Samsung Electronics is a late starter in the already competitive smart car business, but recent moves suggest it is shifting its focus into the segment more quickly than expected.

A Bloomberg report on Wednesday evening said that Samsung is in talks with Fiat Chrysler Automobiles to purchase its auto-parts affiliate Magneti Marelli. The deal could be closed this year at more than $3 billion, it said quoting one of the people familiar with the matter.


Samsung immediately reacted by saying that it wouldn’t comment on unconfirmed matters.

But the market view regarding the mooted M&A is that acquiring such company is a must for the South Korean electronics giant, which has had no foothold in the automobile industry since its complete withdrawal from the car industry in 2000.

The South Korean conglomerate sold its bankrupt automobile unit, Samsung Motors, to Renault 16 years ago. Since then, Samsung has said it would never reenter the automobile market, but it put together an auto component division as part of its future growth strategy.

Samsung is said to be interested in Magneti Marelli‘s experience in lighting, in-car entertainment and telematics, with which the tech giant could produce a synergy effect by using its dominant position in small OLED displays and semiconductors.

“Acquiring an auto-related firm is a necessary strategy for Samsung in order to enter the market that has a high entry barrier for companies with no references in the business,” said Chang Moon-soo, an analyst at Eugene Investment and Securities.

“The price seems to be adequate and the seller seems to have a sincere intention to sell. It depends on how desperate Samsung is to make it happen,” he said, referring to Fiat’s recent attempt to secure funds to reduce its debt level.

If the talks turn out to be real, it may also signal that Samsung has started to shift its focus to smart car business from its declining smartphone segment. Buying the brand name auto parts-maker will also help Samsung catch up with other tech giants that have been making aggressive moves in future car technology.

“Magneti Marelli is a well-known company that supplies components to FCA’s luxury line including Maserati and Ferrari,” said Choi Joong-hyeok, a former automobile analyst at Shinhan Investment and Securities.

“Acquiring such a company means that Samsung will secure those clients and inherit its reputation as well as its technological know-how all at the same time. It means a big takeoff for Samsung in auto market,” he said.

Rival companies on its home turf, including LG Electronics and Hyundai Motor, could feel threatened by Samsung’s massive capital strength allowing it to easily establish itself in an auto parts business that they have been striving to defend for years.

But the chances of Samsung reentering the auto market with a complete vehicle brand manufactured under its name are low, Choi said.

“Either with gasoline-powered or electric vehicles, it would be difficult for Samsung to produce a complete automobile. It could produce components, but not the engines,” he said.

By Cho Chung-un (christory@heraldcorp.com)