Sam­sung to be­come a player in auto tech

South Korean giant ac­quires U.S.-based Har­man for $8B

Baltimore Sun - - BUSINESS - By Youkyung Lee

SEOUL, South Korea — Sam­sung Elec­tron­ics’ $8 bil­lion ac­qui­si­tion of U.S. auto elec­tron­ics com­pany Har­man will in­stantly trans­form the South Korean tech com­pany into a ma­jor player in the highly com­pet­i­tive and rapidly grow­ing market for auto in­fo­tain­ment, soft­ware and con­nected car tech­nol­ogy.

Sam­sung an­nounced Mon­day that it would pay $112.00 per share in cash for the Stam­ford, Conn., com­pany. It’s Sam­sung’s largest ac­qui­si­tion by far, and it will put the com­pany in a strong po­si­tion as the race to de­velop au­ton­o­mous ve­hi­cles bar­rels for­ward.

Har­man In­ter­na­tional In­dus­tries is al­ready is a $7 bil­lion-in-sales per year player in the au­to­mo­tive market. It makes touch screens that con­trol ve­hi­cle func­tions and in­fo­tain­ment sys­tems, and it’s dom­i­nant in au­to­mo­tive sound sys­tems with brands such as Har­man Kar­don, JBL, In­fin­ity and Mark Levin­son.

In re­cent years Har­man Sam­sung’s pur­chase al­lows it to en­ter the auto busi­ness with a well-es­tab­lished brand. has used ac­qui­si­tions to move into over-the-in­ter­net soft­ware up­dates and cy­ber se­cu­rity.

Har­man com­ple­ments Sam­sung’s work in elec­tronic dis­plays and com­puter pro­ces­sors and, be­cause of its es­tab­lished rep­u­ta­tion in the auto in­dus­try, gives Sam­sung a strong foothold there, said Sam Abuel­samid, se­nior an­a­lyst for Nav­i­gant Re­search.

Sam­sung plans to keep Har­man as an in­de­pen­dent sub­sidiary and re­tain its man­age­ment team, the com­pa­nies said.

That al­lows Sam­sung to en­ter the auto busi­ness with a dif­fer­ent and well-es­tab­lished brand, avoid­ing any image prob­lems be­cause of the re­cent Sam­sung Galaxy Note7 cell­phone bat­tery fires.

“They’re look­ing for other rev­enue streams not nec­es­sar­ily as de­pen­dent on con­sumer per­cep­tions,” Abuel­samid said.

So­phis­ti­cated telem­at­ics sys­tems will be in most new cars by 2020 to sup­port over-the-in­ter­net soft­ware up­dates and other func­tions, Abuel­samid said. Since Har­man al­ready sup­plies screens and soft­ware, Sam­sung can get in the door to sell com­puter chips, he said.

The deal also po­si­tions Sam­sung well as car com­put­ers take on more and more driv­ing func­tions while en route to fully au­ton­o­mous cars, Abuel­samid said. Last month, Sam­sung bought ar­ti­fi­cial in­tel­li­gence firm Viv Labs, founded by cre­ators of Ap­ple’s Siri. It also re­cently bought a cloud ser­vice com­pany, a mo­bile pay­ments firm and a con­nected-home startup.

“They’re put­ting to­gether a lot of the pieces that they could in­te­grate to sup­ply some of these com­pa­nies,” Abuel­samid said.

More than 30 mil­lion cars al­ready are equipped with Har­man com­po­nents, and most of its sales for the year that ended Sept. 30 came from auto-re­lated tech­nolo­gies.

“Upon clos­ing, the trans­ac­tion will im­me­di­ately give Sam­sung a sig­nif­i­cant pres­ence in the large and rapidly grow­ing market for con­nected tech­nolo­gies, par­tic­u­larly au­to­mo­tive elec­tron­ics, which has been a strategic pri­or­ity for Sam­sung,” the com­pany said.

YON­HAP

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