Harman, the audio subsidiary Samsung Electronics (005930.KS) acquired a decade ago in its largest-ever merger and acquisition deal, has emerged as a cash cow offsetting weak earnings in the company's home appliance business. With appliance losses expected to widen this year on surging chip and raw material prices, Harman is projected to maintain stable operating profit of more than 1 trillion won ($700 million) on the strength of its 80-year-old brand. Samsung plans to deepen technology synergies with Harman across both its appliance and mobile businesses to solidify its position in the audio market.
Harman is forecast to post annual operating profit of more than 1 trillion won this year, according to financial information providers on the 22nd. That is down slightly from 1.5 trillion won last year, a record high. The figure contrasts with Samsung's Visual Display and Digital Appliances divisions, which handle the home appliance business and are expected to log hundreds of billions of won in operating losses this year after a 200 billion won loss last year, as cost pressures mount.
Combining the operating results of the VD and DA divisions with Harman's, Samsung's appliance-and-audio operations are likely to stay in the black this year, with the audio business partly covering losses in televisions and home appliances. Harman has been generating hundreds of billions of won in quarterly operating profit, including 400 billion won in the second quarter of this year. Although Harman's results are tallied separately from the parent company's VD and DA divisions, the unit has established itself as the core organization overseeing audio across Samsung's entire business.
Samsung attributes Harman's resilience amid deteriorating profitability across the appliance industry to the brand strength of JBL, which marks its 80th anniversary this year. A solid JBL customer base has sustained sales volumes, while high-priced premium products have defended margins, the company said. Harman is also expanding into artificial intelligence microphones and automotive audio. Last year it acquired Bowers & Wilkins, a 60-year-old audio brand, broadening its scale.
Harman's growth accelerated after Samsung's acquisition a decade ago. Samsung announced in November 2016 that it would buy Harman for $8 billion, or about 9.4 trillion won at the exchange rate at the time — the largest overseas acquisition ever by a South Korean company. Harman's revenue, which stood at 7.1 trillion won in 2017 shortly after the deal closed, more than doubled to 15.8 trillion won last year, helped by business synergies with Samsung. Operating profit also topped 1.5 trillion won.
Young Sohn, an adviser to Samsung Electronics and chairman of Harman's board, said Samsung will continue to strengthen its Harman-related businesses. "Together with Harman, Samsung Electronics will continue to innovate in audio technology so that customers around the world can enjoy the best sound in every moment of their daily lives," he said. The company also said it will "respond aggressively to fast-growing demand in automotive electronics, including centralized controllers, and expand sales of audio products based on brand recognition and a strengthened lineup," adding that it will "maintain stable growth by expanding revenue across both the automotive electronics and audio businesses."
Harman will hold an exhibition marking JBL's 80th anniversary at Project Space Line in Seoul's Gangnam district from the 24th to the 31st of this month. The show will feature signature products ranging from vacuum-tube radios of the 1920s to the L100 Century, a global hit in the 1970s, as well as portable speakers and AI microphones aimed at today's campers. A showroom recreating the interior design of each era will accompany the products. The aim is to deepen loyalty among existing customers while drawing in new ones.