Why Intel is paying $15 billion for Mobileye

Cars coming off the assembly line in the next few years will have computing power to rival your cellphones, and they’ll get even more complex as automakers introduce more self-driving technology.

That’s why Intel — known for its chips, data centers and computing capabilities — just bought self-driving tech supplier Mobileye for $15 billion. Intel, which has long been a supplier to the PC industry, lost out on the mobile revolution. It sees cars as “data centers on wheels,” generating as much as four terrabytes of data a day.

Mobileye, which makes an array of cameras and laser-based sensors, already sells its technology to 27 automakers, as well as to other automotive suppliers. It has a firm foothold within the car industry. Intel, meanwhile, has an automotive division, but it doesn’t have as many direct inroads into autonomous driving.

The self-driving industry is still very new and car manufacturers as well as auto suppliers are all creating different parts of the technology. Chipmaker Nvidia, for example, competes with both Intel and Mobileye. In addition to making chips, Nvidia also has mapping technology.

While Mobileye is one of the few companies that has a comprehensive set of technology, no single company currently offers the entire stack of technologies for self-driving. Intel and Mobileye together would be able to marry the data-crunching needs with sensor tech.

Intel CEO Brian Krzanich estimates self-driving will be a $70 billion industry by 2030. Intel and Mobileye struck a deal last year to start developing better autonomous technology.

The market is increasingly competitive as both established players and new startups attempt to plant their flag in the transformed world of auto-tech.

In October, Qualcomm acquired automotive chip supplier NXP for $47 billion, further fueling Intel’s need to quickly get on board the automotive wave. That’s especially true given Intel missed the mobile wave and is attempting to make up for it through investments in virtual reality and self-driving technology.

In the past, however, Mobileye and many other suppliers typically offered one aspect of an automated driving system. In Mobileye’s case that was the computer vision software and hardware. Recently, however, suppliers have begun to partner with each other to provide automakers with a more cohesive package of technology.

For instance, Mobileye partnered with Delphi, and Nvidia announced it would begin working with hardware suppliers Bosch and ZF and would power Audi’s self-driving system.

Even Alphabet’s self-driving company Waymo, which says it’s possible it will supply its self-driving tech to automakers but in the meantime is working on its own cars in partnership with those automakers, brought their hardware efforts in-house in an attempt to edge out traditional suppliers.

Self-driving systems require all data from sensors to be deeply fused together so that it can be fed to the brain of the car to make fast and safe decisions in real time. The more closely hardware and software are developed the easier it is to connect the technology.

Intel’s acquisition of Mobileye takes that step, formalizing the deep collaboration the companies already have as part of a deal they struck last year. As part of the acquisition, Intel’s automotive team will move to Israel to work under the company’s CEO Ziv Aviram and CTO Amnon Sashua.

“The kind of deep collaboration we need to do in order to accelerate things cannot be done without being together,” Sashua said during a press call.

There are some obvious financial motivations for the deal. Absorbing Mobileye will also help Intel save $175 million a year by 2019 thanks to certain tax advantages to the combination.

This still looks like it could be an expensive purchase. Mobileye made $121 million in operating profit last year, making Intel’s $15 billion purchase price 124 times its profit.

For Mobileye, Intel’s appeal was threefold. With Intel’s resources, Mobileye will be able to scale its portfolio of hardware and software systems that have now expanded well beyond forward-facing camera technolgy, Sashua told Recode. Secondly, Intel already employs 10,000 people in Israel — where Mobileye was founded and is headquartered — and understands the culture, making the chances of the merger going well high, he said.

Lastly, by absorbing Intel’s automotive team, Mobileye can continue to work directly with its many partners.

That may change, of course. While the companies are convinced of the strong value proposition combining its autonomous efforts will provide, these automakers and suppliers agreed to work with Mobileye, not necessarily Intel.

However, on a press call on Monday, Sashua said that he has already spoken to some of his customers who saw this acquisition as a positive.

“What’s going to change is we’re going to get access to more resources,” Sashua said.

Watch how the technology works:

This article originally appeared on Recode.net.