Intel Acquires Automotive Machine Vision Leader Mobileye for $15.3 Billion—Is the Price Right?

In March (2017), Intel announced that it will acquire Mobileye, the market leader in machine vision software for advanced driver assistance systems (ADAS), for US$15.3 billion. With this acquisition, Intel joins competitors NVIDIA and Qualcomm to expand from its traditional consumer electronics market into automotive, positioning the company to take full advantage of the growth opportunities represented by ADAS and autonomous vehicles.

In recent years, Mobileye established a dominant market position in ADAS, accounting for around 70% of the ADAS machine vision market in 2016, enabling 27 OEMs to equip their models with a variety of functions such as autonomous emergency braking (AEB), lane departure warning (LDW), and lane keeping assist (LKA) in a cost-efficient way. Looking beyond ADAS, Mobileye demonstrated solutions and engaged in a number of partnerships to support the development of autonomous vehicles. These include joining a consortium with BMW and Intel to accelerate the deployment of highly automated driving, as well as a similar but distinct partnership with Tier One supplier Delphi, in addition to Intel, to develop a platform for autonomous driving to be sold to OEMs. Furthermore, Mobileye’s Road Experience Management (REM) system enables low-cost maintenance of digital maps for autonomous driving, leveraging low-cost camera sensors and sparse rendering to enable low bandwidth.

After years of building up its presence in automotive with small investments and well-publicized partnerships, Intel now secured its position as major automotive player. The announcement of the acquisition of an ADAS market leader came hot on the heels of its investment in digital mapping and open location platform vendor HERE, meaning Intel now holds a stake in the machine vision sensing, mapping, map maintenance, and location intelligence technologies, which are vital to enabling autonomous driving.

The sizeable investment is a significant vote of confidence in Mobileye and in its solutions, not only as it exists today, but also in how it will support autonomous vehicles in the future. The supplier endured an unusually public break from Tesla in 2016 as part of the fallout from criticism of the low-level automation Autopilot system, which allowed competitor NVIDIA to gain further traction in the automotive market. However, the purchase price of over US$15 billion represents a premium of approximately 60X Mobileye’s 2016 revenues. Given that Mobileye already has a commanding position in the ADAS market, Intel clearly expects the return on its investment to come from its contribution to semi-autonomous and autonomous driving. This is bolstered by the fact that Intel is set to inherit all of Mobileye’s existing partnerships and consortia memberships following the close of the acquisition.

The deal, however, clearly represents a significant threat to long-time partner of Mobileye, STMicroelectronics, the semi-conductor supplier that served as Mobileye’s hardware partner in the EyeQ family of ADAS SoCs. As part of Intel’s earlier announced partnership with Mobileye and Delphi, the semiconductor supplier would provide the processing power to interpret the camera sensor data captured by Mobileye. On top of the earlier BMW consortium announcement, it seems very likely that the days of the Mobileye-STMicroelectronics duopoly are numbered. Of course, until the deal closes, Intel and Mobileye must continue to operate as independent companies, meaning that STMicroelectronics saved the EyeQ4 business, and it is unlikely that Intel will be able to take on the manufacture of the EyeQ5, given that it is expected to begin sampling in 2018.  

In contrast to NVIDIA’s longer-term strategy, Intel, Samsung, and Qualcomm clearly preferred investment in market incumbents as their ticket into automotive. Indeed, the expected growth in connected and autonomous vehicles drove considerable ecosystem consolidation in the past 18 months.

On the semiconductor side, and following the Qualcomm acquisition of NXP (which formerly acquired Freescale) the number of players that can provide a newcomer with robust automotive manufacturing experience and a range of established partnerships is diminishing fast, with Infineon, Renesas, and STMicroelectronics being the most logical candidates for acquisition.

In the field of machine vision, as previously mentioned, Mobileye’s hold is dominating, with NVIDIA and its deep learning value proposition (enabled by its GPU parallel processing capabilities) representing the greatest threat. Like Intel, NVIDIA announced impressive partnerships with OEMs and Tier One suppliers—most recently with Bosch. Therefore, it may be tempted to further entrench its automotive presence and automotive grade manufacturing credentials through acquisition of one of the automotive incumbent semi-conductor vendors listed above, ahead of the rapid growth in connected and autonomous vehicles.