Amazon bought Blink in secret chip deal

Startup’s energy-efficient chips were more interesting

Amazon bought a home security camera outfit, Blink last year. Analysts wondered why, but it turns out the outfit had some rather interesting energy-efficient chips.

Amazon paid about $90 million to acquire the maker of Blink home security cameras late last year. But Amazon did not need to sell another camera, and it was interested in the company's chip tech.

According to Reuters, the online retailer is exploring chips exclusive to Blink that could lower production costs and lengthen the battery life of other gadgets, starting with Amazon’s Cloud Cam and potentially extend to its family of Echo speakers, one of the people said.

Amazon views its in-house devices as key to deepening its relationship with shoppers. The Cloud Cam and Echo currently need a plug-in power source to operate. Blink, which says its cameras can last two years on a single pair of AA lithium batteries, could change that.

Blink's owner was Immedia Semiconductor which was started in Massachusetts by old hands from the chip industry. Chief Executive Peter Besen and two of his co-founders came from Sand Video, which had designed chips in the early 2000s that decoded a new and improved video standard.

In 2004 they sold Sand Video to Broadcom and remained there as executives, according to an Immedia website. The group left in 2008 to create Immedia, aiming to design chips for video conferencing, and later targeting laptop makers as potential customers.

Dan Grunberg, a co-founder who left Immedia in 2016, said that plan fell through. Laptop makers were unwilling to pay $1 per chip when cheaper options were on the market. So Immedia changed to cameras.

The Blink security camera, which hit the market in 2016, did not require a power cable like many rival products, making it easier to place around users’ properties. It was cheaper, too, starting at $99. Amazon’s wired Cloud Cam launched at $119.99, while Netgear Inc’s wire-free Arlo cost more still. Netgear said last week it plans to spin off its Arlo business.

As Blink’s sales rose on Amazon’s website, the retailer noticed and realised the camera's chip was the secret sauce.

Having a proprietary chip design will make it harder for rival retailers to copy Amazon’s devices. And now that Amazon owns its chips, it can go straight to the manufacturers, cutting out middlemen chip designers such as Ambarella which has powered GoPro Inc products. Amazon has a division called Annapurna Labs that makes an unrelated kind of chip, and it was not clear which supplier it uses for chips that primarily process video.