There have been some eyebrows raised over OpenAI’s $6.5 billion acquisition of former Apple designer Jony Ive’s startup, but OpenAI seems to have a solid business case to get into the hardware space.
OpenAI CFO Sarah Friar has indicated that OpenAI could build a hardware product to get its free users to become a bigger part of its ecosystem, and eventually pay for its services. This could justify the big bucks that OpenAI had spent to get star designer Jony Ive onboard.
“We are in a brand new era of computing,” Friar said in an interview. “And if you think about every era previously, like the PC for the internet age, the phone for the mobile age, Jony was really at the nexus of a lot of these. (He was a part of deciding) what the graphical user interface would look like on the PC, on the phone when we got to touch (the screen), it was kind of incredible,” she added.
“And we believe that as you birth this new era of AI, there’s going to be new platforms and new substrates in the way people experience it. I think it’s personally gonna be a lot more multimodal. So we think of tech today a little bit more around touch, but we as humans we see things, we hear things, we talk. And so our models are great at that. And so we were excited to work with the best in the business on that,” she added.
Friar hinted that $6.5 billion was a fair price to pay for a hardware play. “How do you value that? I don’t know. It’s very hard to value something in that early phase. You’re really betting on great people and beyond Jony, there is an incredible team. Because it’s not just about imagining what a new platform could look like, but you’ve got to be able to craft it, you’ve gotta be able to build it, you’ve gotta be able to understand supply chains,” she said.
She said that a hardware product also made business sense for OpenAI, which had thus far only made text, image and video generation models. “So if we can get people around the world excited to use AI, we have many ways to begin to think of a business model around that. So it could be an ongoing bigger subscription for ChatGPT. The vast majority actually use our product for free. And that’s on purpose, because we want to make sure AI gets into the hands of everyone. But getting you to that point where you see the value to upgrade — that’s with new products. So most recently image gen, when it went viral at the end of March, that was a moment where we saw people fall in love again with what AI could do, but also start to subscribe more because they would use it more effectively. And I think hardware’s just a part of that next value add we put into the product,” she said.
It’s an interesting argument. OpenAI has already exposed billions of people to AI — ChatGPT is now the fifth most-visited website in the world, and seems to be getting ever more popular. Most of these users are on OpenAI’s free plan, but if the company can create a hardware product whose use-case is so compelling, like the smartphone for instance, it could eventually become ubiquitous, and get millions of people to buy it. OpenAI already seems to be laying the groundwork for such a transition by integrating memory into its LLMs, and regular ChatGPT users would only need to port their accounts to the new hardware device, and it could instantly have context of all their previous interactions. It’s still early days, but there might be a strong argument for OpenAI splurging on building an AI-focused hardware device.