Autotalks raised $30 million in March, and has received $70 million in investments since it was founded. The company wants to lead the revolution in communications between vehicles for the purpose of preventing traffic accidents and solving other transportation problems. Founded by Nir Sasson and CTO Onn Haran, Autotalks develops chips for communications between vehicles, and between vehicles, various infrastructure, and people. The company's solutions, as explained by Haran and CEO Hagai Zyss, do not compete with Mobileye's (NYSE: MBLY) solutions; they complement those solutions. In order to understand how and why Autotalks is regarded as one of the global leaders in its field, we got into our non-smart car, typed "Grand Netter" into Waze, and set off for the company's offices in Kfar Netter.
"We have a great deal of respect for Mobileye. The company did amazing work, and its success shows how disruptive (the term used for technology that creates a material change in an existing industry, in this case the auto industry, T.T.) the smart car industry is. When an industry does that, it gives birth to a lot of new players. Mobileye was among the very first players, and because that substantial change is now gaining momentum, there are many more new players," Zyss tells "Globes" in an exclusive interview.
"Globes": How do you explain Israel's prominence in this industry?
Zyss: "The smart car industry requires a system-wide perspective, and Israel has that. You have to understand communications, signals processing, cyber security, and a lot more. You have to solve a problem from end to end, and Israelis know how to do that."
Could you say that Mobileye's success helped in Autotalks most recent financing round?
Haran: "Mobileye has existed for 17 years already, and it has been a public company for two and a half years. This is not a company that came from nowhere. In my opinion, our previous financing round in October 2014, shortly following Mobileye's IPO, was affected by its success, but the recent financing round succeeded because of our success."
Zyss: "In the recent round, we had to prove that our product could already become commercial, in other words, that it had customers. That's possibly one of the most difficult things in founding a company: to move from developing a product to achieving penetration with customers. You could say that we're at the state at which Mobileye was when it recruited its first customers, in other words, at the validation stage, at which you say, 'It's really happening.' Our biggest competitor, NXP-Qualcomm, is a semiconductor giant worth $36 billion. When a customer chooses the chip made by us, a small company from Israel, rather than their chip, it's a big expression of confidence. It's even against his DNA, and when that happens, it means that our technology is better than our competitor's."
Haran: "The auto industry is a very conservative industry, and every contract we sign with a player in it is for seven years. What startup can guarantee that it will exist seven years from now? So anyone who chooses us believes in us."
The company, which is a chip manufacturer without a manufacturing plant, i.e. a fabless company, is developing a vehicle-to-everything (V2X) communications set-up. The technology facilitates vehicle-to-vehicle (V2V) communications, vehicle-to-infrastructure (V2I) communications, vehicle-to-motorcycle (V2M) communications, and vehicle-to-pedestrians communications (via smartphone). This wireless technology is designed, among other things, to help prevent traffic accidents, and is therefore part of the development of an automated car (although not only that). In slightly simpler language, a car talks with a car and/or a car talks with a traffic light and/or a car talks with a motorcycle and/or a car talks with a pedestrian.
According to the company, V2X technology is significant because it creates effective communications mainly in situation in which there is no direct line of sight and under difficult weather and lighting conditions, and therefore constitutes critical technology for preventing accidents in general, and accidents with autonomous vehicles in particular. Autotalks' recent financing round succeeded, among other things, after the US Department of Transportation issued a notice of proposed rulemaking (NPRM) making it obligatory to install V2V systems based on dedicated short-range communications (DSRC) technology in all new cars sold in the US, starting in 2023, for the purpose of improving road safety. In order to comply with this target, V2V deployment in new cars will begin in 2019.
How did it all begin?
Haran, who has a BSc and MSc in electrical engineering, was formerly the chief Bluetooth solution architect for chip giant Texas Instruments and CTO of Israeli company Passave, which developed semiconductors for fiberoptic systems. Passave was sold to PMC Sierra in 2006 for $300 million in shares. Haran remained in PMC Sierra for a short time, when he decided to do something more significant than producing the high-speed Internet infrastructure that Passave was involved in. "One day, I came home from work, and near the Wingate Institute, a car braked suddenly, forcing me to make an instantaneous response. I thought, 'Why can't I get early warning that a car is about to put on the brakes,' because it had no real reason for braking. I came home, did a Google search for communications between cars, and discovered that they had already begun researching this in Japan two decades ago."
