Speculation is mounting on Hyundai Motor’s possible acquisition of Dongbu HiTek, a Dongbu group semiconductor foundry that is on the sales block. The move would reflect Hyundai’s aims to reinforce its car electronics, insiders said.

“Hyundai Motor is seriously weighing the move, and there have been reports within the company of a possible marriage,” said one source, declining to be identified.

An anonymous source from Dongbu’s main creditor bank Korea Development Bank said, “If Hyundai acquires Dongbu HiTek, it will create positive synergy.” Bidders will be decided within the month.

Another reason that Hyundai’s acquisition may make sense is because Hyundai Motor is planning to soon scrap its electronics arm, Hyundai Autron of the Autron.

Sources said that this decision is mostly due to the low quality.

The company has literally reached a standstill after posting 11.2 billion won ($10 million) of operating loss and 7.1 billion won of net loss in 2012.

Autron manufactures engine control units ― an electronic control unit that ensures engine performance ― but the quality is substandard, according to industry sources. Some of the cars installed with Autron-made ECUs had to be pulled from the market. These cars have yet to be specified by Hyundai.

The carmaker is also supplied by a number of outside manufacturers including Freescale, Infineon Technologies, Bosch and also LG Electronics. The foreign makers are good but expensive, while LG, which operates a vehicle semiconductor team of around 200 people, is said to offer below-par quality.

This is primarily why Hyundai is so desperate to invest in a good automotive electronics system partner. It would also be a way of easing its reliance on the foreign suppliers.

The stock market reflected the rumors surrounding the sale, with Dongbu HiTek prices closing at 8,040 won per share on Friday, up 49 percent from a month earlier.

However, some were skeptical. “What Hyundai needs right now is to enhance its non-memory semiconductor business for vehicle electronics, but Dongbu HiTek, as a foundry business, is not able to do that,” said Kyobo Securities analyst Kim Dong-ha.

Purchasing cheaply from Japan, thanks to the weaker yen, may be a better solution, according to KB Investment & Securities’ Shin Jung-kwan.

Other sources said Hyundai may try to buy a company from Europe. Back in the mid-2000s, the carmaker had unsuccessfully sought to acquire Infineon Technologies.

Meanwhile, SK is being cited as another possible match for Dongbu HiTek, mainly due to its growing ambitions for autos.

SK Hynix, the group’s semiconductor arm, is said to be gearing up to jump into the market for electric and hybrid vehicles to expand its business beyond device memory.

At the 2014 International CES in Las Vegas last week, SK Hynix CEO Park Sung-wook toured the auto booths and reportedly met with auto industry executives.

By Shin Ji-hye and Kim Young-won 

(shinjh@heraldcorp.com)

(wone0102@heraldcorp.com)