Intel Plunges Into the Self-Driving Car Market with $15 Billion Acquisition

Yesterday, the global semiconductor giant Intel announced that it would acquire the Israel- based startup Mobileye N.V. for $15.3 billion. Founded in 1999, Mobileye has developed computer vision software it says can propel self-driving cars into the mainstream.

The value for data systems within the autonomous vehicle market will reach $70 billion by 2030, according to Intel estimates. And McKinsey projects that 15 percent of all automobiles will be fully autonomous by 2030. Last summer, Morgan Stanley estimated that the entire driverless car sector could be worth $2.6 trillion at the end of the next decade.

From Intel’s point of view, its purchase of Mobileye is necessary to compete in an emerging sector ripe with opportunities. This industry is now dominated by the global automakers and upstarts such as Tesla Motors, as well as technology and ride-sharing companies like Google and Uber. If Intel hopes to continue to placate its shareholders, the company must venture beyond the hyper-competitive and commoditized semiconductor market. Analysts have noted that Intel missed the boat when the time was right to seize opportunities within the smartphone market – and its continued strength in the personal computer and server market is not a sure long-term bet. Therefore, a forward-looking eye on the self-driving market makes sense.

But this acquisition is not without risk. Bloomberg’s Tara Lachaelle noted that when measured on an EBITDA (earnings before interest, tax, depreciation and amortization) basis, Intel just dived into one of the most expensive takeovers since the heady dot-com days around the turn of the century. Investors responded in kind. As of press time, Intel’s stock price was down 2 percent.

Nevertheless, Intel purchased one of the world's leading self-driving car technology firms, and one that can boast a track record of almost two decades.

Headquartered in Jerusalem, the company says it has at least 450 engineers working a bevy of software systems, including the LiDAR-based driving technologies that allow an autonomous car to 'see' what is on the road and eliminate the bane of commuting: human error.

As LiDAR (light detection and ranging) software evolves and proves to be more sophisticated, watch for self-driving cars to become more of a reality.

Hence the fierce competition -- and even litigation: Google, for example, recently sued Uber for patent infringement, unfair competition and the stealing of trade secrets related to autonomous cars. Tesla has also staunchly defended its turf and taken a former engineer to court for allegedly poaching employees as he launched his own self-driving car software startup.

Meanwhile, the conventional automakers are considering their own chess moves, as it makes more sense for them to develop what are currently expensive software systems in-house, rather than having to license the technology or attempt what would be a far more expensive acquisition in the future.

In early 2016, General Motors invested $500 million in Lyft as it viewed that ridesharing company as a ticket to continued viability in a rapidly evolving automobile market. And last month, Ford Motor Co. plunked $1 billion on an artificial intelligence company that in the future could be the brains behind its driverless cars.

The rise of autonomous vehicles will most likely mean fewer cars on the roads, so everyone is scrambling to snag their pieces of the pie -- and, in the meantime, creating a bubble that may burst before these next generation of cars even become a common sight on the streets.

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