In the middle of November 2016, the business sphere was awash with rumors of a major acquisition. Samsung Electronics (KS:005930), the consumer tech titan of smartphone, computer, TV, appliance and VR fame, let the world know that it had intentions to branch out even further. Its target was the automotive tech firm Harman International Industries (NYSE:HAR), well-known for its in-car audio equipment, vehicular navigation and infotainment offerings.
The Heart of the Deal
In a news release, the president of Samsung Electronics declared that the Harman acquisition would help the company tap into a future where smart tech and connectivity become commonplace in vehicles. With the deal, Samsung joins numerous other tech players that have recently acquired firms that might help them make bids for smart-car market share.
Even Footing?
This acquisition may not be quite as large as some similar mergers, like Softbank’s $32-billion purchase of ARM Holdings (LON:ARM), Qualcomm's (NASDAQ:QCOM) $39-billion NXP buyout or Arago Technologies’ $37-billion Broadcom (NASDAQ:AVGO) deal. Nonetheless, it could still have the desired impact.
The Samsung deal stands out because the company seems to have gone straight for a firm that already has direct standing in the auto tech market. For instance, companies like NXP make a huge range of other semiconductor products in addition to devices for use in connected cars. Harman brands, like Harman Kardon, Infinity, JBL, Becker and Revel, have long been known for their use in vehicles.
A Harman acquisition will also grant Samsung direct control of existing supplier deals with global automakers, like Toyota Motor Corp Ltd Ord (NYSE:TM), BMW, Subaru Co Ltd (T:9778), Lexus, Hyundai Motor Co (DE:05380), Ford Motor Company (NYSE:F) and many others. This could give the deal longer legs that heighten its chances of success.
A Push Against Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL)
Why would Samsung make its announcement now? Observers say that the firm is gearing up for a long struggle for supremacy against other consumer tech giants.
It’s been suggested that Samsung seeks to compete with possible plans by Google and Apple to develop their own intelligent vehicles. Whoever succeeds stands to corner a rapidly growing market that could soon dominate the entire automotive sector.
As these firms are already natural rivals in the realm of smartphones, it only makes sense that they’d continue their battles in this novel domain. Samsung’s approach of targeting component suppliers instead of automakers themselves, like Apple tried doing with BMW (DE:BMWG), could also give it a major edge.
What Will This Mean for Consumers?
These trends aren’t anything new, but it looks like the common folk may benefit. Support from new parent companies like Samsung might let auto-tech firms like Harman deliver cheaper perks, such as infotainment, augmented navigation and user interfaces.
The biggest change to look forward to, however, may occur as more vehicles implement telematics hardware that connects them to the cloud and other Samsung devices. Features like intelligent driver aids and safety assistance, which have long been promised to consumers, are also likely to be spurred on by Samsung’s push for increased market value.