3 trillion won, respectively.

Samsung Electronics Chief Financial Officer Choi Yoon-ho said during an earnings conference call with analysts last week that the company has been closely looking at M&A targets in the past three years and it is now “ready to act.”

He said Samsung is well-geared to chase M&A deals and expand its facilities over the next three years to make full use of its cash holdings.

Last month, Samsung undertook a leadership reshuffle, under which young executives were promoted to lead memory chip and foundry businesses. The shake-up spawned market chatter that the world's top memory chipmaker might tap into its huge cash reserves to pursue aggressive M&A deals.

“We’re looking at various sectors for possible M&A deals. Our interest is not limited to automotive chipmakers,” said a Samsung executive.

Write to Su-Bin Lee at lsb@hankyung.com
In-Soo Nam edited this article.