Samsung Electronics is to buy Harman International Industries in an US$8bn deal, which will see the Korean company enter the connected technology market expected to grow to US$100bn by 2025.
Around 65% of Harman’s US$7bn sales to 30 September this year were automotive-related and its order backlog for the sector at 30 June was some US$24bn.
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Harman notes its experience designing and integrating in-vehicle technologies, as well as its long-term relationships with most of the world’s largest automakers, will create growth opportunities for the combined business by enabling it to leverage Samsung’s expertise in connected mobility, semiconductors, user experience, displays and its global distribution channels.
“Harman 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,” said Samsung Electronics CEO, Oh-Hyun Kwon.
“As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, Harman immediately establishes a strong foundation for Samsung to grow our automotive platform.
“Dinesh Paliwal is a proven global leader and, in our extensive discussions, we have developed deep respect for him, his strong senior leadership team and Harman’s employees.”
For his part, Samsung Electronics chief strategy officer, Young Sohn added: “The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way simple feature phones have become sophisticated smart devices over the past decade.
“We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialised electronic components and solutions continues to grow. Working together, we are confident Harman can become a new kind of Tier 1 provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”
Paliwal noted partnerships and scale were “essential to winning over the long term in automotive” as demand for connected car and autonomous driving solutions increases at a rapid pace.
Data from just-auto’s Qube service shows just how complex the area of future technology will be with the average connected car requiring 250m lines of code, while the level of cost and technological capability will present challenges for the insurance industry.
On closing, Harman will operate as a stand-alone Samsung subsidiary, and continue to be led by Paliwal and Harman’s current management team.
Samsung is pursuing a long-term growth strategy in automotive electronics, and plans to retain Harman’s work force, headquarters and facilities, as well as all of its consumer and professional audio brands.
Samsung’s Automotive Electronics Business Team, which was established in December, last year to identify opportunities in the automotive sector, will work closely with the Harman management team.
The transaction, which is subject to approval by Harman shareholders, regulatory approvals and other customary closing conditions, is expected to close in mid-2017.