Haran was familiar with the Japanese market from Passave. He combined with Autotalks' other founder, Sasson, and they created an initial prototype V2V chip for Japanese market in 2010. They were helped by a Japanese governmental plan to require every new vehicle starting in 2012 to install such a chip, but the plan was implemented only in 2015, and the company began looking at the US market, for which it create its first prototype in 2012. The company already has a second generation of the chip, called Craton, which is already ready for commercial marketing. Its main competitor is NXP-Qualcomm. "It's a miniature David against a mega-Goliath, that's how I see it," says Zyss about competing against the US corporation. "When you're competing against a company that's worth a lot more than you are, you have to beat it in technology." Other than NXP-Qualcomm, and mainly in the Japanese market, Autotalks is competing against Renesas Electronics, which has a $17 billion market cap. Last September, Japanese auto systems giant Denso selected the Israeli company's V2X technology, and mass deployment of it is scheduled to begin in 2019, as a beginning in the North American market. "We beat Renesas in its home market, and that says a lot. After all, Japanese companies always prefer buying from Japanese companies," Haran brags.
Zyss has been CEO at Autotalks for a year. Before that, he was VP R&D at Israeli company EZchip, which merged with Mellanox Technologies Ltd. (Nasdaq:MLNX), while most of his career was at Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT), another Israeli company. Like Haran, he has a BSc and MSc in electrical engineering.
So because you were chosen in preference to NXP-Qualcomm and Renesas, you claim that your technology is better.
Zyss: "The market claims. We're paranoids, like legendary Andrew (Andy) Grove's book, 'Only the Paranoid Survive.' We're not complacent. The market tells us, 'You're the best, but you're small.' That means that we're already doing well. A Japanese company like Denso, which is regarded as the most reliable, because it's Japanese, chooses us after looking very deeply into Autotalks. They went into every small point in great detail, and asked innumerable questions. When you're talking about engineering, there's no place for slogans - only facts."
What is the overriding purpose of V2X technology? To prevent traffic accidents?
Haran: "Yes, but that's not all. Another goal is to solve important transportation problems, such as traffic jams, because they aren't necessarily created by too many vehicles on the road or poor infrastructure or too few lanes."
Zyss: "We believe that it's not enough for cars to take care of themselves and their passengers with air cushions, ABS systems or Mobileye's system. These are systems for just the driver or the vehicle by itself. The next stage is sharing, like with the wisdom of the crown that created Waze - sharing critical information between vehicles about all sorts of situations that occur when you're traveling."
Give me an example.
Zyss: "Let's say there's a bicycle rider on the road, and a car sees that he's liable to get into an accident. A V2X chip installed in the car will broadcast to the other vehicles in the vicinity that a dangerous situation is liable to occur, and they will be able to avoid getting into an accident. It's like looking into the future, and because of that, the company's slogan is, 'The confidence of knowing ahead.' If we know everything about all the objects moving in the area of the road, we'll be able to predict what's going to happen in this space. In other words, instead of responding to situations when they occur, like through cameras, communications will make it possible to prevent them.
But for that to happen, as many vehicles as possible have to install this technology - as you said, the wisdom of the crowd. It's not an easy challenge, and is liable to make it difficult to penetrate the market with your technology.
Zyss: "True. There has to be a very substantial penetration in order to generate this sharing, and regulatory assistance is therefore needed, and that's what's happening now in the US. The US auto market accounts for 20% of the global auto market in money terms. As soon as the US pushes for regulation of this market, the rest of the world follows suit. Already now, there are automakers in Europe that are encouraging the installation of V2X systems, even though regulator is not requiring it."
