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Why Is Intel Investing $60 Million Into Drones?

By Chris Neiger - Sep 1, 2015 at 8:20AM

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The chipmaker is looking to the drone market to fill out its Internet of Things ambitions.

Intel's (INTC -2.86%) on a mission to find its purpose in the post-PC era, and now it's looking to the skies for a sign. Last week, the chipmaker said it will invest $60 million in Hong Kong-based electric aviation company, Yuneec Holding, to develop consumer drones. 

Intel's newfound interest in drones comes as the unmanned ariel vehicles are on the cusp of massive growth, which could eventually help Intel open up new revenue possibilities. If Intel can parlay its new relationship with Yuneec into a viable drone business, it'll prove to the rest of the tech world that its chips are just as capable in the skies as they are on desktops and laptops.

Source: Yuneec.

Sky-high Internet of Things ambitions
Intel's latest move shouldn't come as that big of a surprise to those following the company. Intel's shown, under the direction of CEO Brian Krzanich, that it's very interested in becoming an Internet of Things chipmaker, no matter where that may take the company. 

Over the past two years, Intel's made a series of acquisitions, started new partnerships, and developed new technologies specifically for the burgeoning Internet of Things (or, IoT) market. The IoT will connect formally unconnected things to the Internet, bring new ways to automate processes, and provide a slew of data that needs to be analyzed. 

Here are just a few ways Intel's already hitched itself to the IoT: 

  • It purchased Basis Science and released a new smart watch under the brand.
  • it partnered with Opening Ceremony to develop a high-end wearable tech bracelet.
  • It uses its chips to power smart headphones made by SMS Audio. 
  • It partnered with Accenture, Dell, SAP, and others to develop an IoT platform.
  • It created the Quark chip for wearables and other IoT devices.
  • It purchased German chipmaker and home networking company Lantiq to expand its connected home offerings.

Intel's already earning more money from its IoT division than its mobile division, and as the company's PC revenues continue to decline, the company is looking to the IoT for its next wave of growth. In Q2 2015, Intel earned $559 million from its Internet of Things division, up 4% year over year. 

The drone market takes off
Intel's latest move won't bring in any revenue for the company just yet, but it's definitely a step in the right direction. The company needs to make strategic partnerships in different IoT segments, and working with Yuneec helps Intel understand how its chips work in drones. 

The commercial drone market, which Yuneec is a part of, is expected to grow from $609 million right now to $4.8 billion by 2021, according to Radiant Insights. Most of the drone growth is expected to come from the agricultural, energy, construction, and film industries over over the next few years. 

While Intel's IoT future isn't dependent on drones, the company needs to execute its Yuncee partnership correctly in order to benefit later. Intel's Interent of Things revenue will continue to be a combination of multiple sources, and adding drones into the mix could make those revenues larger and more stable in the years to come. 

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