LG Electronics, the Korean conglomerate best known for its home appliances, is pushing into the hot field of high-tech vehicles with the acquisition of an Israeli automotive cybersecurity startup.
Already one of the largest makers of electric vehicle batteries, LG said it is taking a 64% stake in Tel Aviv-based Cybellum for $140 million. The startup was founded in 2016 by Michael Engstler and Slava Bronfman, both former software engineers with the Israel Defense Forces.
“It’s no secret the critical role software plays in the automotive industry and with it comes the need for effective cybersecurity solutions,” said Kim Jin-yong, president of LG Electronics Vehicle Component Solutions Company, in a statement. “This latest deal will further strengthen LG’s solid foundation in cybersecurity, enabling us to be even more prepared for the era of connected cars.”
LG will acquire the remaining shares of Cybellum in the near future, according to the company. On top of the $140 million investment, LG will contribute a further $20 million in the form of a simple agreement for future equity, a type of financing where the valuation isn’t set yet, in the fourth quarter.
“LG Group has been trying to get a bigger foothold in the auto industry for the past decade,” said Sam Abuelsamid, principal research analyst based in Michigan at research firm Guidehouse Insights. “With software and connectivity accounting [for] more value in the car every year, it makes sense for LG to strengthen its cybersecurity capabilities.”
U.S.-based automakers alone will crank out 1.2 million EVs per year, Abuelsamid said in March. Pressure to produce them could mount ahead of 2035, when the 39.5 million-population state of California will ban sales of new gas-powered vehicles. Globally, the release of new models, consumer demand and supportive government policies should raise EV sales this year onward, analysis firm ResearchAndMarkets.com says.
In-vehicle software must incorporate security to minimize the risk of malicious code getting to safety-related systems through a high-tech vehicle’s telematics gateway, notes Abuelsamid. Telematics refers to the intersection of cables and informatics such as computer systems.
LG will need the contributions of Cybellum, among others, to build vehicles, says Miraj Mainali, Boston-based senior research associate with Lux Research. “LG’s high-tech car push will require it to incorporate several components from third-party and open-sources in addition to building its own,” he says.
LG said in August it would exit the smartphone market and focus on high-tech cars, among other fields. It has already spent billions on the global EV battery sector under LG Corp. Chairman and CEO Koo Kwang-mo, who is No. 15 on the Korea Rich List with an estimated net worth of $2.3 billion.