Partnership Changes
As Samsung Electronics is acquiring Harman International Industries, an American auto component supplier, for US$8 billion (9.34 trillion won), LG Electronics and Hyundai Motor are trying to remain calm. This is because LG Electronics has been working together to produce various products, such as premium TVs, head sets and notebook computers, with Harman, while Hyundai Motor has been cooperating in premium cars, including the Genesis.
According to LG Electronics on November 1, the company is using the technology of Harman-owned audio brand Harman Kardon in the LG Signature OLED TV. As an ultra premium lineup with its advanced technology and expertise, the LG Signature products are considered the pride of LG Electronics.
Moreover, the company is using Harman Kardon’s technology in the LG Tone Infinim (HBS-900) Bluetooth neckband headset and Harman Kardon’s audio in its 4K ultra HD laptops.
Therefore, LG Electronics cannot be ignored the latest decision of its competitor Samsung Electronics. However, the two companies cannot help but maintain the technical tie-up for a while. In this regard, LG Electronics said that the contract holds good and the two will not terminate the collaboration immediately.
An official from LG Electronics said, “Regardless of the fact that Samsung Electronics will take over Harman Group, the term and provisions of the contract are still valid. We cannot predict what will happen in the future but the contract will be the same in every particular and hold good at the moment.”
The bigger problem is that the capability of Samsung’s automotive electronics business is dramatically growing. With the latest acquisition, Samsung Electronics has jumped to the top player in the global automotive audio market.
Harman is considered a global leader in car audio and automotive supplies. The group is engaging in various automotive audio businesses, including over-the-air (OTA) software update solutions using connected car's infotainment, security and wireless communications systems. It overlaps with LG Electronics’ infotainment business, such as telematics, a core part of autonomous vehicles. LG Electronics takes the number one spot in terms of global market share of telematics with 22 percent. For Harman’s sales by sector, connected car accounts for 45 percent, audio for 32 percent, audio system for 14 percent and connected services for 9 percent. Its automotive infotainment sales account for 77 percent of the total.
As Samsung Electronics has emerged as the “automotive audio giant” overnight, domestic carmakers seem to be tensed up. Hyundai-Kia Motors have used car audios of JBL, Lexicon and Infinity by Harman. Ssangyong Motor and Chevrolet have also applied Harman’s audio brands in their premium products.
In particular, the Hyundai Genesis is equipped with Lexicon's sound system which is the winner of the 2014 Technical Grammy Award.
Just like LG Electronics, Hyundai Motor say that the technical partnership will continue. When the two companies agree to go on contract in the future, Hyundai Motor will be a client of Samsung Electronics.
However, industry watchers say that Hyundai Motor is highly likely to change a provider as Hyundai Motor exercise caution against Samsung’s movement to push into the automotive electronic business.
Meanwhile, the stock market experts said that Samsung’s M&A with Harman is the best choice that can be made. Kim Dong-won, an analyst at Hyundai Securities, said, “By incorporating Harman’s onboard entertainment, Internet of Things technology and popular high-end brands as well as the company’s global networks with Samsung’s technology on chips and display for in-vehicle use, Samsung can secure a competitive edge in competing with Bosch and Continental.”