Samsung bets $8 Billion on Smart Cars with Harman Deal

By Maciej Wilowski,
Money and Investing Writer
samsung

Throughout recent months, tech giants have begun investing large amounts of money into the automobile industry. Google  (NYSE: GOOG) has allocated funds for the development of self-driving vehicles, while Apple (NYSE: APPL) has initiated a secretive car-development project of its own.

Most recently however, South Korean electronics giant Samsung had announced plans to purchase Harman International Industries, a U.S. based automotive firm that designs safety and security systems for cars.

This recent announcement was publicized on Monday, November 14th. Pressured by similar initiatives undertaken by Samsung’s competitors, company executives have praised the move as beneficial for the company’s future given strengthening competition among technological firms.

One month ago, chip manufacturer and tech giant Qualcomm had struck a $39 billion deal with NXP Semiconductors, a leading firm in automotive computer chips. The agreement reflected the second-biggest tech deal of all time.

Samsung’s desired acquisition of Harman International Industries, when complete, would translate into the firm’s biggest deal in its history.

More importantly, it would provide the perfect opportunity for the company to expand its base of products offered beyond smartphones, especially in the wake of the Galaxy Note 7 fiasco of recent weeks. Executives at Samsung expect the automotive market to dramatically increase in value over the next ten years, reaching a worth of over $100 billion by 2025.

Regarding its agreement with Harman, Samsung stated it would agree to pay $112 per share to stockholders of Harman.

Harman Industries had aggressively expanded its influence in the automotive sector in the past year as a pioneer in audio and electronics.

By acquiring Harman, Samsung would instantly establish itself as a leading tech firm in the expanding automotive industry, on par with Apple and Google. Samsung is both a partner and a rival to both tech giants, and the acquisition would push the rivalry between all three firms to a new level as each company would seek to exert the most influence over the automotive industry.

Samsung does not plan to manufacture or produce vehicles of its own, but rather sees opportunity in the automotive industry as driverless cars and self-reliant vehicles enter the market with increasing popularity.

As a manufacturer of semiconductors as well as cell phones, Samsung will seek to sell more of its electrical conductors and display panels as accessories and components of newly produced cars.

By having access to Harman Industries’ capabilities, Samsung can incorporate better wireless internet service and software components.

Under its current Chief Executive Officer, Harman has diversified its products to produce quality audio speakers, navigation systems and improved Wi-Fi components for vehicles.

Another key factor for Samsung moving toward the automotive industry involves executives’ concern for over-reliance on smartphones.

The Samsung Galaxy series has been the main driver of company growth over recent years, and executives fear lack of diversification would cause the company’s influence to decline over time.

The recent failures attributed to the Galaxy Note 7, which cost the company over $5 billion in losses, have compounded executives’ concerns.

Samsung’s planned acquisition of Harman Industries has been shed in positive light with regard to the company’s prospects.

With a positive outlook on the future of the automotive industry, Samsung will instantly establish itself as a key player among other tech giants.

If all goes according to plan, Samsung will witness higher revenues and growth capabilities in the following years with Harman as a subsidiary partner.

A version of this article appeared in the Tuesday, November 22nd print edition.

Contact Maciej at
maciej.wilowski@student.shu.edu

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s