November 22, 2024

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[THE INVESTOR] A Samsung Electronics president has reaffirmed the Korean tech giant’s intention not to build cars on its own amid speculation around its recent automotive push, including the latest US$8 billion acquisition of Harman International, the US audio maker that is betting big on in-car solutions. 

Samsung Electronics President and chief strategy officer Young Sohn

“We don’t really want to build cars. It is important to recognize what we believe going forward is that we are not interested in the more traditional area of business or technology like powertrains or seats or bodies,” Young Sohn, president and chief strategy officer, said of the Harman deal in an interview with Forbes on Nov. 15.

“We don’t add a lot of value in that area,” he added.

His comments come after Samsung announced the largest-ever purchase on Nov. 14.

Since setting up a separate automotive components unit in December last year, Samsung has been making a big push on car parts. Despite several mergers in recent months, the company has yet to secure a firm footing as it struggles to build partnership with carmakers.

The Samsung executive who oversees the company’s chip business in the US also admitted the high entry barriers in the automotive industry.

“We realize that this industry takes a long time to build a team, build relationships, and has very long business cycles,” he said, calling Harman’s OEM relationship and heavy investments in the areas of connected cloud, telematics, over-the-air updates and security as key factors behind the purchase decision.

Industry watchers also predict the latest deal with the top-tier infotainment systems supplier to numerous carmakers, including Mercedes-Benz, General Motors and Hyundai Motor, would drastically reduce the time for Samsung to become a potent player in the car industry especially ahead of an era of autonomous driving.

The US$8 billion deal is the largest acquisition of a foreign firm by a Korean company. The purchase price is about 28 percent higher than the company’s market capitalization based on its share price.

Like previous cases, all the management members of Harman are expected to remain even after the acquisition. About 8,000 software designers and engineers are working currently.

By Lee Ji-yoon (jylee@heraldcorp.com)