Samsung Electronics has announced that it will spend $8 billion to purchase Harman International Industries Inc, a company which designs and manufactures connected automobile infotainment systems. The buyout of Harman is Samsung's "largest ever overseas acquisition" and sets up the company to become the "go-to supplier" for automobile accessories and systems (via Bloomberg).
Harman's customers, including BMW, Volkswagen, and General Motors Co., will now become clients of Samsung following the acquisition, placing the South Korean company in the "top ranks of auto technology suppliers." Harman is a major home audio company as well, with products under brands like JBL, Infinity, Harman/Kardon, and more.
The announcement comes a few days after Jay Y. Lee officially became the vice chairman on Samsung's board. According to analyst Park Kang-ho, the acquisition is the first of many moves that solidifies Samsung's "life after smartphones," which Kang-ho believes to be electric vehicles.
“This is the first deal cut after Jay Y. joined the board and shows his management style is different from his father. He is an aggressive deal maker,” said Park Kang-ho, an analyst with Daishin Securities Co. “In the longer term, Samsung is thinking that life after smartphones is electric vehicles.”
Samsung previously purchased a stake in Chinese electric-car maker BYD Co., but its automotive aspirations appear to momentarily focus solely on continuing its history as a components manufacturer, rather than entering the market with its own vehicle. With Harman, Samsung could produce new products for internet-connected cars with attention focused on navigation, multimedia entertainment, security systems and analytics tools.
“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,” Vice Chairman Kwon Oh-hyun said in the statement. “Harman immediately establishes a strong foundation for Samsung to grow our automotive platform.”
Besides expanding the scope of Samsung's future, the Harman acquisition could also help the company find its "next leg of growth" and move away from a reliance on smartphone sales, made worse this year by the Galaxy Note 7 recall. In total, market research firm IDC estimated that Samsung shipped 72.5 million smartphones in Q3 2016, which was down 13.5% compared to the estimated 83.8 million smartphones it shipped in the same quarter in 2015.