With cars becoming ever more like their smartphone cousins, automobiles represent a gigantic business opportunity for tech companies that want to entice passengers with in-car entertainment and communications services. By swallowing a well-known automotive supplier, Samsung is aiming for an overall market that, , according to a recent study by PricewaterhouseCoopers, could reach $7.8 trillion in revenue by 2030.
"The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade," said Young Sohn, president of Samsung Electronics, in a statement.
But Harman isn't simply a company for audio-lovers. Its own connected-car business spans a vast range of industries that Samsung hopes will give it a running start. For example, Harman sells technology to automakers that allows them to gather customers' driving data for safety and insurance purposes. And it also produces systems enabling cars to update their own software wirelessly.
The auto industry is undergoing rapid change as technology threatens to overwhelm traditional ways of making and selling vehicles. New entrants such as Google and Uber are developing cars that can drive themselves. Tesla is attempting to build an electric-vehicle empire. Growing connectivity is presenting firms such as AT&T and Verizon with opportunities to sell data connections and business applications to automakers.
"The fact that another technology giant has gotten further involved in this industry shows the importance of this space and its future revenue potential," said Jessica Caldwell, an industry analyst at Edmunds.com. "It's becoming very apparent that the autonomous and connected car is becoming a new battleground for some of the worlds largest and most influential companies."
This is not Samsung's first foray into the automotive business. In the 1990s, Samsung launched a subsidiary to produce automobiles, Samsung Motors. It led to an early partnership with Nissan to produce a mass-market car, but Samsung was soon forced to sell the majority of the business to Renault in the midst of the Asian financial crisis.
One of the world's most popular consumer electronics companies, Samsung reported $45 billion in revenues last year. It has a stake not only in mobile and wearable devices but also in home theaters and kitchen appliances.
But recent troubles concerning exploding batteries in its Galaxy Note 7 device and Samsung washing machines have raised questions about the strength of its position. Recalls for both products highlighted how Samsung's race for global dominance has pit it against a dizzying array of companies such as Apple and Whirlpool.
With Harman, Samsung is expected to extend its grasp even further, reaching into an area of consumers' lives that the Korean company has until now only modestly explored. And it underscores how Samsung — whose retail business is often caught in the middle between premium brands such as Apple and smaller, low-cost competitors — may be looking to developing corporate customers like automakers as well. The deal is expected to close in the middle of next year.