Big technology companies are unleashing a wave of acquisitions to gain a foothold in the autonomous car market, including the quest to build driverless cars, and for good reason. The market's expected to grow to over $70 billion by 2030, Intel Corp. CEO Brian Krzanich told the Financial Times.

Big Buyout Premiums

In recent months: Samsung Electronics paid $8 billion to buy Harman International Industries Inc., an audio and telematics supplier; Siemens AG spent $4.5 billion for Mentor Graphics Corp., a producer of automotive design software; and Qualcomm Inc. executed the $39 billion takeover of automotive chip supplier NXP Semiconductors NV. Not to be outdone, Intel Corp. last week announced plans to purchase Mobileye NV, a lead supplier of automotive sensor systems, at a price tag of about $15.3 billion, according to The Wall Street Journal. (To read more, see: Tech Firms Eyeing Autos as Next Big Profit Wave.)

The big buyout premium that Intel paid for Mobileye is just one example of the rich price these tech companies are willing to pay to expand their presence in the budding market for driverless vehicles, a market that is changing the very dynamics of competition within the automotive industry by pitting traditional automakers against technology companies, the Journal said in its March 14 story.

Source: Wall Street Journal

As autonomous driving becomes less hypothetical and more of a concrete reality, the automobile supply chain is undergoing a significant transformation. The interesting question in that transformation revolves around whether it will be tech companies or automakers that will have greater dominance in the way in which the `smartification' of the automobile develops. There is a possibility for intense competition and also partnerships between big technology and big auto companies.

Building From Scratch

Features like infotainment and connectivity are no longer just add-ons but are becoming differentiating factors guiding consumer behavior in their automobile-buying decisions, according to a report by McKinsey & Co. Tech companies have proven to have greater expertise in these areas, yet they are also realizing just how challenging it can be “to build a car from scratch,” the Journal says. (To read more, see: Self-Driving Cars: Shifting Gears in Key Sectors.).

Considering the market's fast pace of development, tech and auto companies have already begun forming partnerships. In the past year and a half, Intel has signed partnership deals with automaker, BMW, and auto parts supplier, Delphi Automotive. Also, Fiat Chrysler Automobiles NV is outsourcing its driverless car program to Alphabet Inc.’s Waymo.