OpenAI has announced the acquisition of Jony Ive’s startup, io Products, for $6.4 billion. Ive, who was one of the principal architects of the iPhone, founded the startup last year and has been partnering with OpenAI for two years. Here’s everything we know about the deal and what makes it so crucial for the artificial intelligence (AI) ecosystem.
Io Products is an untested AI hardware startup and not much is known about the products that it is developing. In its blog post, OpenAI said, “The io team, focused on developing products that inspire, empower, and enable, will now merge with OpenAI to work more intimately with the research, engineering, and product teams in San Francisco.”
Ive, on the other hand, would remain independent while taking up “deep creative and design responsibilities across OpenAI and io.”
OpenAI Is Buying Ive’s Startup
The release is extremely vague and doesn’t even explain what kinds of AI products Ive’s company is developing. Instead, it says that the firm is creating “Tentative ideas and explorations evolved into tangible designs.”
OpenAI CEO Sam Altman reportedly said that he sees Ive as “the greatest designer in the world.” He has good reason to believe in Ive as he has been credited with developing Apple products, including iPhone, iPad, and MacBook Air. He was also instrumental in designing Apple’s new Cupertino headquarters, called Apple Park, which officially opened in 2019.
In the blog post, Altman said, “What it means to use technology can change in a profound way. I hope we can bring some of the delight, wonder, and creative spirit that I first felt using an Apple Computer 30 years ago.”
OpenAI disclosed that it already owns 23% of the company and would shell out $5 billion more to acquire the company. While the specifics are still unknown, the Wall Street Journal reported that it is an all-equity deal.
OpenAI is currently burning billions of dollars every year as it develops its AI infrastructure and works to improve its AI models. The company announced its most recent funding round in March this year when it raised a whopping $40 billion at a post-money valuation of $300 billion. The round was led by SoftBank and was the biggest funding round for the ChatGPT parent.
Notably, while Microsoft has been among the biggest backers of OpenAI and has invested over $13 billion into the AI startup, reports suggest that not all is well between the two companies. OpenAI, which has dialed back its plans to fully convert into a for-profit enterprise, is reportedly looking to halve Microsoft’s revenue share by 2030.
Why Is OpenAI Buying a Hardware Company?
While io Products is OpenAI’s biggest acquisition ever, the company has been on an acquisition spree this year. Recently, it agreed to buy the AI-assisted coding tool Windsurf for a consideration of $3 billion. However, what makes the acquisition of io Products special is the fact that it is a hardware company.
The acquisition marks OpenAI’s foray into AI-powered consumer hardware products. While details are scant at the moment, with the io Products acquisition, OpenAI is certainly working on some kinds of new AI-powered devices.
A video posted by OpenAI talks about the opportunity to “completely reimagine what it means to use a computer.” It adds that the merged company will have the “mission of figuring out how to create a family of devices that would let people use AI to create all sorts of wonderful things.” You can watch the full video below.
Altman said that Jony gave him a prototype of a product that “is the coolest piece of technology that the world will have ever seen.” In the video, Altman and Ives say, “The products that we’re using to deliver and connect us to unimaginable technology. They’re decades old, yeah, and so it’s just common sense to at least think surely there’s something beyond these legacy products we have.”
The video ends by saying the company looks to share its work next year, so we’ll have to wait until then for more details on the product.
Could OpenAI Be Making Glasses?
To be sure, reports of OpenAI working on a hardware product have been floating for the last few months. In November 2024, OpenAI invested in Physical Intelligence, a robot startup based in San Francisco. Companies like Tesla are working on robotics as part of their AI initiatives.
Last year, OpenAI hired former head of Meta’s augmented reality glasses initiative Caitlin “CK” Kalinowski. In her LinkedIn post, Kalinowski, who calls herself “a visionary product executive and expert in AR hardware,” announced, “I will initially focus on OpenAI’s robotics work and partnerships to help bring AI into the physical world.”
After OpenAI’s acquisition of io Products, many are speculating that the company might be working on glasses. Notably, Meta Platforms CEO Zuckerberg believes that glasses could be the next major computing platform amid the AI pivot.
Hardware Is the New Frontier for AI
While OpenAI might be late into the AI hardware ecosystem, the game is just about getting started with companies making everything from cars, smartphones, personal computers, and even refrigerators, adding AI to their products. Given OpenAI’s lead in AI, getting into hardware was the next logical step.
Meanwhile, while we don’t know much about what sort of AI hardware OpenAI is going to develop, Altman and Ive have dropped hints that it might compete with legacy hardware devices like computers. The description of the video that OpenAI put on YouTube says, “Building a family of AI products for everyone,” which implies that it could be a mass product.
OpenAI’s foray into the hardware space could potentially shake up the market and also redefine its partnership with Microsoft. While Microsoft does not sell much hardware beyond perhaps the Xbox consoles, the company gets a lot of revenue licensing for its Windows and Office Suite of products to OEMs.