Samsung Electronics is buying the mobile technology business of CSR, the struggling UK chipmaker, in a $300m deal that marks the latest salvo in the smartphone industry’s patent war, according to a person familiar with the deal.
The move reflects Samsung’s focus on strengthening its components business, a month after Kwon Oh-hyun, who headed that division, was appointed as the company’s chief executive. The division’s profits fell by half in the first quarter even as the company’s pre-tax earnings rose 87 per cent.
Samsung is expected to sign the deal later on Tuesday. Samsung plans to pay $300m in cash for CSR’s mobile business, giving it control of the UK company’s patents in WiFi and Bluetooth connectivity components, as well as chips giving access to satellite positioning systems, according to a person familiar with the situation. It will take on about 300 of CSR’s employees.
As part of the deal, Samsung will also take a minority stake in CSR, which will continue to make chips for other devices such as televisions and audio devices.
CSR suffered a widening loss of $16.6m in the first quarter of this year, and its shares have lost nearly half their value since the beginning of last year, leaving it with a market capitalisation of £434m ($680m).
The UK company’s $484m takeover of US chipmaker Zoran last year met with widespread shareholder opposition, and it has been hurt by the declining fortunes of key customers including Research In Motion and Nokia. However, its intellectual property is highly regarded in the industry, and it has a strong market position in Global Positioning System and Bluetooth chips.
As well as boosting the technical performance of its own smartphones and tablets, the acquisition is likely to improve Samsung’s market position as a provider of semiconductors to other device manufacturers.
South Korean rival SK Hynix recently abandoned a mooted bid for Elpida, the Japanese chipmaker, for which it was rumoured to be considering paying more than $2bn.
Samsung’s biggest semiconductor customer is Apple, which is locked in a battle with the South Korean company for supremacy in smartphones and tablets. Apple has also raised concerns about the possible leakage of proprietary information. Samsung says it runs its components business separately from the rest of the company to guard against any conflict of interest.
In the first quarter of this year, Samsung’s revenue from semiconductors fell 13 per cent year-on-year to $7bn, while operating profit from the division declined 54 per cent to $665m.