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(News Focus) Samsung emerges as major player in auto electronics through mega-merger

All Headlines 14:27 November 15, 2016

By Byun Duk-kun

SEOUL, Nov. 15 (Yonhap) -- South Korea's tech giant Samsung Electronics Co. clearly displayed its intention to become a global leader in the automotive electronics industry this week by announcing its US$8 billion deal to buy U.S.-based Harman International Industries Inc., but many experts here note the purchase will also help develop the country's overall auto industry.

The deal itself will make Samsung a global leader in automotive electronics, less than a year after the company set up its first separate division for the business that its heir-apparent and vice chairman Lee Jae-yong has emphasized as the next growth engine.

Samsung's biggest overseas purchase deal to date comes in apparent anticipation of market growth.

(News Focus) Samsung emerges as major player in auto electronics through mega-merger0

Earlier studies forecast the global market for autonomous driving systems and connected car systems would grow an average 13 percent a year over the next 10 years to reach $186.4 billion from $54.2 billion in 2015.

Harman currently is the world's largest supplier of vehicle infotainment systems with a global market share of 24 percent, while its 10 percent market share in the telematics industry also makes it the world's No. 2 leader, according to market observers. The company has also long boasted of its top position in the car audio market.

"Through the merger, Samsung Electronics is set to become a global player in telematics, equal to Japan's Denso and Germany's Continental and Bosch," NH Investment & Securities analyst Lee Se-cheol said.

Market reports suggest the global market for telematics, infotainment systems and connected services alone will grow 9 percent a year to reach nearly $103 billion in 2025.

Models display Samsung Electronics' connected auto system at the Mobile World Congress in Barcelona, Spain, in February 2016. (Yonhap file photo provided by Samsung)

Combining Samsung Electronics' hardware and G5 cellular network technologies with Harman's telematics, infotainment and car audio systems is expected to open new doors for both Samsung and connected car services, as well as the entire auto industry.

"Grafting Samsung's hardware capabilities, such as semiconductors and OLED displays, with Harman's software technologies to offer connected services based on Samsung's Galaxy smartphones will create a tremendous synergy effect," Lee said.

Samsung acknowledged that was the clear aim of the merger.

"Samsung has secured a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung," the company said in a released statement.

In this file photo, taken on Oct. 26, 2016, a locally developed self-driving car is seen running a course in a competition of autonomous vehicles hosted by South Korea's top automaker Hyundai Motor Co. (Yonhap)

A Samsung official said the company sought to provide a "total solution" to carmakers in terms of infotainment and telematics that are essential to building the next-generation self-driving cars.

"The company will offer a never-before-seen user experience," the official said, asking not to be identified.

Advanced and complete connected car services may have been exactly what global carmakers have been waiting for but have been unable to develop on their own or with others for the fear of leaking their automaking technologies to potential competitors.

Samsung officials said the company had no intention of building cars, sending a clear message to local carmakers that the tech giant will be a trustworthy partner and not a threat.

"We have no reason to oppose Samsung's advance into the automotive electronics industry as it will bring more competition to the sector that will in turn help lower prices, benefiting both us and our customers," an official from Hyundai Motor Group said, while speaking on condition of anonymity.

The official noted Hyundai, along with most other global producers of luxury cars, including BMW and Mercedes-Benz, currently use Harman's audio systems.

"If Samsung or Harman offer better products following the merger, the carmakers will have no reason not to purchase from them," he said.

Hyundai Motor Group is the world's fifth-largest carmaker with annual sales of around 8 million vehicles. It has South Korea's top automaker Hyundai Motor Co. and No. 2 carmaker Kia Motors Corp. under its wing.

"And if Samsung is able to provide a total solution for connected cars, it will greatly help the entire auto industry by helping to realize truly self-driving cars, probably also reducing costs by bringing more competition to the sector," the Hyundai official said.

Samsung's purchase of Harman, and what it intends to do with the global leader in connected car technology, clearly sets off an alarm for global and local competitors, including LG Electronics Inc., which is said to have delved into the related sector for at least 10 years.

Other local competitors include the telecommunications giant SK Telecom, which on Tuesday unveiled the world's first 5G-based connected car, the T5, in a test drive environment set up at a BMW driving center in Incheon, South Korea.

Officials from South Korean telecommunications giant SK Telecom and German automaker BMW tune their jointly developed connected car, the T5, before a test run at a BMW driving center in Incheon, South Korea, on Nov. 15, 2016. (Yonhap)


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