After its stunning quality control failure with its exploding Galaxy Note 7 Phone and more recently exploding washing machines, Samsung announced its $8 billion purchase of Harman International Industries, to make it a market leader in mobile devices, home automation, and connected cars.
Harman International Industries, a leader in connected car solutions, supplies over 30 million vehicles with infotainment, telematics, safety, and security solutions. About 65% of Harman’s $7 billion in revenues last year came from the automotive market, and its backlog orders hit $24 billion at the end of June.
Samsung is the world’s biggest manufacturer of smartphones and consumer electronics, however, its biggest weakness is its dependence on mobile devices, which accounted for 46% of its top line last quarter, and its mobile device business has recently been shrinking due to its costly Note 7 blunder. To diversify away from that market, Samsung launched new wearable devices and smart appliances, and acquired smart home company SmartThings two years ago. With its Harman acquisition, Samsung hopes to enable synchronization of data between its phones, Samsung/Smart Things smart appliances, and Harman-equipped cars.
Samsung CEO Oh-Hyun Kwon said the acquisition “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.” By merging Harman’s automotive businesses with Samsung’s mobile and smart appliances businesses, he hopes to make Samsung more competitive with Apple and Google’s Alphabet.
Analysts believe that tech giants now see a peak in smartphone demand, while there is a vast untapped automotive/mobility market aimed at self-driving vehicles that will continue for some time. Samsung’s acquisition of Harman should make it a major player in the rapidly growing market for auto infotainment, software and connected car technology.
Samsung’s plan sounds ambitious, but it could be held back by technical issues. After its SmartThings platform was plagued with glitches earlier this year, researchers found that the platform was poorly protected from malicious attacks. Can Samsung buy its way out of problems caused by poor quality control, or will those problems expand to its new acquisition?