SEOUL, KOREA – At a recent management meeting, Chung Mong-koo, the chairman of Hyundai group, stressed the importance of strengthening automotive electronics – all electric and electronic systems for vehicles, acting as a brain to control automobiles. Formerly, engine parts were the decisive factor in deciding the value of vehicles. These days, however, electronics in vehicles have emerged as the vital marketing point, with information technology applying to engine control as well as automatic transmission. Chairman Chung also emphasized complete localization of these electronics. 98 percent of automotive semiconductor and electronic control systems have relied on imports to date.
Following his remark, Hyundai group reorganized its R&D sector, centering on electronic systems. HYUNDAI WIA, one of the subsidiaries in automotive facilities expanded their production line of automotive electronics, planning to invest around 30 million dollars in the production facility sector. Hyundai plans to back subsidiaries relevant to the system such as MOBIS, KEFICO, and Hyundai-Autron and to expand the existing machine tool division to include electronic system and information technology.
Hyundai group recently shifted KEFICO, a formerly joint business with BOSCH, to an independent company in order to fully concentrate on the development of automotive electronics. Newly established Hyundai-Autron is focused on developing the technology for automotive semiconductor and electronic control. Core personnel of Hyundai motor, MOBIS, and KEFICO will be strategically transferred to Hyundai-Autron, and the number of R&D personnel is expected to increase to over 1,000 within two years.
This emphasis on automotive electronic systems seems to have been motivated by a sense of rivalry with Samsung. This May, Lee Jae-young, a president of Samsung electronics had a meeting with Martin Winterkorn, Chairman of Volkswagen in Germany to discuss cooperation on electronic parts such as automotive semiconductor and secondary battery. He also plans to meet Alan Mulally, CEO of Ford later this year. Last year, he met Dan Akerson, chairman of General Motors, Akio Toyota, CEO of Toyota in January of this year, and Norbert Reithofer, chairman of BMW in February in an attempt to continue cooperation.
Samsung has already selected an automotive battery as one of five new growth engines this year, and is considering setting up of new division pushing the automotive electronics business forward, believing that engine will ultimately be replaced by batteries. The electronics giant aimed at integrating its accumulated electronic technical skills with global vehicles. Samsung already captured an advantageous position in the secondary battery areas which feature high growth potential, with all future cars such as hybrid, electric and hydrogen fuel cells cars requiring electric power. The automotive secondary batteries market is expected to rise to 6.7 million in 2015 and 10 million in 2020.
Why do both companies pay such a great attention to automotive electronics It is because of the high growth potential. Mckinsey predicted that the share of electronics in vehicle production costs would sharply increase from 19 percent in 2004 to 40 percent in 2015. For the same period, the amount would be expanded from USD 120 billion to USD 200 billion. If the age of electric cars comes, the share of automotive electronics is predicted to rise to as high as 70 percent, demonstrating the rising importance of these components.
Automobiles have already evolved to become an electronic-intensive industry beyond mere equipment. Various electronic technologies such as semiconductor, electronic control device, battery, air conditioner, and audio are vital components in the automotive industry. Recently, high tech functions such as automatic parking system, automatic controller and head-up display have been a growing trend. The battle over automotive electronics seems to have attracted immense attention from analysts about which company will take the advantageous position first.
