(Reuters) -OpenAI is buying Jony Ive's startup io Products in a $6.5 billion deal and will bring the chief designer of early iPhones on board as creative head to develop devices tailored for the generative artificial intelligence era.
LoveFrom, the design firm founded by Ive after leaving Apple, has been working with OpenAI for two years on generative AI devices - an area where startups have stumbled due to high computing demands, including flops such as Humane's AI Pin.
With Ive leading design, OpenAI aims to pair the technology behind its popular ChatGPT chatbot with the product design expertise that made devices such as the iPhone bestsellers.
The companies did not disclose the financial details of the deal for io, which Ive co-founded a year ago. The all-stock deal was valued at $6.5 billion based on OpenAI's $300 billion valuation, according to a source familiar with the matter.
OpenAI had previously owned a 23% stake in the company, according to the source who requested anonymity to discuss private matters.
"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," OpenAI CEO Sam Altman and Ive said in a video posted on OpenAI's blog.
Altman said they had a prototype of a device without giving further details, but called it "the coolest piece of technology the world will have ever seen".
Apple did not immediately respond to a request for comment. It's shares fell more than 2% on the news.
The iPhone maker has been slow to roll out Apple Intelligence, a set of features with access to ChatGPT, with several advanced AI tools available on competing Android smartphones.
"OpenAI is interested in owning the next hardware platform so they don't have to sell their products through Apple iOS or Google's Android," D.A. Davidson analyst Gil Luria said.
"This is the same ambition Meta has with the Quest goggles and Meta Ray Bans."
A few companies such as Humane AI and Rabbit have tried to build bespoke devices for the AI era.
However, Humane AI, founded by a former Apple executives, struggled with its AI Pin device, which faced criticism for battery life, heat issues, limited functionality and high costs.
HP acquired Humane AI's assets, including its AI platform Cosmos, intellectual property and technical talent for $116 million, effectively discontinuing the AI Pin product.
Rabbit, on the other hand, has sold more than 100,000 of r1 devices, but reviewers have said functionality remains limited when compared with smartphones.
(Reporting by Akash Sriram and Aditya Soni in Bengaluru and Krystal Hu in New York; Editing by Arun Koyyur)