Samsung Electronics and Baidu to form auto team in search of growth driver

Samsung has taken a decision a take an alternative business of automobile. The reason behind this is the declining profit generated from its Samsung handsets.

According to The Verge, Samsung revealed about starting a team of self-driving car technologies. Following its competitor Apple, Samsung is willing to work for auto components business rather than the whole of the vehicle. This week Hyundai said that it may face a local competition from Korean auto industry too.

The objective of Samsung is to manufacture chips and sensors for autonomous driving. However, it did not reveal its long-term plan, though.

The business aims to build an entertainment system and autonomous driving technology, as reported by Mashable. Moreover, a quiet experienced vice chairman of Samsung's electronics component business, Kwon Oh-hyun is expected to lead the new team developed.

The reason behind their decision is quite appropriate as the company is continually struggling to maintain its declining Smartphone sales profit rate. And the other option it views to overcome the loss is to find an alternative business.

With the advantage of high competition level in the market globally and a race to enter the top position, tech-oriented companies have been expanding its branches into auto technology. Some of the companies have already taken step by signing a partnership with automakers.

The Wall Street Journal reported on Wednesday that Baidu, China's Internet search engine also aims to develop an autonomous car within three years. Previously, Samsung owned an auto manufacturing business back in the 1990s, led by sports cars enthusiast Lee Kun-hee. But it suffered a huge loss following 1997 Asian financial crisis.

In a statement publicized by Samsung, it was mentioned that the developed team will now work in car components sale as reported by Reuters. The highlighted categories on which the team aims to work are in-car entertainment, satellite navigation and autonomous driving technologies. Besides that, it will also play its role in other areas of Samsung Group.

Samsung has been compelled by the investors and analysts to develop their command on fields such as chips and displays. It was because the modern automakers are willing to accept renewed and modern technologies for their vehicles.

According to the investors and analysts, if Samsung Electronics and affiliates such as battery producer Samsung SDI Co Ltd and electronic components maker Samsung Electro-Mechanics Co Ltd join their forces for single motive, the result can be productive.

They also mentioned that products manufacturing in the car industry is a timely process and more strict safety rules are required than handsets. This can be a drawback for Samsung and it can take years for the company to start earning profit from its car-related sales.

"Now that Samsung Electronics rolled up its sleeves, there needs to be a move to consolidate all the different parts into one," Kim said.

SK Securities analyst Kim Young-woo said that Samsung Electronics has taken a right decision but in order for the company to succeed, it needs to unite its key component-making operations on a single platform.