OpenAI $6.5 Billion Purchase of Jony Ive 'io' Company Is About Survival Not Innovation

May 23 2025 10:18
In what might be the most expensive acqui-hire in tech history, OpenAI announced this week that it's purchasing io Products, a company led by former Apple design chief Jony Ive, for a staggering $6.5 billion. The deal, conducted entirely in OpenAI stock, has sent shockwaves through Silicon Valley, not just for its size, but for what it reveals about the state of artificial intelligence's most prominent company.


Let's start with the most glaring question: What exactly did OpenAI just buy? The answer is surprisingly thin. io Products, the company being acquired, doesn't appear to have a website, publicly known customers, or even a clearly defined product. According to reports, the startup employs roughly 55 people—making this a roughly $118 million per employee acquisition.

The math becomes even more striking when you consider that OpenAI already owned a 23% stake in io from a previous investment, meaning they're paying $5 billion for the remaining 77%. For context, that's more than the GDP of dozens of countries, spent on a company that most people in tech had never heard of before this week.

What io does have is Jony Ive, the designer whose fingerprints are all over Apple's most iconic products: the iMac, iPod, iPhone, and iPad. But here's where the story gets complicated—Ive isn't even joining OpenAI as part of this deal. Instead, his design firm LoveFrom will maintain its independence while taking on design responsibilities for OpenAI's products.



While OpenAI has been characteristically vague about what they're actually building, renowned Apple analyst Ming-Chi Kuo has provided the first concrete details about the mysterious device. According to his industry research, the collaboration is producing something far more modest than the revolutionary hardware the announcement suggested.

The device, expected to begin mass production in 2027, will be roughly the size of an iPod Shuffle and slightly larger than Humane's failed AI Pin. Most tellingly, it will have no display functionality, instead relying on cameras and microphones for environmental detection while connecting to smartphones and PCs for computing and display capabilities.

In other words, after spending $6.5 billion, OpenAI appears to be building what amounts to an expensive Bluetooth accessory. The intended use case of wearing the device around the neck evokes more fashion statement than technological breakthrough.

Kuo's timeline also reveals another uncomfortable truth: even if everything goes perfectly, consumers won't see this device for nearly three years. That's an eternity in the fast-moving AI landscape, where models and capabilities are evolving monthly.

My industry research indicates the following regarding the new AI hardware device from Jony Ive's collaboration with OpenAI:
1. Mass production is expected to start in 2027.
2. Assembly and shipping will occur outside China to reduce geopolitical risks, with Vietnam currently the… pic.twitter.com/5IELYEjNyV

— 郭明錤 (Ming-Chi Kuo) (@mingchikuo) May 22, 2025

Kuo's analysis also provides insight into the curious timing of this announcement. He suggests that OpenAI's motive for revealing the collaboration now is to shift market focus away from Google I/O, where Google showcased its ecosystem and AI integration capabilities that pose significant challenges to OpenAI.

This interpretation reframes the entire announcement as a defensive PR move rather than a confident product strategy. Instead of revealing breakthrough innovation, OpenAI may have simply needed a compelling narrative to counter Google's demonstrated AI superiority.

The timing analysis suggests that OpenAI is increasingly reactive rather than proactive in its strategic communications. When your biggest announcement of the year is designed primarily to distract from a competitor's event, it raises questions about your actual technological leadership.


The tech world's fascination with Jony Ive often glosses over an uncomfortable truth: his track record without Steve Jobs as a creative partner has been decidedly mixed. After Jobs's death in 2011, Ive's design decisions increasingly prioritized form over function, leading to some of Apple's most criticized products.

The butterfly keyboard debacle that plagued MacBooks for years? That was Ive's pursuit of impossible thinness. The removal of essential ports from "Pro" machines? Another Ive special. The charging port on the bottom of the Apple Mouse that renders it unusable while charging? Classic post-Jobs Ive thinking.

Even the Apple Watch, often cited as Ive's post-Jobs success, initially struggled because he positioned it as a luxury fashion item rather than the fitness device that eventually found market success. Apple had to significantly pivot the product's positioning after Ive's departure.

The pattern suggests that Ive's genius was most effective when tempered by Jobs's brutal pragmatism and user-centric vision. Without that creative tension, Ive's aesthetic perfectionism often came at the expense of usability.


OpenAI's hardware ambitions arrive at a particularly inauspicious moment for AI-powered consumer devices. The recent failures of Humane's AI Pin and Rabbit's R1 device serve as cautionary tales about the challenges of creating compelling AI hardware.

