Personal Finance

Tech Companies Continue to Dive Into the Evolving Auto Industry


The automotive industry is quickly expanding from Detroit to include Silicon Valley. Image source: Getty Images.

If we've heard it once, we've heard it a million times: The auto industry is going to evolve more in the next two decades than it has in the past century. While fully autonomous vehicles are a long ways off, there's no denying that our vehicles are becoming more connected to every facet of our lives. It's this wildly enticing potential that has lured in many companies not historically associated with the automotive industry. Here are two recent, and somewhat surprising, examples of tech companies leaping into the auto industry.

Let's forget about exploding smartphones

Given Samsung's recent smartphone "issues," expanding into automotive electronics to help diversify its revenue streams can only be even more enticing. Samsung certainly made a splash when it announced it would acquire Harman International Industries (NYSE: HAR) for $112 per share, or a total equity value of about $8 billion.

Harman is mostly known for its premium audio speakers, but what many investors unfamiliar with the company may not realize is that it does so much more. Harman designs and engineers connected products and solutions for consumers and automakers such as navigation systems, audio and multimedia systems, telematics and even cybersecurity solutions, to name only a few. In fact, roughly 65% of Harman's $7 billion in sales during the 12-month period that ended Sept. 30 were automotive related.

And, as previously mentioned, the potential market for the products that are making our cars increasingly smarter is vast.


This is a great move for Samsung, and signals the company's sincerity about being a big player in the evolving auto industry; for instance, Harman offers 36 global auto brands with a backlog of orders worth $24 billion, and roughly 30 million vehicles already have Harman technology.

Image source: Samsung's acquisition presentation.

In the grand scheme of things, this is Samsung's next step in creating an ecosystem for its products that can rival those of its major competitors, as it will have connected products in your home, on your person, in your car, and at public venues. And hey, despite the price tag that was 28% premium to Harman's closing price on Nov. 11, 2016, it's instantly accretive to Samsung's earnings.

A computer chip juggernaut wants in on the fun

Intel's (NASDAQ: INTC) splash was in a different area, more focused on the technology for autonomous vehicles, and it was a much smaller investment than Samsung's $8 billion acquisition of Harman. Intel announced at the Los Angeles Auto Show that it plans to invest more than $250 million over the next two years to develop autonomous vehicle technology, including vision processing, 5G connectivity, cloud computing, and security.

In fact, just this summer Intel partnered up with Mobileye and BMW to develop a self-driving system for the iNext BMW, which is poised to play a big role in the automaker's future. This is part of a shift in strategy for Intel, which hasn't had a long history of supplying products to the auto industry, but it has recently done roughly $1 billion of wide-ranging business with well-known automakers such as BMW, Infiniti, Jaguar , Lexus, and Tesla, among many others.

It's abundantly clear with the rush of tech companies into the auto industry that things are rapidly changing. Investors who keep abreast of these moves and stay on the lookout for businesses with high-quality auto technology could find the next big winner. Stay tuned, this story is just beginning.

Forget the 2016 Election: 10 stocks we like better than Intel

Donald Trump was just elected president, and volatility is up. But here's why you should ignore the election:

Investing geniuses Tom and David Gardner have spent a long time beating the market no matter who's in the White House. In fact, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Intel wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as ofNovember 7, 2016

Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More