Qualcomm Inc. today made a $4.6 billion offer to acquire Veoneer Inc., whose technology is used by automakers to build partly autonomous driving features into their smart cars.

The offer is part of Qualcomm’s ongoing effort to expand beyond the smartphone chip market to other areas. The company is also pursuing expansion opportunities in the data center infrastructure and carrier segments. 

Qualcomm’s $4.6 billion offer is 18% higher than a competing $3.8 billion bid that auto parts maker Magna International Inc. made for Veoneer in July. In a public letter to the Veoneer board of directors, Qualcomm Chief Executive Officer Cristiano Amon stated that the company’s offer “represents a compelling opportunity for Veoneer and its shareholders both on a stand-alone basis and as compared to your merger agreement with Magna.”

Amon also made the case that Qualcomm’s acquisition proposal is less risky for Veneer in certain respects. Specifically, Amon pointed to the fact that Magna competes in some of the same market segments as Veoneer. If the two companies were to merge, the deal might draw scrutiny from regulators concerned about the deal reducing the number of competitors in the segments where both Veoneer and Magna have a presence.

“We do not believe there are material regulatory clearance concerns with respect to the Transaction—as opposed to potential issues with the Magna proposal in which the parties have overlap in active safety,” Amon wrote.

Qualcomm is a leading supplier of mobile processors and the modem chips that handsets use to connect to carrier networks. In recent years, the company has sought to move into other parts of the semiconductor industry to boost revenue growth. As part of that strategy, Qualcomm is working to establish a bigger presence in the automobile chip market, an effort it’s hoping to significantly accelerate with the proposed $4.6 billion acquisition of Veoneer.

Publicly-traded Veoneer makes software and sensors that automakers use to make advanced driver assistance systems for smart cars. The Stockholm-based company is one of the largest players in this market  Veoneer’s technology makes it possible to build advanced driver assistance systems that can perform automatic emergency braking, help drivers maintain a safe distance from other vehicles and assist with parking, to name a few of the capabilities the company promises to enable.

Veoneer last year signed a broad technology partnership with Qualcomm to launch a new business initiative dubbed Arriver. “Our interest in Veoneer is driven by Arriver,” Amon wrote in the public letter to Veoneer’s board.

The plan with Arriver is to create advanced driver assistance systems and, later, fully autonomous driving systems that will combine Veoneer software with Qualcomm hardware. Veneer is set to develop a suite of software components capable of performing tasks such as analyzing data from a vehicle’s sensors to identify nearby cars. Qualcomm, in turn, will provide specialized processors from the Snapdragon Ride system-on-chip line for vehicles it introduced last year. 

Acquiring Veoneer would enable Qualcomm to bring the company’s software, which is a key element of its strategy for the auto sector, in-house. A deal would remove the risk of a competitor potentially buying Veoneer and its technology. Furthermore, it would also enable Qualcomm to more closely align the Arriver software development roadmap with its own product goals.

Qualcomm’s vision with the acquisitions is to offer automakers an integrated suite of chips and software for building autonomous vehicles. By offering autonomous driving software alongside its chips, Qualcomm could remove the need for automakers to develop their own algorithms or source them from another supplier. This would reduce the amount of technical complexity involved in building autonomous vehicles, thereby making Qualcomm’s silicon more competitive.

The Snapdragon Ride processor line with which the company competes in the auto sector is made using a five-nanometer manufacturing process. A single chip is capable of running multiple advanced driver assistance system features. Automakers can also incorporate multiple Snapdragon Ride chips into a vehicle to provide performance equivalent to more than 700 trillion operations per second. Such performance, Qualcomm says, will be sufficient to run autonomous driving software.

Acquiring Veoneer would position Qualcomm to more directly compete with Intel Corp. in the auto market. Through its Mobileye subsidiary, Intel has also adopted a strategy of offering both chips and software services for automakers building partly or fully autonomous vehicles.

“As the automotive industry continues to transform, it is becoming increasingly important for automakers to have a partner who develops horizontal platforms that drive innovation and enable competition,” Amon said.

Qualcomm already has a presence in some parts of the auto sector. The company supplies chips for a number of vehicle subsystems including infotainment units and instrument panels. Qualcomm disclosed today on occasion of its bid for Veoneer that it has a revenue design win pipeline, a metric measuring future revenue, of about $10 billion in the auto sector.

Photo: Qualcomm