Samsung Investing in Automotive Technology

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【Summary】Samsung is betting on automotive tech.

Original Timothy Healey    Dec 06, 2016 6:25 PM PT
Samsung Investing in Automotive Technology

Samsung has placed an $8 billion bet on automotive technology.

The electronics company acquired Harman International Industries last month, with the intent of being a go-to supplier for all sorts of in-car electronics, from audio systems to connected-car and infotainment systems.

Immediately, this makes Samsung a top-tier automotive supplier, and it will allow the company to feed into Harman's existing relationships with BMW, General Motors and Volkswagen. Harman was already generating 65 percent of its sales from the automotive sector.

Samsung now has the chance to pair its technologies -- notably its microprocessor and software tech – with Harman's infotainment systems and other vehicle systems. That could increase connectivity in cars – which there is already plenty of.

"This is not about cost synergies," Young Sohn, Samsung's president and chief strategy officer, said. "It's about taking advantage of what Harman has built. The car will be transformed by connected technology."

Samsung is said to see the automotive industry as one that has yet to be fully remade by software and other online tech – despite the fact that cars have been chock full of software, connectivity tech and other tech advances for years now.

Most major tech companies are trying to get more involved in the automotive space. Microsoft already has been involved, partnering on connectivity software, and Google's research and development into self-driving cars has been no secret. Apple may or may not be working on "Apple Car" (if they aren't working on a car, then they're likely working on tech for cars), Panasonic has also recently acquired a major automotive supplier, and ride-sharing company Uber is working on autonomous-driving tech.

Samsung itself has already invested in Chinese automaker BYD and was flirting with Fiat Chrysler Automobiles on buying a chunk of its parts division before talks broke down. The company's strategy appears to be based on getting involved in components, not design or manufacturing.

"Samsung will not get in the business of manufacturing cars," Sohn said.

The move has a high potential reward – consulting firm McKinsey estimates that revenue streams from in-car connectivity and data streams could lead to a $200 billion market by 2020.

That explains why Samsung and other electronic giants are looking for a foothold in the automotive market – in-car connectivity and data is almost certainly likely to continue growing. Meanwhile, the smartphone market is undergoing a downturn, and some of Samsung's Galaxy phones are struggling with a major safety recall.

Samsung's long-term strategy appears to be a hedging of the bets, then – no matter what happens to the smartphone market, Samsung is poised to take advantage of growth in certain parts of the automotive sphere.

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