Survived the COVID-19 Crisis but... Harman Faces Ongoing Risk of Car Semiconductor Shortage

Q3 Cumulative Operating Profit of 370 Billion KRW

[Asia Economy Reporter Jeong Hyunjin] Harman, a subsidiary of Samsung Electronics, is gradually overcoming the COVID-19 crisis and securing profitability. However, it is still too early to be assured as the adverse factor of a shortage in automotive semiconductor supply weighs heavily.

According to the business community on the 3rd, Harman's cumulative operating profit up to the third quarter of this year reached 370 billion KRW, surpassing the 320 billion KRW recorded before COVID-19 in 2019. Although the cumulative sales for the third quarter stood at 7.19 trillion KRW, it is expected to be difficult to exceed the 10 trillion KRW annual sales level of 2019, but in terms of profitability, this represents the highest operating profit since the acquisition.

This recovery in Harman's profitability appears to have emerged as the damage caused by COVID-19 is gradually being compensated. In July, Harman's CEO Michelle Mauser mentioned that core businesses such as the automotive electronics division and consumer audio division had faced difficulties due to COVID-19 but are showing signs of recovery. In fact, sales of Harman's flagship product, the digital cockpit, increased by 43.5% year-on-year to 3.43 million units in the first half of this year. As the automotive market, which was hit by COVID-19, revived in the first half of this year, demand for automotive electronic components also increased accordingly.

However, risks related to the semiconductor component supply shortage remain, making it premature to guarantee a performance turnaround. The ongoing shortage of automotive semiconductors has caused overall production and sales disruptions in the finished car industry since the second half of the year.

Harman became Samsung’s first balanced “future growth engine” project after Samsung Electronics Vice Chairman Lee Jae-yong joined as a registered director in September 2016 and took a leading role in management. At that time, Samsung Electronics invested a record-high 9.376 trillion KRW (approximately 8 billion USD) for the acquisition of a domestic company’s overseas firm to enter the automotive electronics business. With Samsung Electronics planning large-scale mergers and acquisitions (M&A) within the next three years, securing profitability for Harman is expected to be an important task. As of the end of the third quarter, Samsung Electronics holds over 120 trillion KRW in cash and has stated that it is reviewing opportunities in AI, 5G, and automotive electronics sectors.

This content was produced with the assistance of AI translation services.