Samsung and LG’s new growth drivers—automotive electronics—are performing poorly. Samsung paid over 10 trillion won to acquire Harman, yet it has failed to create synergy. LG, however, has completed the powertrain, infotainment, and lighting trifecta.
On June 18, investment banking sources ascribed the disparity to Samsung and LG’s worldwide car electronics market decrease. Samsung purchased Harman in 2017 and looked to edge ahead of LG, but LG’s recent automotive electronics successes have changed their competitiveness.
Harman and LG Electronics lead Samsung and LG’s automotive electronics sectors.
After generating a profit for the first time in seven years in the second quarter of 2022, LG’s Vehicle Solution Division, which handles automotive electronics, has become a company pillar. In the second quarter of 2022, the division earned 50 billion won (US$39 million), followed by 96.1 billion won (US$75 million) in the third quarter and 30.2 billion won (US$23.6 million) in the fourth quarter. Infotainment systems, electric vehicle powertrains, and automotive lighting systems all had lower costs, keeping it viable.
The VS Division made 54 billion won (US$42 million) and 2.3865 trillion won (US$1.8624 billion) in the first quarter of this year. Both were business division records. The VS Division’s order backlog, a solid sign of future success, expanded rapidly from 60 trillion won (US$47 billion) at the end of 2021 to 80 trillion won (US$62 billion) by 2022.
Harman rebounded in the first quarter, but worry remains. Harman’s business performance improved mostly due to organizational simplification, not Samsung synergies. Its flagship digital cockpit business is declining.
Harman’s operational profit in the first quarter of 2023 was 130 billion won (US$102 million), up 30% from 100 billion won (US$78 million). Sales rose 18.7% to 3.17 trillion won (US$2.48 billion) from 2.67 trillion won in 2022. Harman’s share of the worldwide digital cockpit market declined from 30% in the first quarter of 2020 to 25% in 2021, 24.7 percent in 2022, and 23.1 percent in 2023.
Market experts attribute a recent gap between Samsung and LG in car electronics to synergy between the businesses and their affiliates. LG sources EV powertrain batteries and lighting equipment internally. LG Electronics’ VS business makes infotainment systems, while LG Magna Powertrain, a joint venture with Magna, manufactures electric car powertrains. LG bought ZKW in 2018 to offer automotive lighting components, including headlights.
LG Energy Solution and LG Innotek supply EV batteries and components. LG Innotek makes 5G connectivity modules and car BMSs. LG Display is expanding its OLED-based vehicle goods.
Since acquiring Harman in 2017, Samsung has underinvested in vehicle electronics. Harman acquired AR HUD software developer Apostera to boost its competitiveness. Analysts claim it had little synergy with Samsung.
However, some analysts think Samsung has recently targeted CPUs for Harman’s digital cockpits using its semiconductor competitiveness.
Digital cockpit-specific processors will boost Samsung Electronics’ electronics business and its relationship with Harman. In 2025, Samsung Electronics will supply the Exynos V920 system semiconductor for Hyundai automotive entertainment systems.