Intel's $15.3 billion buyout of advanced driver assistance system (ADAS) maker Mobileye will help advance an alliance between the two companies and BMW, which plans to ship self-driving cars by 2021.
The sale also buttresses a decision by Mobileye to favor BMW with its vehicle vision chip technology (called EyeQ) over Tesla, according to a new report. Mobileye is already planning its fifth generation of EyeQ technology.
"After signing this agreement, Mobileye further stated that the company will not be supplying Tesla's technologies more advanced than its EyeQ 3 chips," Trendforce said in its report.
An image depicting how Mobileye's vision system is used for collision avoidance systems.
Mobileye chose BMW because it has a far stronger market position and will help maximize profits from the launch of its most advanced chip -- the EyeQ 5. Sales of BMW vehicles exceeded 2.1 million units in 2016, whereas Tesla sold around 760,000 units, Trendforce said.
"Formerly, the coalition was made up of two dominant players in their respective industries plus one smaller independent solution provider [Mobileye]. After the deal, Intel and BMW will negotiate with just each other," Trendforce said.
TrendForce believes the improved cooperation between the companies will speed BMW's self-driving vehicle development.
The launch of Mobileye's EyeQ 5 processor will likely coincide with the rapid growth of self-driving vehicles in 2020, when major auto markets such as the U.S. and Japan are expected to have their respective regulatory frameworks for autonomous vehicles passed and in place, Trendforce said.
A MobileEye EyeQ2 chip used in a Hyundai Lane Guidance camera module.
The deal between Intel and Mobileye is also another indication that major semiconductor manufacturers are aggressively jockeying for a favorable position in the fast-growing automotive electronics market.
Mobileye is a Tier 2 automotive supplier that works with all major Tier 1 suppliers, who sell to automotive giants such as BMW, Fiat Chrysler Automobiles, General Motors, Ford and Volvo. In fact, with the exception of Toyota, Mobileye supplies all 27 major automakers. Mobileye also counts Tier 1 system suppliers such as Autoliv and Delphi as its clients.
Last year, BMW, Intel and Mobileye entered into an alliance with the aim of bringing fully self-driving cars to market by 2021, a year after major legal issues are addressed and in time for the first wave of branded autonomous vehicles to hit the market.
Because of the Mobileye acquisition, Intel will also be able to combine its hardware products, such as high-performance computing chips and IoT solutions with Mobileye's image processing algorithms for autonomous driving systems. In turn, the deal gives Intel the potential to develop an autonomous driving product that incorporates cloud computing, Trendforce said.
Mobileye, an Israeli technology company, is a leader in developing both software and proprietary chip technology in support of a vision-based ADAS that provides warnings for collision prevention and mitigation. Mobileye commands 70% to 80% of the forward-looking vehicle camera marketplace, according to IHS Automotive.
Mike Ramsey, a research director at Gartner, said Mobileye's small, single-camera automotive vision system is both inexpensive and effective. It "uses a chip...that has a vision system embedded on [it] that recognizes vehicles, signs, pedestrians and lane lines and makes automatic emergency braking and lane-keeping possible.
In 2016, Mobileye's annual revenue increased by 48.7% to $350 million and the company's operating profit margin also reached 33.8%.
TrendForce said it expects Mobileye will continue to produce "impressive performance results in the future," just as it has over the previous two years.
"In terms of technology, Mobileye has accumulated expertise in machine vision, deep learning, data analytics and high-resolution image mapping," Trendforce said.
Conversely, Intel's subsidiary Altera, which it acquired in 2015, develops field-programmable gate arrays (FPGAs) -- processing chips that can be customized for automotive applications.
The addition of Mobileye's technology "will considerably strengthen Intel's position in the automotive chip market," Trendforce stated.
While leveraging Mobileye to strengthen its existing collaboration with BMW, Intel can also leverage Mobileye's close relationships with carmakers and avoid the lengthy product verification process that new market entrants are often being subjected to.
"With this deal, Intel will thus be able to quickly seize emerging opportunities related to the demand for autonomous driving systems," Trendforce stated.