Samsung Electronics

Samsung buys car tech firm Harman for U$8bn in continued push into driverless car market

Bold move in effort to catch up with Tesla, Google parent Alphabet, Apple, and China’s Baidu and LeEco who have already made significant inroads into the sector

PUBLISHED : Monday, 14 November, 2016, 6:22pm
UPDATED : Monday, 14 November, 2016, 10:34pm

Samsung Electronics has agreed to buy US-based Harman International Industries for US$8 billion, pushing forward its ambitions in the connected car and autonomous driving sector, as efforts also continue to rehabilitate its image after the Galaxy Note 7 fiasco.

The two companies said on Monday the deal would immediately give Samsung a significant presence in the rapidly growing market for connected technologies, particularly automotive electronics, that is estimated to grow to more than US$100 billion by 2025.

It is a market in which the likes of Tesla, Google parent Alphabet, Apple, and Chinese internet companies Baidu and LeEco have already been making significant inroads.

“Harman perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” Samsung vice-chairman and chief executive Kwon Oh-hyun said.

According to Connecticut-headquartered Harman, it is the market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems.

These include embedded “infotainment” and telematics, as well as connected safety and security.

Harman, which is more widely known for its audio brands JBL, AKG and Harman Kardon, said about 65 per cent of its reported US$7 billion sales in the 12 months ended September 30 are automative-related, and its order backlog for this market was US$24 billion as of June 30.

Samsung expected its expertise in mobile innovation like 5G, security systems and display technology would enhance Harman’s business, drive sales, and help accelerate the development and adoption of next-generation connected cars.

Their all-cash transaction has been unanimously approved by the boards of directors of both companies. It is expected to close in the middle of next year after approval by Harman shareholders and regulators, and other customary closing conditions.

The acquisition appears to mark another step for Samsung to quickly move past its Note 7 crisis, which has severely tarnished its global brand. The company last month permanently halted all production of its Note 7 amid increased concerns about the device catching fire while charging.

“We remain focused on collecting the outstanding Galaxy Note7 phones in the market,” Samsung said earlier this month.

Samsung created an automotive electronics business team a year ago to identify growth opportunities in the connected car sector. Its Shanghai Samsung Semiconductor unit invested US$450 million in Chinese carmaker and rechargeable batteries supplier BYD in July.

Separately, Samsung has held talks with Fiat Chrysler Automobiles over a potential sale or tie-up with the Italian firm's Magneti Marelli car-parts unit.

The Samsung-Harman deal followed the recent creation of a new alliance that aims to help accelerate the development of 5G mobile standards and support the growth of connected automated driving around the world.

In September, telecommunications equipment suppliers Huawei Technologies, Ericsson and Nokia joined European car titans BMW, Audi and Daimler, as well as US semiconductor technology giants Intel and Qualcomm to form the “5G Automotive Association”.

The association said it would welcome more partners from the automotive and broader information and communications technology industry.