As self-driving cars edge closer to street-legal status, technology companies don't want to be left out.
"This acquisition essentially merges the intelligent eyes of the autonomous car with the intelligent brain that actually drives the car," Intel Chief Executive Brian Krzanich said in a note to employees about the acquisition.
Billions of dollars are on the line as self-driving technologies transmogrify a transportation system based for more than a century on human drivers.
It's not just automakers that are being forced to change. Longtime tech companies and relatively young ride-hailing apps, too, are jumping into the game as cars become computers on wheels. In October, San Diego-based Qualcomm paid $38 billion for NXP Semiconductors, primarily for NXP's strength in the automotive market.
Nvidia is successfully moving beyond its roots as a graphics chip maker for high-end gaming to become a key supplier of central processors that use artificial intelligence to provide the brains for self-driving cars.
Chips have been peppered throughout cars and trucks for decades, but they continue to grow in number and sophistication. Beyond guiding a car's basic functions, they're key to infotainment systems and are central to emerging communications systems that connect to the cloud and allow instant software updates.
Intel and Mobileye were already partners in self-driving system development with automaker BMW. The three companies plan to put 40 autonomous vehicles on the road for testing by the end of the year.
With an outright purchase by Intel, Mobileye will enjoy plenty of access to capital and other corporate resources, enabling its products to hit the market faster at lower cost.
Mobileye's vision systems dominate the market for lane-keeping and other driver-assist technologies, and are being used by most of the companies testing driverless cars. The company said it has contracts with 27 automakers.
The deal will "greatly expand Intel's automotive reach," said Michelle Krebs, senior analyst at Auto Trader.
In an email to staff, Mobileye Chief Executive Ziv Aviram and fellow co-founder Amnon Shashua said they're staying on to run Mobileye. "We always wanted to change the world – now we have better means of doing so," the email said.
Intel's Krzanich, in a prepared statement, struck a more bureaucratic tone:
"Together, we can accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for automakers."
Bureaucracy is always a danger in deals like this.
Intel, whose chips powered the personal computer revolution, failed to take full advantage of the mobile phone revolution and doesn't want to miss out on self-driving cars. Absorbing a scrappy small company with 660 employees into a giant organization with 106,000 workers, without killing the entrepreneurial spirit, is always a challenge.
In the meantime, competitors abound, and there is no guarantee that any one company's technological path is the right one.
Ultimately, autonomous cars will require tight integration of optical, radar and lidar sensors working with artificial intelligence software.
The technological distance Mobileye and perhaps competitors must travel to achieve true autonomy was made clear last year when the Mobileye vision system on a
After that, Tesla dropped Mobileye as a supplier, and began using chips from Nvidia, which is emerging as a major force in self-driving technology, to process its video and other sensor data.
Nvidia's stock has more than tripled over the last 12 months, while Intel's has barely budged.
The automakers themselves are taking different routes toward their driverless future. General Motors and Ford have each purchased small companies developing driverless systems: Cruise Automation in GM's case, Argo AI's in Ford's.
Most of the automakers will be mixing and matching technologies from different vendors to come up with a complete system. The technology in Google's Waymo driverless car unit, however, is mostly home grown.
Mobileye, a specialist in vision, will have to develop or purchase expertise in radar and lidar if it is to become a full system provider.
In the deal, Intel will pay $63.54 for each share of Mobileye, a 34% premium to its Friday closing price. The boards of each company must approve the deal, which is expected to close by the end of the year.
Israeli Prime Minister Benjamin Netanyahu praised the Intel acquisition of Mobileye, which he said was the largest deal in the country's history. He said he's been assured that the company's operations will stay in Israel.
"The purchase dramatically proves that the vision we are leading is coming true," Netanyahu said. "Israel is turning into a global technology center, not just in cyber but also in the automotive industry."
Mobileye shares closed Monday at $60.62, up 28.2%. Intel closed down 2.1% at $35.12.
The Associated Press was used in this report.
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2:55 p.m. This story has been updated with additional details.
12:13 p.m.: This article has been updated with staff reporting.
8:15 a.m.: This article was updated with comments from Intel and Mobileye executives and from Israel's prime minister, as well as stock prices and additional background information.