This week, Samsung announced its plan to acquire Harman International Industries. The deal comes in at $8 billion and is the biggest acquisition in Samsung's history. Harman is an American engineer and designer of products for automotive manufacturers, this normally takes the form of connected car systems, including audio and visual products, as well as smart services. But what does this have to do with Samsung? According to calculations by Reuters, the failed launch of the company’s Galaxy Note 7 phone after it repeatedly caught fire, will cost the company $17 billion in lost revenue and now, it's now more important than ever to review the company's innovation portfolio and start looking for new markets.
The IoT market is booming, with Samsung themselves estimating that the connected technologies market will grow to more than $180 billion by 2025. In his official statement, Samsung's vice chairman Kwon Oh-Hyun referred to the deal as: 'Harman 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.'
Today, there are quite a few tech giants who are trying their luck in the connected car sector. Google, Uber, Apple, and the original equipment manufacturers like Tesla make it difficult to develop any competitive advantage. However, for Samsung, the entrance into a new market is critical if the company wants to regain the trust of their shareholders and customers, and to be once again seen as real innovators.
The IoT and the global shift towards smart technology has disrupted many industries, and particularly in the automotive sector there are several opportunities. Horsepower and 0-60 are no longer measurements of a high-quality car, it's the quality of the inbuilt technology that attracts a modern customer. According to a McKinsey & Co report, 13% of car buyers, nowadays, would no longer even consider purchasing a vehicle without internet access, with more than 25% of the respondents having said that they prioritize connectivity over conventional features like engine power.
Samsung, however, is not entering the new market to produce its own cars, but to focus on producing something they are already good at - mobile services, display panels, and semiconductors. The company has a strong skillset and innovation portfolio which will help them to compete in the market. Additionally, by acquiring Harman - the leading supplier of connected devices in the automotive sector - chances to succeed are increasing.
Overreliance on the already saturated smartphone market and the Note 7 failure are warning signs that the company needs to move in a new direction. It may take Samsung a while to regain their lost mobile customers and until then, the company needs to come up with a new strategy orientated towards revenue growth and expansion. So, before Samsung reaches the point when it needs a complete turnaround, it's paramount to take the opportunity to move into the uncharted waters of the booming new connected automotive market. Who knows, this may turn into a new chapter of success.