The $8 billion acquisition of Harman by Samsung represents a teaming of two very different but complementary companies. Korea’s Samsung grew into a mobile phone and computing powerhouse over the last two decades, whereas roughly over the same period U.S.-based Harman built a portfolio of diversified and respected audio brands while also betting big on automotive. But as cars become increasingly connected and complex, companies ranging from OEMs to Apple are finding they can’t go it alone in this brave new world. I spoke with Samsung Electronics president and chief strategy officer, Young Sohn about how the acquisition of Harman and the two companies’ core competencies could create a connected car powerhouse.
C3 Report: What does this acquisition mean for the auto industry?
Young Sohn: First, I’m going to say that I am not an auto guy. I am more of a mobile, semiconductor and communications person. However, we have a vision that the car of tomorrow will be much different than today. We are envisioning what happens in the future as similar to the smartphone experience. And that doesn’t mean we compromise safety or security, but have the convenience and technology that can bring more relevant information to one’s driving experience. And ultimately even full autonomy is a possibility and we’re very excited about that when we think about the potential.
C3 Report: What prompted the acquisition of Harman?
Sohn: We looked at many options out there in terms of strategies. First, we realize that this industry takes a long time to build a team, build the relationships and has very long business cycles. The other thing is that 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. We don’t add a lot of value in that area. Where we add value is in areas of transportation where we support an autonomous connected experience, electrification and better user experiences. What we want to do is provide the core engines for intelligence of what the future car needs. And then obviously you look at specific options that can help you to get there quicker. We fit with Harman extremely well and both companies decided this made a lot of sense and this is how the discussion accelerated.
C3 Report: What made Harman attractive for an acquisition?
Sohn: Harman brings three things. One, it has a tremendous customer relationship that we don’t have in this industry. The OEM relationship is by far the best that we’ve seen in all the companies we looked at. Second, it also has invested heavily in the areas of connected cloud, telematics, over-the-air updates and security, which are very critical functions one has to build. I’m sure we can build it over time, but time to market is an issue so we want to make sure we take advantage of that. Thirdly, Harman has a proven management team that has delivered over time and we like that consistent performance. They are also consistent with our value system. We have a similar DNA. It’s about customer orientation, it’s about speed, it’s about delivery to expectations. That’s like Samsung. There are a lot of things that come from different areas but we share similar things and we are very excited about it.
C3 Report: How does Samsung complement Harman’s existing automotive business?
Sohn: The OEMs are already our customers; they are using our memory technology in their platforms. We’re the largest memory maker in the world. We are also developing application processors that are becoming more powerful and the number of domain controllers that need to be integrated [into a vehicle]. All of a sudden there is the need for more compute power, and that is something we’ve been investing heavily in the past. We’re the largest maker of chips, CPUs based on ARM processor architecture. That’s another synergy. Then we have our own modems. We have the modems that can support 4G LTE but also we have been investing heavily in 5G. We believe technology like 5G can give you the speed you need to have a safe driving experience and to access the kind of secure information you need in a timely manner. Those are some examples of our semiconductor heritage that can help Harman or any other tier-one be more competitive as they meet their customer requirement.
C3 Report: This acquisition gives Samsung access to 8,000 Harman software designers and engineers. How important was that? Does Samsung already have that capability in house and how does bringing in these engineers and designers from Harman benefit Samsung?
Sohn: Software is really critical. Software with our hardware tradition and then understanding the end market, is even more important. The combination can architect much better solutions. For us, moving into the auto space to meet their needs, we don’t have enough system knowledge or software knowledge, although we have the world-class components that we provide, and world-class connectivity. But you have to harness that properly to meet customers needs. So I think this is where we see a huge synergy between the two companies.
C3 Report: How will Harman and Samsung work together?
Sohn: I’m really happy to say that the management team will stay and run this business for Samsung. And our job is to harness the team and platform based on our technology that can accelerate their business and become a unique tier-one that can do it alone by size, by scale, by technology and by delighting customers. This is our biggest acquisition we’ve ever made.
Originally published by Forbes.com