Conglomerates compete on next-generation carsMadeinkoreablog
Dec. 9, 2015 was a big day for South Korea’s top two conglomerates — Samsung and Hyundai Motor.
Samsung announced it would set up a new team dedicated to car parts for infotainment systems and self-driving cars, while Hyundai said it would start developing automotive chips through its own electronics unit.
Technological convergence across industries has become an increasing trend in recent years, with the automotive sector becoming a fierce battlefield for tech firms and carmakers in the era of electric mobility.
According to Strategic Analytics, a market research firm, electronics parts would make up 50 percent of all the parts used to build a car by 2020, up from the current 35 percent. When it comes to electric vehicles, tech firms build almost all the parts aside from the auto body and tires.
In response to the growing presence of tech giants in the auto industry, carmakers are also pouring resources into electric cars and connected driving not to lose their century-old leadership.
The trend is set to be reflected at the 2016 Consumer Electronics Show in Las Vegas next week. The world’s largest electronics trade show said two of the total seven keynote speakers will be carmaker CEOs.
For Korea’s Samsung and Hyundai, their smart car push is also part of their desperate efforts to find the next growth engine as their flagship businesses face rapid market saturation and technological challenges from rivals in emerging markets.
“The future car will have both functions — the so-called ‘autonomous driving’ where the programmed car will do all the driving, and the telematics program that links everything through the Internet,” said Sunwoo Myung-ho, professor at Hanyang University in an interview.
“The car will be a game changer in the future industries and the centerpiece of pretty much everything the modern technology can offer.”
Samsung’s return to car business after 15 years
The auto business has been a sore point among Samsung Group’s sprawling businesses.
Under the leadership of chairman Lee Kun-hee, a car enthusiast, Samsung jumped into the auto sector in 1994 despite skepticism from critics. Hit hard by the Asian financial crisis in the late 1990s, it had to sell off Samsung Motor, its auto unit, to France’s Renault in 2000.
But speculations haven’t ceased about Samsung’s re-entry into the car business over the past few years, as Samsung has started producing batteries and chips for cars.
In 2009, the company won a crucial deal from BMW, becoming the sole supplier for the German luxury carmaker’s first fully electric compact i3 and the i8 plug-in hybrid sports car.
The two companies have strengthened their partnership into infotainment systems as well. The BMW deal also paved the way for Samsung to secure more deals from other carmakers like Audi in recent years.
With the tech giant gearing up for the leadership transition to the next generation, the car business has resurfaced as one of the company’s next major growth engines, alongside biotechnology.
Samsung Electronics vice chairman and the group’s heir apparent Lee Jae-yong has also built close relationships with CEOs of global carmakers for future partnerships.
Then, the announcement of a new team dedicated to car parts came in December.
The company said the team would focus on parts for infotainment systems and self-driving cars in the earlier phases. The team will be directly controlled by Kwon Oh-hyun, one of the company’s three co-CEOs, who oversees the display and chip business units.
Samsung’s other affiliates have already secured automotive technologies for smart cars. Samsung SDI makes lithium-ion batteries and energy control systems for electric vehicles, while Samsung Electro-Mechanics produces camera modules and sensors, key parts for autonomous cars.
Industry watchers also predict Samsung could use its own operating system Tizen as self-driving software to connect all machines and devices, including home appliances and cars, with its mobile devices.
“Together with LG, Samsung’s joining would offer a boon for Korea to lead futuristic automotive technologies,” said Shin Jung-gwan, a senior analyst at KB Securities. LG also launched a separate team for car parts in 2013.
“But the entry barrier of the car business is still higher than other industries. It would take some time for Samsung to see tangible results,” he added, saying Samsung could seek ties with European carmakers based on its brand awareness in the region.
A Samsung executive made it clear that the company would not compete directly with carmakers.
“Smart cars like self-driving cars are a totally different concept from conventional vehicles. We expect more leadership in competition with global tech rivals like Google and Apple in the field,” he said on condition of anonymity.
After Google and Ford recently announced their partnership on self-driving cars, hopes were high for Samsung and Hyundai to team up for futuristic vehicles. But sources say it is unlikely for them to join hands in the near future.
“There were several attempts in the past, but they could not be realized due to their different corporate cultures. On self-driving cars, Samsung and Hyundai would (more likely) compete with each other, rather than seek a partnership,” a Hyundai executive said.
Hyundai’s renewed push on self-driving cars
Following years of robust growth, Hyundai Motor, together with sister firm Kia Motors, has poured considerable resources into creating new growth engines, especially on self-driving cars.
By around 2020, Koreans will be able to use “the largest smartphone on Earth with wheels” — fully automated cars. And the frontrunner is Hyundai, the nation’s largest carmaker.
Hyundai plans to invest 2 trillion won ($1.7 billion) into autonomous driving cars by 2018, with aims to launch the first rollout model by 2020.
The carmaker has also formed an alliance with local tech and information technology companies, such as LG, Naver, KT and Hanwha for technological convergence in the futuristic vehicles.
Hyundai in 2012 established Hyundai Autron, an automotive electronics unit that designs semiconductors essential for self-driving cars. Several tech experts from Samsung and LG have been scouted to join the firm.
“The company believes that in order to become a market leader you should develop your own semiconductors for programming,” a company insider said, declining to be named.
“In the end, the whole competition will be narrowed down to whether the mass-produced cars can realize all the fancy functions in the real roads. At least in this respect, we are ahead of luxury carmakers such as BMW or Mercedes-Benz.”
After several showcases at home and abroad, some of the early features of the autonomous driving techniques have been adapted to the EQ900, the first model under Hyundai’s newly launched premium standalone sedan brand, Genesis, in December.
The highway driving assist has an adaptive cruise control function, which not only turns the engine and accelerates the car, but also detects the lane and collision risks from 360 degrees and keeps the car at an appropriate distance from other cars on the road. It also operates the brakes and air bags autonomously while contacting emergency response services.
Hyundai in June also released its traffic jam assist program, slowing down or stopping the car when a car from the next lane attempts to join the driver’s lane in front of the car.
A car performing like a computer became a reality when Hyundai Motor America, Hyundai Motor’s U.S. affiliate, became the first carmaker to commercialize Google’s infotainment system in its 2015 Sonata.
Using the Android Auto — Google’s equivalent to Apple Carplay — people can sync their Android phones with their cars to see various applications, including Google Map on the display screen inside the car.
But Hyundai’s enthusiasm dates way back to early 2012, when the carmaker launched the Blue Link telematics program, which garnered 160,000 users across the country.
The Blue Link executes a number of different information, entertainment and safety functions including music and video streaming, remotely turning on the engine or arranging checkups or repairs when abnormality is detected. Earlier this year the carmaker projected that the same manipulation will be made available with smart watch devices in the near future.
In Korea, the New Tucson sport utility vehicle was adapted with an LTE-driven Blue Link, securing swifter performance, earlier this year, hinting that telematics will be the next big thing in the automotive industry.
To many carmakers, automated cars with smarter telematics are not just about evolution, but more of a survival.
A market report notes that the total cost of IT tools or software parts used in a car accounted for 25 percent of a car’s manufacturing cost in 2010, but it is assumed to have risen to around 40 percent in 2015 and is likely to increase more in the future.
At the same time, it is also about the power game — whether these cars will be a large movable smartphone or a car that is just very intelligent.