Samsung Buys Harman - Connected Car Biz or Hi-Fi Pride?

Samsung Electronics announced this week that it will buy Harman International in an $8-billion deal that should be finalized by the middle of 2017. The acquisition is widely viewed as a way for Samsung to quickly secure a competitive edge in the growing connected car market, the industry bringing wireless communication technology to the automobile. Samsung has already attempted to make inroads into automotive electronics, an industry that would put it into direct competition with its long-time adversaries in the cell phone business, Apple and Google. However, even though the growth potential of the connected car market is good business for Samsung, don’t underestimate the importance of Harman’s audio brands. The list of hi-fi companies Harman owns is vast and almost certainly played a bigger role in the decision to buy Harman than most analysts know. Harman’s elite talent in audio has been long coveted by the South Korean company.

In-car electronics is a no-brainer market for Samsung to seek growth as smartphones sales begin to level out. It’s a win for its semiconductor, wireless and mobile business since cell phone sales are starting to flatten out. Add to that the Galaxy Note7 fiasco, and Samsung becomes a company in dire need of a win.

Earlier in the year the South Korean electronics company was in talks to acquire a piece of Fiat and its components division, Magneti Marelli, but apparently those talks didn’t go far enough and Samsung began looking elsewhere.

The purchase of Harman at $8-billion is a risk, but could make Samsung a leading supplier for connected automobile services, capitalizing on its deep experience with several convergent technologies.

Buying Harman comes with built-in relationships with automotive manufacturers like BMW, Volkswagen and GM. This gives Samsung a foot in the door that Silicon Valley stalwarts Apple and Google have also been pursuing – connected and self-driving cars. The sweet irony for Samsung is that it could find itself an essential supplier of the connected car parts required by its number one competitor in the phone business, Apple. The iPhone maker’s secretive Project Titan is Apple’s foray into the self-driving car.

Samsung/Harman Growth Opportunities - Internet of Things

This brings Samsung’s audio/visual and wireless technology into its last potential growth-area, the car. The brand that is already known for cell phones and portable devices today has also long been a fixture in the home with everything from appliances to home entertainment.

Samsung-Harman Audio

Buying its way into the connected car market is good business and serves as the rationale for Samsung’s purchase of Harman. But we all know the real reason this proud South Korean company purchased Harman. Audio! It’s no secret that Samsung has sought a strong audio division for many years. Although the company is known for producing a wide range of consumer goods, its never been taken seriously as a high fidelity audio company. But over the last decade Samsung has invested in changing that perception.

In 2014 Samsung opened the doors on a new state-of-the art audio research facility - Samsung Audio Lab in Valencia, California. In the years leading up to the launch of its new audio lab, Samsung was determined that it should be built under the direction of some of the best minds in audio available. So, about a decade ago Samsung got busy poaching talent directly from one of the world’s leading hi-fi brands – none other than Harman.

Foremost among Samsung’s new acoustic gurus is renowned Canadian sound engineer, now Samsung’s VP of Audio and R&D, Allan Devantier. Devantier, along with a handful of other key engineers were recruited directly from Harman over the last decade. Of course, Samsung went to the right place for the most elite talent in audio. Harman has been one of the biggest names in high-fidelity since the 1950s when Sidney Harman teamed up with Bernard Kardon to form the legendary Harman-Kardon. 

Even without the Harman purchase, Samsung audio products already carry the Harman pedigree. Although Samsung mainly builds products for a mainstream market, Devantier brings an audio purist’s edge to research and development. The results so far have included the HW-K950 Atmos sound bar and the Radiant360 speaker. Based on product reviews, Devantier’s team seems to found that balance between mainstream product lines with fine audio.

It remains to be seen of course, what Samsung will do next year when it has control of all the acoustic talent it can handle. Hopefully Samsung will do nothing to harm many of the established and much-loved brands under the Harman umbrella. But one thing is for sure, Samsung will be forever associated hi-fi audio.

Whether in-car, in-home or on the go – Samsung’s future will be all about great sound.