Chipmaker Qualcomm took its boldest step yet in the race to develop self-driving technology, swooping in to snag a prized asset out from under the nose of a major auto parts supplier.
Qualcomm and New York–based private equity firm SSW Partners agreed to acquire Veoneer in a deal that values the Swedish componentry manufacturer’s shares at $4.5 billion in total, an 18% premium over the July offer from rival North American bidder Magna.
Best known for its dominance in smartphone chips, Qualcomm aims to carve out the prime piece for itself: Veoneer’s self-driving software development unit, Arriver, as part of a plan to best rivals like Nvidia. The leftovers will go to SSW Partners, which intends to sell off the remaining assets over time to competitors.
“This transaction creates superior value for our shareholders,” said Jan Carlson, chairman and CEO of Veoneer, in a statement on Monday, adding Magna waived its right to a counteroffer. “It also provides attractive opportunities to our Arriver team at Qualcomm and allows our other businesses to find long-term industrial partners where they can continue to develop.”
While Veoneer investors AMF, Cevian, AP4, and Alecta, which collectively represent roughly 40% of the equity, had already signaled their support for the Magna deal, no mention was made in the statement about whether they agreed to tender their shares.
An industry insider employed at one of the major global corporate consultancy firms said Magna has no reason to feel left out, though, speculating that it could still end up bidding for a remaining piece of Veoneer’s business that more closely mimics its own traditional auto components business anyway.
“While Arriver may be the crown jewel of Veoneer from Qualcomm’s perspective, it’s likely a lump of coal for Magna that doesn’t have the expertise in this field,” he said. “If they’re smart, they’ll pair up with Qualcomm to jointly offer automakers a fully integrated self-driving hardware and software system, much like ZF Group has done with Nvidia.”
Big ambitions
Arriver was created in August of last year as part of a deal to develop next-generation autonomous driving technology powered by Qualcomm’s proprietary chipset, Snapdragon Ride, from 2024.
“Qualcomm is the natural owner of Arriver,“ said Cristiano Amon, CEO of Qualcomm, in the statement, arguing the deal will allow his company to accelerate plans to become a leading supplier to the auto industry.
The automotive industry’s importance to Qualcomm is growing, with an order pipeline of more than $10 billion, from companies like China’s Great Wall Motors, whose upcoming Ora Cat battery-powered vehicle uses a Snapdragon 8155 chip to run its electronics system, sometimes referred to as a digital chassis, for features like in-car infotainment.
“With the transition to electrification, automakers are looking for other elements in the future that can enable them to deliver differentiation in the product, and the digital chassis is one of them because of the user experience you can achieve in the car,” Qualcomm Europe boss Enrico Salvatori told Coins2Day last month.
Automakers like Mercedes-Benz and Volvo have inked deals with Nvidia, looking to get their hands on the latest high-performance processors that can power automated driving, and Qualcomm wants its Snapdragon Ride automated driving chipset to bite off a bigger piece of the pie.
For the moment, the road map for Qualcomm’s automated driving processor lags that of its close rival in terms of computing speed, measured in tera operations per second.
However, Salvatori said Qualcomm is focused on a secondary attribute: conserving electrical energy. This will increasingly play a factor in the future as more EVs hit the road, where juice left in the battery ultimately determines range.
“We’re paying a lot of attention to power consumption,” Salvatori said.
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