Samsung Electronics is now in high gear to restructure its business portfolio through M&As. The Korean tech giant’s business portfolio structure on conventional finished product businesses like TVs and smartphones is shifting to put more emphasis on its parts and solutions businesses. The move means Samsung Electronics is shifting from the existing business-to-consumer to a business-to-business format, and a shift from a focus on hardware to one on software. Business analysts shared the view that Samsung Electronics’ restructuring of its business portfolio is a departure from a conventional format. Samsung, which was reluctant to bet big, is now changing its course of investment with a willingness to invest or acquire any technology proven to be competitive globally.
The latest example of this new strategy is Samsung Electronics’ deal to acquire Harman International Industries for $8 billion in cash, indicating the company’s ambitions in the connected car business.
They noted that Samsung Electronics Vice Chairman Lee Jay-yong, who focused on disposing non-mainstay businesses, is hitting the accelerator to restructure its business portfolio with a focus on the exploring of new growth engines to boost its future growth momentum.
The acquisition of Harman, a No. 1 player in the infotainment and telematics market, will likely help Samsung, a late-comer in the automotive market, make a big splash in the upcoming connected car business. Harman, the world’s leading car audio systems-maker, takes a 24 percent share in the premium in-vehicle entertainment segment under such brands as JBL, AKG and Bang & Oulfsen. Harman is also the second-largest player in the telematics segment, including car navigation services and onboard entertainment systems with a 10 percent market share.
Samsung Electronics carried two massive M&As since Vice Chairman Lee Jay-yong joined the board of directors on Oct. 27. The junior Lee has betted big under a strategy of choice and concentration since being in management since May 2014 when his father and Chairman Lee Kun-hee was hospitalized after a heart attack, virtually stepping down from management. The junior Lee has focused on disposing of non-mainstay business units, including chemical and defense businesses, and consolidating Samsung C&T and Cheil Industries. These are part of Samsung Group's efforts to reshape its business structure into tow axis — electronics and financing. Samsung is acquiring foreign companies or investing by dipping into its huge cash reserves, which stood at 33 trillion won as the end of September 2016. This may be considered as an effort to restructure its business portfolios to secure future growth engines.
Samsung Electronics has a different pattern of M&As, departing from the conventional method. In the past, the company had focused on investing in or acquiring foreign companies to secure overseas production centers, particularly in such areas as semiconductors and home appliance businesses.
Samsung Electronics has now focused its M&As on companies specializing in such software technologies as A.I., self-driving and mobile platforms.
Starting with SmartThings to lay a foundation for the IoT business, Samsung Electronics acquired PrinterOn for cloud services, Promximal Data for big data, LoopPay for mobile pay, Joyent for cloud services, and Viv Labs for artificial intelligence. The M&As indicate the start reality that Samsung Electronics no longer depends on the conventional business structure focusing on smartphones.
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Harman International Industries CEO Dinesh Paliwal is flanked by President Sohn Young-kwon of Samsung Electronics Strategy Innovation Center and Senior Executive Vice President Park Jong-hwan, Samsung Electronics ‘ automotive division chief, at a press meeting at Samsung Electronics’ Seocho-dong office in Seoul on Nov. 21. Samsung Electronics has agreed to acquire Harman.
