Qualcomm, one of the world's biggest providers of silicon and technology for 5G smartphones, announced plans with SSW Partners to acquire Veoneer for $4.5 billion. The move is part of Qualcomm's long-term efforts to expand beyond cellphones and into the automotive industry.

In doing so, Qualcomm is chasing the lead of rival chipset suppliers Intel and Nvidia, both of which have made significant investments into the automotive space over the years. It also comes amid massive shifts in the automotive industry toward computer-assisted driving and connectivity – as well as a chipset shortage that has upended vehicle suppliers from Ford to Toyota.

For Qualcomm, the company's new agreement for Veoneer caps years of pushing into the automotive business. Qualcomm in 2016 offered to pay $44 billion for Dutch chipmaker NXP, a major supplier of processors for the auto sector. But the deal collapsed two years later when Chinese officials declined to approve the transaction.

The company's pursuit of Veoneer also represents the first major strategic purchase orchestrated by Qualcomm's new CEO, Cristiano Amon. Amon took over leadership of Qualcomm in June, and in August Qualcomm announced its plan to acquire Veoneer in a challenge to Sweden's Magna, another major supplier in the automotive industry. Magna had intended to acquire Veoneer for $3.8 billion, but announced Monday it would drop its pursuit of the company.

"Magna's waiver decision underscores our disciplined approach to valuation as we pursue strategic acquisitions and continue to act in the best interests of our shareholders," Swamy Kotagiri, Magna's CEO said in a statement.

Veoneer will pay a termination fee of $110 million to Magna under their failed merger plan.

Terms, conditions and ambitions

Qualcomm's plan to purchase Veoneer involves the company partnering with investment firm SSW Partners to pony up the full purchase price. SSW will acquire Veoneer and will then sell Veoneer's Arriver sensor perception and drive policy software platform to Qualcomm. SSW Partners will keep Veoneer's Restraint Control Systems (RCS) and Active Safety businesses.

According to the Wall Street Journal, the amount Qualcomm will pay for Arriver wasn't immediately available.

Qualcomm first announced it would partner with Veoneer in 2020. At the beginning of 2021, Veoneer announced the fruits of that partnership: Arriver, a business that integrates Veoneer's perception and driving policy software stack with Qualcomm's Snapdragon Ride platform for autonomous driving (AD) and Advanced Driver Assistance System (ADAS).

According to Veoneer's latest quarterly filing with the SEC, Arriver is making progress in the market. "The first Arriver perception and drive policy software running on the Qualcomm Snapdragon Ride platform has now been demonstrated in-vehicle to potential customers with encouraging initial feedback, a true milestone. During the quarter the Volvo XC40 Recharge, which runs the current generation of Arriver software, was picked as 'Top Safety Pick+' by the Insurance Institute for Highway Safety in the United States, another proof point that we are on track to create a leading global challenger for Active Safety systems and software," the company wrote.

Thus, Qualcomm appears to be padding the Snapdragon Ride automotive business it has been slowly nurturing for years. In its most recent quarter, Qualcomm reported $253 million in automotive sales, a figure that's more than double what it reported in the same quarter a year ago – but still a drop in the bucket of its total quarterly revenues of around $8 billion.

Qualcomm's move into the automotive industry "marks a critical changing of the guard in the automotive industry and the conclusion of a decades-long battle to tackle the automotive infotainment market. Prior to Qualcomm's late arrival with high profile design wins across the globe, the company watched from the sidelines as first Intel and then Nvidia sought to conquer the automotive infotainment opportunity," wrote long-time automotive analyst Roger Lanctot, of Strategy Analytics, in a post to the company's website early this year. "Qualcomm stands at the fulcrum of the world's largest automotive market as a rising force in automotive and wireless semiconductors setting the stage for unique opportunities and outcomes."

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano