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Samsung sells $1.3 bn stake in China’s BYD, keeps watchers puzzled

The move comes as Samsung walks a tightrope on its US investment plans, pressured by the Biden administration

By Sep 06, 2021 (Gmt+09:00)

Samsung headquarters building in Seoul
Samsung headquarters building in Seoul

Samsung Electronics Co. has sold a 1.6% stake worth 1.5 trillion won ($1.3 billion) in Chinese electric vehicle and rechargeable battery maker BYD Co., raising questions over its stake sale as technology firms and automakers are in a race to develop electric and self-driving vehicles.

According to a regulatory filing, the South Korean tech giant said its stake in BYD was 0.3% at the end of the first quarter. That compares with its earlier report to Korea’s financial regulator that its BYD stake was 1.9% at the end of 2020.

The 1.9% stake was worth 1.7 trillion won at the time, more than a threefold increase from its purchasing price of 529 billion won.

Samsung bought into the stake in 2016, saying the purpose was to strengthen ties with the Chinese electric car and battery maker and boost its automotive chip business.

Samsung made the investment through its Chinese subsidiary, Shanghai Samsung Semiconductor.

BYD, which counts Warren Buffet's Berkshire Hathaway as a backer, began as a battery maker for personal electronics before launching its automotive business that focuses on electric and hybrid vehicles in 2003.

Officials from China and the US at the opening of the BYD headquarters in LA Oct. 24, 2011
Officials from China and the US at the opening of the BYD headquarters in LA Oct. 24, 2011

PUZZLED OVER SAMSUNG’S STAKE SALE

Samsung’s BYD stake sale, which comes as global technology companies are tapping into the automotive industry’s shift toward next-generation vehicles, has left industry watchers puzzled over its motives.

Some people say Samsung has decided to sell the BYD stake to book profit as the Chinese company’s shares have risen significantly in the past few years.

BYD’s shares listed on China’s Shenzhen Stock Exchange were trading at 254.1 yuan last Friday, up 31% from 194.3 yuan at the end of 2020.

However, other people say Samsung has little reason to cash out of the BYD stake, given that the Korean company currently sits on cash reserves of close to $100 billion.

Samsung’s sale of the BYD stake also comes at a time when it is walking a tightrope on its US investment plans, squeezed between US President Joe Biden’s call on global firms to spend more in America to constrain China and the need to serve its Chinese clients.

US President Joe Biden asks global firms to invest more in America to constrain China
US President Joe Biden asks global firms to invest more in America to constrain China

Samsung, the world’s largest memory chipmaker, is currently considering investing $17 billion to build a new chipmaking plant close to its existing factory in Austin, Texas.

In China, Samsung operates a NAND flash memory plant in Xian and plans to expand facilities there to meet rising demand from one of its largest chip buyers. Samsung’s Chinese clients include smartphone makers such as Xiaomi, Oppo and Vivo. Samsung could also be asked by the Chinese government to build more chip plants in China, industry officials said.

Write to Shin-Young Park at nyusos@hankyung.com

In-Soo Nam edited this article.

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