Acquisition of Harman International Industries by Samsung Electronics

Acquisition of Harman International Industries by Samsung Electronics 3

Situation and Positioning of the Company

Samsung’s current ambitious drive towards the automotive industry can be traced back to the firm’s history with automobiles. In 1995, Samsung Motors Incorporated (SMI) was set up as a technological centre for the Korean automobile industry. Backed by support from the Nissan Motor Company, the “SM5” project was soon initiated; launching its first midsize sedan based on Nissan’s world bestseller, “Maxima”. However, there was also the Asian financial crisis which resulted in a stagnant economy severely damaging SMI’s sales. SMI only sold 45,000 vehicles. Even worse, it was mostly sold to Samsung group employees and the company’s profit quickly deteriorated. Before long, SMI fell into the hands of Renault for $562 million, and Renault Samsung Motors was established in Busan (2000) [12].

 Samsung felt that failure had come from adverse external environments, not from within the firm. Samsung was confident of its brand power and employees. It also believed that it could still leverage and create synergies with Samsung Electronics. Chairman Lee Gun-Hee was especially optimistic about the possibility of convergence between the automobile and electronics industry, expecting it to yield transactional synergy [12].

 For automakers, high-tech companies, and mobility services providers, the AV phenomenon may seem a decade or two away. but deferring positioning strategies can rob players of both influence and degrees of freedom. Winning this game will require companies to evaluate their entry strategies carefully, balancing the high risk involved against the potential value of becoming a leader in the largest long-term market for autonomous vehicles in the world. As the figure 3.2 shows sales predicted to increase by year by. More important than this is the complementary products of cars will have an evaluation in electronics hardware and software areas.

 Besides figure 3.3 shows how vehicle connectivity increases over the years. At this point the position of Samsung is very clear. According to the press conference [9] Samsung said that ‘we are not getting into car making, yet we are going to supply the very high‐end electronics and system architecture and design and end‐to‐end software analytics.’ All the estimations about the car industry are in favour of Samsung.

Samsung is a key business partner of Harman, providing DRAMs, flash memories and displays with increasing demands for automotive application components. The company has strengthened its software engineering capabilities to some extent; as Harman has a team of approximately 8,000 software engineers working on end-to-end services for the automotive market as well as cloud-based consumer and enterprise experiences. Samsung positioning itself somewhat as a minor player and a non- threatening ally to existing automakers.

The 5 level of Vehicle Connectivity 2015-2030
Figure 3.3: The 5 level of Vehicle Connectivity 2015-2030

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