Intel buys local IT venture firm

Intel has acquired IT venture firm Olaworks for 35 billion won ($30.7 million), marking the U.S. chipmaker’s first purchase of a Korean company.

According to investment bank insiders, Intel recently signed a stock purchase agreement with Olaworks to acquire 100 percent of the company’s shares.

Both Intel and Olaworks declined to give further details related to the deal yesterday.

The Seoul-based firm was founded in 2006 by Ryu Jung-hee and some college friends with capital of 363 million won.

Ryu, an electrical engineering student who graduated from the Korea Advanced Institute of Science and Technology (Kaist), served as an adjunct professor at his alma mater in 2003.

Olaworks specializes in face and image recognition technology. It has provided solutions to local and foreign smartphone companies including LG Electronics, Motorola Korea, HTC and Pantech.

It is also the developer of a hit mobile phone application called Pudding, which shows pictures of celebrities resembling the smartphone user.

Industry observers said Intel’s acquisition of Olaworks is aimed at strengthening its mobile business segment based on a strategy of getting its hands on firms with cutting-edge technologies ahead of its rivals.

“Intel wants to go beyond making nonmemory semiconductors for personal computers. It is transforming into a mobile component and solutions provider, which encompasses the development of mobile central processing units, graphic processors and digital signal processing chips,” an IT source was quoted as saying by the JoongAng Ilbo yesterday.

“That’s why it has aggressively sought M&A deals to obtain outstanding components and solutions firms in the mobile sector.”

Intel last year acquired Silicon Hive, a system-on-chip firm which possesses the technology to have mobile devices take digital camera-quality photos.

Industry sources said Intel will now seek to integrate the technologies of Olaworks and Silicon Hive.

Before 100 percent of Olaworks shares were sold to Intel, Olaworks executives controlled about 49 percent of the firm’s stocks.

Intel Capital, a venture capital subsidiary of Intel, and Skylake Incuvest each controlled 19.1 percent of Olaworks after they made a combined $4 million investment in the company back in 2007.

Some industry sources celebrated the deal as an indication of how Korean IT ventures are now competitive enough to draw the interest of global tech giants like Intel. They predicted the trend will continue.

By Kim Mi-ju [mijukim@joongang.co.kr]