What is Samsung's Harman up to?

A digital cockpit developed by Samsung and Harman is on display at the Consumer Electronics Show 2018 in Las Vegas. Yonhap

Connected car tech provider's performance yet to justify price tag

By Kim Bo-eun

Samsung Electronics made an ambitious $8 billion investment to acquire connected car technology provider Harman in 2016.

It was the most expensive acquisition of a foreign entity by a Korean company and there were high hopes of the synergy Samsung could create with Harman as a leading tech firm.

Samsung has affiliates for manufacturing display panels and batteries, and the conglomerate was expected to bolster its competitiveness in connected car products.

Among Harman's key products is a digital cockpit featuring monitors that are replacing the traditional instrument clusters inside cars. They provide a digital experience for drivers via multiple screens, voice assistance and other means of input.

But expectations have yet to be met. The company grew in the first three years after the acquisition, but earnings slowed in the following years. Harman is owned by Samsung, but operates independently.

Harman's third-quarter revenue stood at 2.4 trillion won, down 8.4 percent from the same quarter of 2020. Harman's share of the global market for digital cockpits fell from 27.5 percent in 2020 to 24.9 percent as of the third quarter of this year, according to Samsung's estimates based on data from market trackers Omdia and LMC.

Samsung recently mentioned uncertainties over Harman's growth in the following years, citing the global shortage of automotive chips that has led to a reduction in car production around the world.

"We forecast that there will be limits to Harman's revenue growth despite high demand due to high levels of uncertainty based on monthly changes in the imbalance of chip demand and supply," Samsung stated in a quarterly report filed Nov. 15.

"Harman's earnings will be affected by factors uncontrollable by the company such as the continuation of the COVID-19 pandemic. The company may become subject to negative effects of additional restrictions by governments around the world, and even if the COVID-19 situation alleviates, Harman's earnings could continue to deteriorate due to negative factors such as a global economic slowdown."

Others pointed out that Harman needs to boost its performance to justify its price tag.

"Harman is not showing expected levels of output," an industry official said. "It goes to show that there is more to be done beyond a key acquisition."

But Samsung said it is focused more on long-term goals.

A Samsung official said, "The Harman acquisition was made with a long-term vision to create synergy with existing affiliates and businesses. The COVID-19 pandemic and auto chip shortage may affect the company's business in the short-term, but Samsung continues to work with Harman in R&D for new products."

Harman is expected to launch new products at the upcoming Consumer Electronics Show 2022.

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