Samsung acquires ZF’s driver-assistance business for $1.77 bil.

Harman Chairman of Board Sohn Young-kwon, center, shakes hand with ZF Friedrichshafen CEO Mathias Miedreich, left, and Harman International CEO Christian Sobottka after signing a contract on Harman's acquisition of ZF's advanced driver assistance system business in this handout photo released on Tuesday. Courtesy of Samsung Electronics

Samsung Electronics’ audio electronics unit, Harman International, acquired the advanced driver assistance system (ADAS) business of Germany’s ZF Friedrichshafen, accelerating the company’s push into the electric auto parts sector.

Samsung Electronics said Tuesday it has signed a contract with the German company to take over the ADAS business at 1.5 billion euros ($1.77 billion). The deal is expected to close next year.

This marks Samsung Electronics’ first mergers and acquisitions move in the automotive sector since acquiring Harman in 2017, and follows a string of takeovers announced this year, including Germany’s FlaktGroup in climate control, the ADAS business, the audio business of U.S.-based Masimo and U.S. digital health firm Xealth.

ZF is one of the world’s leading electric auto parts makers, with its ADAS business leading the global market for smart cameras for driver assistance.

Samsung Electronics said the takeover will accelerate Harman’s entry into the fast-growing ADAS market by securing key technologies and products that play a central role in driver assistance, including forward-facing automotive cameras and ADAS controllers.

ZF's advanced driver assistance products / Courtesy of Samsung Electronics

As software-defined vehicles (SDVs) are emerging as the future paradigm for the auto industry, electronic auto parts makers are shifting their focus to centralized controllers, which integrate digital cockpits and ADAS.

Through the acquisition, Harman will be able to integrate ZF’s ADAS technology into its digital cockpit products, enabling the development of a centralized controller system and laying the groundwork for a leading role in the emerging SDV market, Samsung Electronics said.

The company expects the global market for ADAS and centralized controllers to grow from 62.6 trillion won ($42.2 billion) this year to 189.3 trillion won in 2035.

“The acquisition adds ADAS to Harman’s product portfolio and provides a strategic foothold to supply centralized controllers in an automotive electronics market,” Harman CEO Christian Sobottka said. “Harman will actively support automakers’ transition to SDVs by combining its automotive electronics expertise with Samsung’s technological leadership.”

The takeover came amid Harman’s growing contribution to Samsung Electronics’ earnings. Since becoming a wholly-owned subsidiary of Samsung in 2017, Harman’s revenue has doubled over the past eight years, rising from 7.1 trillion won to 14.3 trillion won last year. The company has also maintained a stable operating margin of 10 percent.

Automotive electronics are one of the growth drivers that Samsung Electronics Executive Chairman Lee Jae-yong has been prioritizing for the tech giant’s future growth.

Last month, Lee and Sobottka met Mercedes-Benz Group Chairman Ola Kallenius in Korea to discuss collaboration between the two sides in the future mobility business. In March, Lee also visited BYD’s headquarters in Shenzhen and Xiaomi’s EV factory in Beijing to explore potential collaboration opportunities in automotive electronics with Samsung affiliates.