Both products suffered from the same fundamental problem: they attempted to solve problems that smartphones already handle quite well, while introducing new friction into users' daily routines. The AI Pin required users to speak aloud to their clothing, while the R1 offered little more than what a well-designed smartphone app could provide.

Meta's Ray-Ban smart glasses represent one of the few success stories in AI-powered wearables, but even that product focuses on a narrow set of use cases and leverages an existing, proven form factor. Creating an entirely new category of device remains extraordinarily difficult.


Apple's own recent hardware struggles provide another cautionary tale. The Vision Pro, despite Apple's massive resources and hardware expertise, has failed to gain significant traction due to its unwieldy form factor, limited use cases, and social awkwardness.

If Apple—with its integrated hardware and software ecosystem, massive R&D budget, and years of AR development—couldn't crack the code on revolutionary new hardware, what makes OpenAI think it can succeed with a much smaller team and no proven hardware track record?

The Vision Pro's lukewarm reception also highlights how even excellent engineering and design can't overcome fundamental product-market fit issues. Creating compelling hardware requires more than aesthetic brilliance; it demands deep understanding of user needs, manufacturing scale, software ecosystems, and market timing.


Perhaps the most revealing aspect of this acquisition is its structure. OpenAI is paying entirely in stock—essentially using its inflated $300 billion valuation as currency to make acquisitions that would be impossible with cash.

This strategy makes perfect sense for a company that knows its current valuation may not be sustainable. By converting paper value into tangible assets and talent, OpenAI is hedging against a future where the AI market corrects and valuations return to earth.

The all-stock nature of these deals also suggests that OpenAI may be more concerned about preserving cash for core operations than its public statements indicate. Training frontier AI models is extraordinarily expensive, and the company has already signaled it won't be profitable until 2029.


Strip away the glossy marketing materials and carefully crafted announcement video, and OpenAI's recent acquisition spree looks less like confident expansion and more like desperate diversification.

The company's core business—selling access to large language models—faces increasing competition from Google, Anthropic, and others. Meanwhile, the costs of training and running these models remain astronomical, and the path to sustainable profitability remains unclear.

OpenAI's pivot toward consumer hardware feels like an admission that the company needs to find new revenue streams beyond its current API business. But entering the hardware market means competing against companies like Apple and Google that have decades of experience, established supply chains, and integrated ecosystems.


It's worth noting that this isn't Sam Altman's first controversial acquisition strategy. His track record includes some questionable self-dealing, including his involvement with multiple companies that later benefited from OpenAI relationships.

The announcement video for this acquisition, featuring Altman and Ive in an oddly intimate photo shoot, has drawn criticism for its tone-deaf presentation. When your company announcement looks more like a fashion spread than a business strategy, it raises questions about priorities.


The video's emphasis on personality over product details also suggests that this acquisition is as much about optics as it is about capability. OpenAI gets to say it hired "the iPhone guy," regardless of whether that translates to successful products.


Creating successful consumer hardware in 2025 requires more than great design—it demands an entire ecosystem. Apple's success isn't just about beautiful products; it's about the seamless integration between hardware, software, services, and third-party developers.

OpenAI currently excels at one thing: large language models. Building a hardware ecosystem requires expertise in industrial design, manufacturing, supply chain management, retail distribution, customer support, and software platform development. None of these are core competencies for OpenAI.

Even if Ive and his team can design a beautiful device, OpenAI will need to either integrate with existing platforms (like Android) or build their own ecosystem from scratch. The former makes them dependent on competitors; the latter requires capabilities and investments far beyond what they've demonstrated.


The broader tech industry should pay attention to what OpenAI's hardware pivot reveals about the current state of AI. Despite years of hype about artificial general intelligence and revolutionary capabilities, OpenAI is now betting its future on consumer gadgets and developer tools.

This suggests that the company's leadership recognizes that AI models alone aren't sufficient to build a sustainable business. The pivot toward hardware and applications represents an implicit acknowledgment that the current AI boom may not support the valuations and expectations that have been built around it.

For consumers, the bigger question is whether we actually need new AI-powered hardware devices. Most of the compelling AI use cases can already be accessed through smartphones, computers, and existing devices. Creating entirely new form factors seems to solve problems that don't really exist.

The next few years will reveal whether Jony Ive's design magic can work without Apple's ecosystem, and whether OpenAI can successfully transform from an AI research lab into a diversified tech company. Given the track record of both expensive acquisitions and AI hardware startups, skepticism seems warranted.