Samsung pursues connected cars with $8B acquisition of Harman


Samsung is betting heavily on the IoT again with an $8 billion acquisition of Harman International Industries, a U.S.-based supplier of auto parts.

Harman is a major player in a connected-car market that is just beginning to take off: Roughly 65 percent of its $7 billion in sales over the last year are related to the automotive industry, and its backlog in that market was $24 billion as of June 30. More than 30 million cars are equipped with its connected car and audio systems, Samsung said, which include embedded information and entertainment, telematics, safety and security.

The move marks the largest acquisition in the history of Samsung, the world’s largest smartphone vendor. Harman was founded in 1953 and is headquartered in Stamford, Connecticut.

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“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” said Young Sohn, president and chief strategy officer of Samsung Electronics, in a prepared statement. “We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialized electronic components and solutions continues to grow.  Working together, we are confident that HARMAN can become a new kind of tier-one provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”

Harman will operate as a standalone Samsung subsidiary once the deal closes. The purchase price marks a 28 percent premium over Harman’s closing stock price Friday.

Samsung continues to suffer the fallout from the disastrous release of the Note 7, which forced the company to issue recalls after some batteries overheated and caught fire. The company recently posted a third-quarter profit of roughly $4.6 billion, down significantly from its previous estimate, as revenue slid 7 percent year-over-year.

Meanwhile, the South Korean electronics giant is aggressively pushing into other tech markets as growth in the worldwide smartphone market slows. Samsung recently unveiled plans to spend $1 billion to boost chip production at its semiconductor factory in Austin, Texas, and it is said to be investing heavily in the production of OLEDs to prepare for next year’s release of the iPhone 8. The company also announced plans in June to spend roughly $1.2 billion in the U.S. over the next four year for the research and development of IoT technologies.