Samsung's (SSNLF) $8 billion purchase of Harman International (HAR) illustrates the value of the portfolio of smart-car technology that the target has amassed, in large part through recent acquisitions.
While the company is known among consumers for audio brands such as Harman/Kardon, Bang & Olufsen, JBL and Infinity, Chairman and CEO Dinesh Paliwal has boosted Harman's position in the market for connected cars and other cloud and mobile services. The company has acquired tech to improve automotive cyber-security, safety, data transfers and other processes.
"They really got their start as a premium audio system supplier then moved into building and supplying the infotainment head units [or central user interfaces] and recognized early on the importance of software and services in the growing connected vehicle market," said Gartner analyst Jim Hines. "Given their niche in the infotainment space and the importance of the in-vehicle infotainment system as the central gateway for connected vehicle services, Harman has executed on a solid vision."
Samsung Chief Technology officer Young Sohn told investors Monday that the automotive technology market will hit $100 billion in annual sales by 2025, and said cars are undergoing a shift akin to the evolution of feature phones to smart phones.
The Korean conglomerate created a team to study car tech last December and decided it needed to move fast. "Organic growth will not get us where we want to go fast enough," Sohn said. "By acquiring Harman, which is a market leader, we'll immediately achieve critical mass."
Connected car technology such as infotainment systems, telematics, safety and security account for 44% of Harman's $7 billion top line. Clients include BMW AG, Daimler AG, Ford (F) , General Motors (GM) , Subaru, Toyota Motor Corp., Lexus and others.