Starting small on its automotive dreams Samsung, through its smartphone-to-chipmaker Samsung Electronics, is investing in BYD an electric car maker in China. In a bid to diversify and reduce its dependency on mobile handsets, Samsung is looking towards the automotive ecosystem for growth.

A few months ago Samsung announced its plan to enter the auto semiconductor market with a customized Exynos line of chips for electric and connected cars. The strategic investment will allow Samsung to push its ambition along with BYD’s electric vehicle.

Key points that work for Samsung are:

• China is poised to become the largest EV market in the world. According to EV Sales China registered 32000 units in the month of June, Europe in the month of May registered 15000 units with the US in line with Europe in June. Europe and the US combined are registering fewer EV sales than in China.
• BYD has a market valuation of $20 billion dollars and leads the Chinese EV market with a 31% share in June and 37% year to date.
• The investment will allow Samsung to enter the automotive supply chain with its customized Exynos chips for electric and connected vehicles.
• Although Samsung is currently not claiming to be a battery supplier to BYD, this remains a potentially substantial market opportunity for the company.
• The partnership will further help Samsung smooth relationships with the Chinese government after the ban on use of nickel manganese cobalt (NMC) batteries produced by Samsung SDI and LG Chem for use in electric buses.

Tesla and BYD sales in China in June and Year-to-date

As China aims to have 5 million electric vehicles on road by 2020, BYD is well positioned to maintain its market lead.

The key points that work for BYD in respect of the Samsung relationship are:

• Samsung Exynos chips have proved successful in the smartphone space due to the companies technologically advanced designed chips based on latest ARM architecture. The new line for customized chips for automobiles will give BYD an advantage over others.
• BYD can leverage Samsung’s technological knowledge and smartphone learnings to take a strong position in connecting its cars to the internet and other networks.
• Being an early ally to the over $210 billion conglomerate can prove fruitful for BYD as it strives to fight off competition from Tesla to remain the number one EV manufacturer in China.
• Samsung is in collaboration with a number of players like AT&T to develop connected car technology which may be helpful for BYD.

The deal between the two companies is mutually beneficial. In the aftermath Samsung will be able to move its automotive chips along with BYD EVs and BYD will be able to leverage Samsung technology to grasp market share and remain number one in the EV space in China and potentially expand beyond.