Intel said Monday it would buy Israeli autonomous vehicle technology firm Mobileye for $15.3 billion, betting it can become a leader in developing driverless systems for automakers as it continues to diversify away from its legacy chip business.
The bet is quite an expensive one for Intel, pricing Mobileye at about 21 times expected 2017 revenue — more than six times the semiconductor industry’s three-year deal average. Intel will pay $63.54-per-share, a premium of about 33% to Mobileye’s closing price on Friday.
Mobileye’s cameras, sensor chips and other technologies help autonomous vehicles safely navigate streets. Last year, Goldman Sachs projected the market for advanced driver assistance systems and autonomous vehicles would grow from about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035.
“The pricey acquisition of Mobileye could propel the world’s largest computer chipmaker into the front ranks of automotive suppliers at a time when Intel has been reaching for market beyond its core computer semiconductor business,” Reuters said.
Intel had not been a significant player in the sector but the deal could put it in direct competition with such companies as Nvidia and Qualcomm.
“In October, Qualcomm acquired automotive chip supplier NXP for $47 billion, further fueling Intel’s need to quickly get on board the automotive wave,” Recode noted. “That’s especially true given Intel missed the mobile wave and is attempting to make up for it through investments in virtual reality and self-driving technology.”
Intel CEO Brian Krzanich estimates self-driving will be a $70 billion industry by 2030. The company had previously partnered with Mobileye and BMW to bring autonomous cars to city streets by 2021 and had acquired a 15% stake in Here, a digital mapping business.
Some investment analysts raised concerns about the potential synergies between Intel and Mobileye, as well as the acquisition’s price, but Betsy Van Hees of Loop Capital Market said the deal was “a tremendous opportunity for [Intel] to get into a market that has significant growth opportunities.”
“This deal makes Intel a Tier 1 partner for the automotive industry,” Martin Birkner, an automotive analyst at Gartner, told The New York Times.