Auto electronics units emerge as cash cows for Samsung, LG

Visitors try out LG Electronics' AI-based automotive solutions at CES 2026, the world's largest consumer electronics and IT exhibition, held in Las Vegas in January. The company's AI-powered in-cabin vision solution analyzes the driver's gaze and delivers relevant information in real time, displaying it intuitively on a transparent OLED screen. [LG Electronics]

The automotive electronics businesses of Samsung Electronics and LG Electronics are drawing attention as stable profit engines. As cars evolve beyond simple transportation into software-defined vehicles (SDVs), the market has expanded in scale — and years of sustained investment are now translating into meaningful returns.

LG Electronics' Vehicle Solution (VS) division crossed the 3 trillion won ($2.11 billion) quarterly sales threshold for the first time in the first quarter of this year. It followed that with 3.03 trillion won in second-quarter sales, pushing first-half revenue above 6 trillion won — a record high.

Profitability has also improved markedly. After recording more than 200 billion won in quarterly operating profit for the first time in the first quarter, the division posted 191.2 billion won in the second quarter, bringing cumulative first-half operating profit to 402.8 billion won. Operating margins came in at 6.9 percent in the first quarter and 6.3 percent in the second.

LG Electronics' VS division sales over the past 10 years and operating profit over the past five years. [Created with ChatGPT]

LG Electronics launched the VS division in 2013 and endured a decade of losses before the business turned the corner. The division surpassed 1 trillion won in quarterly sales for the first time in the third quarter of 2018, then crossed the 2 trillion won mark in 2022. This year it has posted 3 trillion won in sales for two consecutive quarters, cementing its status as a reliably profitable operation.

The VS division has built partnerships with major global automakers — including Hyundai Motor, BMW, Mercedes-Benz and Toyota — and holds an order backlog of 100 trillion won.

Analysts also note that the division has grown both revenue and operating profit while improving its margin, even as the automotive electronics industry matures. That combination is why observers say the business has moved beyond simple scale expansion into a phase of quality growth with genuine profitability.

The division's margins stand out even against global automotive electronics peers. Last year's annual operating margins were 1.8 percent at Bosch's mobility division, 3.9 percent at Continental, 4.5 percent at ZF and 7.2 percent at Denso.

The VS division operates across three core areas: infotainment, telematics and digital cockpit systems. Of these, telematics and infotainment account for the largest share of total sales.

Telematics — the key technology linking vehicles to external networks — is considered essential to the spread of connected cars and SDVs. According to market research firm TechInsights, LG Electronics held a 23 percent share of the global telematics market in the fourth quarter of last year, ranking first worldwide.

Because LG Electronics' core telematics and infotainment products are fitted to both electric vehicles and internal combustion engine cars, the division is relatively insulated from the slowdown in EV market growth. Demand for in-vehicle displays, connectivity and software features continues to rise, and the shift toward connected cars and SDVs is expected to sustain the division's growth momentum.

LG Electronics is also accelerating development of next-generation automotive solutions built on physical AI. The company is developing a high-performance computing platform that combines its existing infotainment technology with physical AI for autonomous driving and in-cabin AI that understands the driver, passengers and interior environment. At CES this year, it unveiled the "AI Cabin Platform," an on-device AI solution for vehicles.

Samsung Electronics' Harman division sales over the past 10 years and operating profit over the past five years. [Created with ChatGPT]

Samsung Electronics entered the automotive electronics business in earnest when it acquired US-based Harman, a global leader in automotive electronics and audio, in 2016. Chairman Lee Jae-yong had identified automotive electronics as Samsung's next growth engine and made the bold decision to acquire Harman.

Harman posted sales of 3.8 trillion won and 4.6 trillion won in the first and second quarters of this year, respectively. Operating profit came in at 200 billion won and 400 billion won for the same periods, with operating margins of 6 percent and 9 percent, reflecting steady growth. On an annual basis, the operating margin has trended upward from 6.0 percent in 2021 to 9.5 percent in 2025.

In December last year, Samsung broadened its automotive electronics footprint by acquiring the advanced driver assistance systems (ADAS) business of Germany's ZF. ZF holds expertise across a wide range of technologies, including ADAS, transmissions, chassis systems and EV drivetrain components.

Samsung Harman's automotive electronics solutions on display at CES 2025. [Samsung Electronics]

Samsung Electronics plans to combine Harman's digital cockpit technology with ZF's ADAS capabilities to compete in the centralized vehicle controller market. The goal is to strengthen its position in automotive software and high-performance computing as the global auto industry rapidly shifts toward SDVs.

Samsung Electronics also plans to invest 131.18 million euros ($152 million) in Hungary to expand an autonomous driving software and hardware research and development center and Harman's automotive electronics production base.

Samsung Electronics Chief Financial Officer Park Soon-chul said at the company's second-quarter earnings call that the acquisition of ZF's ADAS business had allowed the company to expand "from a business centered on digital cockpit and car audio products into an ADAS business supplying smart camera sensors and high-performance controllers." He added that the company would "leverage synergies between Samsung Electronics and Harman to introduce in-vehicle IT and AI experiences, expand into autonomous driving, and emerge as a top-tier global automotive electronics company."

go@heraldcorp.com