OpenAI to buy AI device startup from Apple veteran Jony Ive in $6.5 billion deal

By Mark Gurman and Shirin Ghaffary Bloomberg OpenAI will acquire the AI device startup co-founded by Apple Inc veteran Jony Ive in a nearly billion all-stock deal joining forces with the legendary designer to make a push into hardware The purchase the largest in OpenAI s history will provide the company with a dedicated unit for emerging AI-powered devices Acquiring the secretive startup named io also will secure the services of Ive and other former Apple designers who were behind iconic products such as the iPhone Related Articles Chatbot Arena group goes from academic project at UC Berkeley to million startup DoorDash ends AI voice-ordering product for restaurants Microsoft is bringing Elon Musk s AI models to its cloud Elon Musk s xAI blames rogue tampering for white genocide glitches How Apple fell behind in the AI race I have a growing sense that everything I ve learned over the last years has led me to this place and to this moment Ive revealed in a joint interview with OpenAI Chief Executive Officer Sam Altman It s a relationship and a way of working together that I think is going to yield products and products and products For the British-born designer the move marks a high-profile return to a consumer tool industry he helped pioneer Working for years alongside Steve Jobs he crafted the look and feel of the modern smartphone in addition to the iPod MacBook iPad and Apple Watch He left Apple in When Ive departed Apple CEO Tim Cook pitched the idea that the two parties would remain collaborators But they never distributed a product together after Ive s exit And now the designer is embarking on a new collaboration with Altman who he called a rare visionary Ive was once described by Jobs as his spiritual partner and his new stint designing rival tool products could be seen as a bad omen for Apple a company already struggling to compete in AI In the interview Altman explained Jobs would be damn proud of Ive s latest move OpenAI is going to create a product at a level of quality that has never happened before in consumer hardware Altman reported AI is such a big leap forward in terms of what people can do that it requirements a new kind of computing form factor to get the maximum anticipated out of it he announced Apple shares dropped as much as in New York on Wednesday They had been down this year through Tuesday s close As part of the deal OpenAI is paying billion in equity for io The balance of the nearly billion stems from a partnership reached in the fourth quarter of last year that involved OpenAI acquiring a stake in io Separately OpenAI s startup fund also invested in Ive s company at that time Billionaire philanthropist Laurene Powell Jobs is an io backer as well through her firm the Emerson Collective Other investors include Sutter Hill Ventures Thrive Capital Maverick Ventures and SV Angel Altman doesn t have equity in io OpenAI disclosed The deal is expected to be completed this summer pending regulatory approvals The takeover of io will provide OpenAI with about hardware engineers program developers and manufacturing experts a squad that will build what Ive and Altman expect to be a family of devices The two executives had already been exploring various early ideas for about two years they explained The pair expects their first device to be a truly novel type of product People have an appetite for something new which is a reflection on a sort of an unease with where we right now are Ive stated referring to products available at present Ive and Altman s first devices are slated to debut in When he left Apple six years ago Ive started the firm LoveFrom a collective of designers and engineers The staff includes veterans of Apple s hardware and application departments as well as friends of Ive and other collaborators He then co-founded io last year with Apple alumni Scott Cannon Evans Hankey and Tang Tan Hankey was Ive s successor at Apple and remained at the company until while Tan led iPhone and Apple Watch product design until Cannon worked at Apple before co-creating the once-popular email app Mailbox which was acquired by Dropbox Inc At io the group set out to develop engineer and manufacturer a collection of products for an era of artificial general intelligence the point when tool achieves humanlike cognitive abilities The squad will now continue that mission at OpenAI becoming a threat to the very devices that the designers helped create That adds to the challenges of Apple which has fallen behind its Silicon Valley peers in artificial intelligence The company s AI platform published last year lacks the capabilities of rival systems and relies in part on OpenAI s ChatGPT chatbot to fill in the gaps Still Ive and Altman don t see the iPhone disappearing anytime soon In the same way that the smartphone didn t make the laptop go away I don t think our first thing is going to make the smartphone go away Altman declared It is a totally new kind of thing The phone as it currently is is a remarkable general-purpose device Ive announced adding that people will connect with AI in very new options OpenAI founded a decade ago as a research organization became a driving force in AI with the release of ChatGPT in The company s valuation has swelled to billion and it s looking to expand its reach through acquisitions OpenAI is working on other transactions such as a billion deal for AI coding tool company Windsurf OpenAI also shook up its management ranks this month with the San Francisco-based company appointing Instacart chief Fidji Simo as the CEO of applications She reports directly to Altman allowing him to focus on the broader strategy Hankey who will become an OpenAI employee along with Tan and Cannon reported that ChatGPT s debut prompted a realization that hardware system would have to change A number of us looked at each other and stated This is allegedly the the bulk incredible tool of our career she reported in an interview While Ive and LoveFrom will remain independent they will take over design for all of OpenAI including its system Altman explained his first conversations with Ive weren t about hardware but rather about how to improve the interface of ChatGPT We are obviously still in the terminal phase of AI interactions explained Altman We have not yet figured out what the equivalent of the graphical user interface is going to be but we will LoveFrom has a number of former Apple designers who helped create the look of the Mac and iPhone operating systems including Bas Ording Mike Matas and Chris Wilson Ive noted They could help redesign OpenAI s app for a new generation of consumers LoveFrom will continue its existing relationships with customers like Ferrari NV and Airbnb Inc but won t take on major new clients The new hardware company within OpenAI will be overseen by Peter Welinder who will description to Altman as a product vice president Ive noted ChatGPT was initially put on his radar by one of his twin sons Charlie and he at once knew he had to meet Altman after using it The new company at OpenAI will work at io s existing workspace in Jackson Square a neighborhood in San Francisco and OpenAI s current offices I have felt that my the greater part key and useful work is ahead Ive announced adding that he s been training for this moment He compares the experience to Apple in the late s and early s before the iPod and iPhone I m just really really grateful we all determined each other Ive and Altman wouldn t elaborate on what hardware products they are working on but they will be entering a realm in its infancy Meta Platforms Inc the owner of Facebook and Instagram is perhaps the the greater part notable maker of AI devices It sells popular Ray-Ban smart glasses that use cameras and microphones to provide context about the surrounding setting There have been inhabitants failures as well such as the Humane Ai Pin and the Rabbit r personal assistant device Those were very poor products declared Ive There has been an absence of new procedures of thinking expressed in products Tan who was central to advancing every version of the iPhone within Apple s hardware engineering department revealed the new club isn t tied to a legacy and will have an opportunity to rethink this space Still really delivering a product will take a while It will be worth the wait Altman reported It s a crazy ambitious thing to make More stories like this are available on bloomberg com Bloomberg L P