UPDATE : 2020-07-14 11:59 (화)
Acquisition of Magna's battery pack business to raise Samsung's firepower
Acquisition of Magna's battery pack business to raise Samsung's firepower
  • 온라인뉴스팀 기자
  • 승인 2015.02.27 13:30
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The acquisition underlines Samsung SDI's sharp focus on advancing its battery technology expertise and expanding its customer base in mature alternate powertrain vehicle markets.

Earlier this week, Samsung SDI agreed to acquire the battery pack business of Magna Steyr, an Austria-based operating unit of Magna International, to strengthen its foothold in the automotive market. The acquisition includes all 264 employees, production and development sites as well as the existing contracts of the business. The transaction is expected to be completed in the first half of 2015. Financial details of the deal are not disclosed.

Magna's move to divest its battery pack business is seen as a "positive" by industry experts as the division was considered to be a "non-core business". Magna's battery capabilities were in battery module manufacturing, not in manufacturing battery cells. Magna stated that its intent is to focus on its "core propulsion competencies including engineering, drive trains and fuel systems". For Samsung SDI, which produces batteries for mobile phones, energy storage and automotive applications, experts feel that the deal will be favourable considering its diversified target market, which can generate a "reasonable return on investment" than an automotive supplier like Magna.

The acquisition will help Samsung enhance its capabilities in developing batteries for electric cars and strengthen its position in the battery value chain for both modules and cells. By combining its expertise in battery cell and modules with Magna's know-how in assembling battery modules, the Korean company will enhance its profile as an advanced battery manufacturer and supplier in the alternate powertrain market. Samsung SDI expects batteries-targeted for automotive and consumer electronics-are going to be a major growth driver in near future. The company estimates that the global market for lithium-ion batteries will reach USD32 billion by 2015, from USD11 billion in 2010. IHS Hybrid-EV forecasts global lithium-ion production to reach 6.6 million units in 2020 from 1.07 million units in 2014.

The acquisition is likely to better position Samsung SDI in boosting its automotive clientele in Europe, North America and China. Samsung SDI is already working with BMW, which renewed its contract with Samsung SDI last year with plans to increase orders of EV battery cells by at least 20-30% from its current levels in 2016. Samsung SDI has a contract to supply BMW's future models such as X5 PHEV, apart from its i3 EV and i8 PHEV. Ford also formed a partnership with Samsung SDI last year to build lightweight lithium-ion batteries.

A crucial area where the deal will prove significant is Samsung SDI's overseas presence. According to The Globe and Mail, the deal includes plants in Michigan, Austria and China, part of the assets that were bought by Magna International for USD75 million in 2012 to buy the interest in Magna E-Car Systems. After dissolving Samsung SDI's joint-venture with Bosch in 2012, due to a disagreement over strategy, the supplier was left with its Ulsan battery plant in South Korea. The company lacked overseas presence in the lithium-ion battery segment, since two plants in the United States went to Bosch. Samsung SDI had formed joint-venture with German battery maker Bosch in 2008. While the tech giant has already started taking steps to expand manufacturing footprint as construction is presently underway for a new plant in China with an investment plan of USD600 million, the Magna Steyr acquisition will help boost international presence further. IHS Hybrid-EV thinks that moving to relatively developed EV/HEV markets will work to the company's advantage. "It is a lot less risky than moving into a developing market. You're pretty sure of your customer base, market volumes. Skilled labour force is available. All of the risks that one might consider moving into an emerging market don't exist in a mature market," says Phil Gott, Senior Director, Long term planning, Industry Analysis - US, at IHS Automotive.

Samsung SDI is upbeat about the global market prospects for the hybrid and plug-in cars, expecting it to reach 7.7 million units by 2020 from 2.1 million in 2014. IHS Hybrid-EV forecasts global hybrid and plug-in vehicle production volume to reach 7.9 million units in 2020.

The acquisition, clearly, is a move to future proof its business and aligns well with the broader objective of Samsung SDI to achieve 30% share in the global lithium-ion battery market by 2015. With fast advancements in technology, acquiring new customers and retaining existing ones is a big challenge for any company in the battery space; Samsung seems mindful of this challenge.

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