This is a huge deal for the future of the connected car
Early this morning, South Korean electronics giant Samsung announced that they had reached a definitive deal to buy out HARMAN at a valuation of roughly $8 billion.
According to their release, Samsung views their purchase of HARMAN, a Stamford, Connecticut-based leader in audio and in particular automotive electronics, as an important element in their entrance into the connected car sector.
Among the audio brands listed under the HARMAN umbrella are well known names like JBL and Harman Kardon. Add to this their work in infotainment systems, cyber security, over-the-air updates, and telematics, and they become a very attractive package for Samsung.
In speaking about their decision to pick up HARMAN, Samsung cited in their release that around 65 percentof HARMAN’s $7 billion in reported sales had been in the automotive sector. The company has cited automotive electronics as “a strategic priority”, pointing to estimates that it will blossom into a $100 billion industry by 2025.
There are not real indications at this point that any of the big electronic manufacturers like Samsung, Google, or Apple have any intention of churning out their own branded vehicles anytime soon, with Mountain View and Cupertino apparently having backed out of their own ventures. This makes sense as building up the necessary infrastructure to build cars, as well as the long process of dealing with regulations, is perhaps more cumbersome than these companies are willing to put up with for the time being.
Apple reset its autonomous vehicle plans last month despite what seemed to be a push into the industry with the $1 billion investment in Chinese ridesharing giant Didi back in May.
However, what is far more likely in looking around at the market, is that they will work with existing auto manufacturers to implement their technologies and products into the connected ecosystem.
“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,” President and Chief Strategy Officer of Samsung Electronics Young Sohn was quoted as saying in the company’s release on the deal. “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 1 provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”
One of the big elements to consider in this deal is IoT and HARMAN’s ability to secure the connected ecosystem. In January, the company bought up Israeli Internet of Vehicles (IoV) cyber security startup TowerSec for an impressive $75 million. Concerns surrounding security have been brought to the forefront as more technology enters the vehicle, and leading towards the autonomous car. As this next step nears, more pressure can be expected from manufacturers to implement security measures aimed at keeping hackers out.
Previous acquisitions by HARMAN include Symphony Teleca ($780 million), Red Bend Software ($200 million), Yurbuds (undisclosed) and AMX ($365 million).
Already having such technology in house was a significant advantage for HARMAN, and now apparently will transfer over to Samsung. In light of the recent fiasco surrounding the Note 7 recall, this acquisition should give the Korean multinational a reason to smile.