In this context, Zyss explains that the US regulator has ruled that V2V technology (as of now, only communications between vehicles is involved), will be installed in every vehicle going on the road, starting in 2023. In order to achieve 100% penetration in this year, however, 50% penetration must be achieved by 2021, and it is therefore necessary to begin installing already in late 2018-early 2019. "Our solution consists of only a single chip, and that's part of its effectiveness. Such a chip is a big step forward for all the sensors and cameras in a car. As soon as cars start exchanging information between them, the effectiveness of using them on the road to prevent traffic jams and accidents will significantly improve," he explains.
Haran: "When the overriding goal of preventing traffic accidents is involved, a camera isn't enough to reach a state of zero traffic accidents. A camera sometimes doesn't function effectively at an intersection or in tough weather. When an autonomous car is involved, there's a challenge that not many people mention: how an autonomous car can communicate with a non-autonomous car. It's virtually impossible. At some stage, they will have to speak to each other, and there's no way other than communications."
You mean creating a common language for all types of cars
Haran: "Exactly. Today, there still aren't many autonomous vehicles on the road, and so this challenge isn't very bothersome, but as soon as there are enough of them, it will be a problem."
Zyss: "Sometimes, a driver can understand another driver's intention by looking at his face - think about that. In an autonomous car, a person's face is irrelevant. How can you know what the car's intention is? Whether or not you should enter a roundabout? Whether or not you should yield the right of way>"
At this point, Zyss emphasizes that the initial goal of V2X technology is communications between vehicles, V2V, but the company and its competitors also want to protect the more vulnerable users of the road, meaning pedestrians, bicycle riders, and motorcycle riders. "In the case of a motorcycle, V2X technology is far more effective, because there's no other way of identifying a motorcycle as a motorcycle without this technology," Haran stresses. "Even the American Motorcyclist Association has recommended to the US Department of Transportation adding them to the regulation being prepared."
Now explain to me what V2I, communications between vehicles and infrastructure, means.
Zyss: "For example, a car exchanges information with a traffic light. Not infrequently, when a security vehicle or ambulance has to pass private vehicles, the driver of a private vehicle doesn't see it. He hears the siren, but doesn't always realize where the ambulance is. In general, he may have noise-proof windows, and then he doesn't even hear the siren. V2V communications lets a driver of a private car know ahead of time to leave the lane empty for an ambulance. V2I technology will enable the ambulance to change the traffic light from red to green, and pass through it safely."
But that's liable to mislead other drivers, who will following the ambulance through the green light.
Zyss: "No, because as soon as the ambulance passes through the traffic light, it changes it back to red."
Isn't V2X communications liable to burden the driver with too much information, some of which is liable to be unnecessary?
Haran: "No, that's exactly the advantage. It's not technology that works like radar, which requires a copilot to tell you on what to focus. It's a technology that will give warnings only when there's an imminent danger."
Are you competitors of Mobileye, or do you complement them?
Zyss: "We complement them. Mobileye specializes in image processing, and we're not in that field at all. The most important sense that people have is sight. We're the hearing and the ability to speak."
Who is your customer, and at what commercial stage is the product?
Haran: "Our customer is a vehicle parts supplier for an auto manufacturer, but we have cooperative ventures with a number of auto manufacturers, such as Audi, mainly in the process of developing the chip. Each side gives the other information."
Zyss: "As I told you, last September, Japanese company Denso announced its selection of us, and the first cars with our chip are scheduled to go on the road in 2019. As of now, there aren't any vehicles on the road with our chip - only experimental projects, like the one by auto manufacturer Renault in Paris."
Haran: "We have installed our chip commercially in a number of mining vehicles - the heavy vehicles that move within the mines. It's very easy to penetrate with the technology in this market, because every accident with a vehicle causes enormous financial damage."
At this point, Haran adds that Autotalks' solution can be sold simultaneously in an aftermarket, i.e. after the car is already on the road. "You can buy it separately from the car, and install it by yourself," he says.
Zyss stresses, "The auto market is not an easy one to penetrate. An auto manufacturer can put you through seven circles of Hell before he'll trust you blindly. After all, it's a matter of life and death."
Published by Globes [online], Israel Business News - www.globes-online.com - on April 2, 2017
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