Samsung’s road to recovery

Korean conglomerate Samsung has been in the news for the wrong reasons, lately namely, the tendency of its latest flagship mobile phone to explode, and the company's ham-fisted attempts to contain the problem. Now, however, Samsung is turning its focus from smartphones in an effort to muscle in on the car-tech market. Its $8bn purchase of Connecticut-based Harman International is the largest ever overseas acquisition by a South Korean company. It offers Samsung "a chance to shed its reliance on a smartphone market undergoing its worst downturn on record", say Jungah Lee and Hooyeon Kim on Bloomberg.

Harman is an electronics giant in its own right, producing a huge range of mid-to-high-end audio equipment. But Samsung is more interested in its "connected car" systems. As well as audio, these contain navigation, security and telematics systems. "Many electronics companies see the car as an opportunity for the next consumer electronics boom," says James Titcomb in The Daily Telegraph. Vehicles are set to get "the same internet connections and high-powered processors that have made it into smartphones". Apple and Google have both developed operating systems for connected cars CarPlay and Android Auto respectively which sync with the user's smartphone to offer music, calls, navigation and even control of some of the car's settings, says Rob Price in Business Insider. Microsoft is also represented with its "Windows Embedded Automotive" system Samsung can't afford to be left out.

"More than 30 million vehicles worldwide are equipped with Harman systems," says Harris, "and the company has established key relationships with premium carmakers such as BMW and Mercedes-Benz." The deal gives Samsung "an instant presence in the brain of a multitude of cars", says John McCann on TechRadar.com. Samsung's hope, he says, is that cars will become "smarter, safer and more user friendly, with better integration with your mobile phone and by extension your life while also pushing forward technology such as autonomous driving and alternative fuels".

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Samsung believes the market will be worth $100bn by 2025. Its president and chief strategy officer, Young Sohn, expects future vehicles to be "transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices". Today, 40% of the world's cars offer connected technology. By 2025, that could rise to 90%, says Bryan Harris in the FT. In the 12 months to October, Harman made $7bn in sales, and as of June, had an order backlog worth $24bn. Samsung is paying $112 a share, a 28% premium on the closing price at the end of last week.