Mobileye deal making Israel smart car hub

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Tier-1 auto industry players are already starting to flow to Israel and the mobile communications industry is showing interest too.

2017 is far from over, but it can already be stated that the Intel-Mobileye deal completed last week was one of the most important events of the year for Israel, if not the most important of all. We are not referring only to its tremendous macroeconomic effect. The billions of shekels from the deal that will stream into the state treasury will give tax revenues a big boost that will compensate to a large extent for decline in GDP resulting from weakness in important real indicators. Yes, it is a one-time event that did not even appear in the preliminary growth forecasts, but we are willing to bet that it will provide a great deal of fuel for the politicians' public relations machinery.

What we are interested in is the long-term effects of the deal, and it is no exaggeration to say that it constitutes a strategic milestone, and even a turning point in the history of the local high-tech industry. Even before the deal, the Israeli auto-tech sector was on the map of the auto industry and the venture capital entrepreneurs, which gave it the reputation of an incubator for interesting ideas and investments in the smart car sector. The creation of Intel's global smart car division in Israel, however, raises the Israeli industry into the big time.

Intel's ultimate goal in the merger is much broader than the realm of sensors and machine vision in which Mobileye specializes, and Intel is making no secret about it. At the recent annual Deutsche Bank auto-tech conference, Intel's autonomous driving group's CEO unveiled the company's plan to provide the auto industry with a comprehensive computer solution, entitled GO. This holistic ecosystem solution will provide all the autonomous vehicle manufacturers' needs: development of a platform for autonomous driving based on Mobileye's chips and Intel's processors, 5G communications between the vehicle and the cloud, and special data centers solutions for processing and commercialization of the data produced from the vehicle.

All of these areas are interdependent, and constitute an essential element and byproducts of the autonomous vehicle vision. Once you equip an autonomous vehicle with sensors that read the environment and provide the vehicle with connectivity to services on the cloud, an enormous quantity of information is produced - 1,000 times the information provided by a car that is not smart. This information is essential to the vehicle's autonomous functioning in time, and creates extremely valuable byproducts, such as collection of data, mapping, and commercial potential of the information about how the vehicle is used. In order to make these data relevant to driving and translate them into money, they must be streamed to and from the vehicle in real time through rapid and stable 5G communications. In order to process the information collected simultaneously from millions of vehicles, serious data centers are needed. On the road, the manufacturers will also have to equip a vehicle with serious processing power, artificial intelligence, memory components with hundreds of times as much capacity, etc.

This is a business bonanza for multidisciplinary chip producers like Intel, because each of these areas is currently regarded as a growth engine that will generate demand totaling tens of billions of dollars over the next decade. The fact that the focus of these events will be in Israel will bring tier-1 global players and projects here.

The ball is starting to roll

This is not a utopian vision. This process has already begun, and will move ahead much faster than many people expect. This week, for example, Toyota announced that it is forming a new consortium together with Intel for vehicle computing aimed, according to the founders, "at developing an ecosystem for a vehicle connected to the Internet and supporting future services, such as intelligent driving, creating maps, and giving information assistance in real time, based on cloud computing." In addition to Toyota, the consortium will have IT giants from Japan and elsewhere, such as auto parts manufacturer Denso, regarded as one of the largest in the world; Japanese communications company NTT DoCoMo, the largest mobile provider in Japan; and communications concern Ericsson.

This is the very serious dowry brought by the deal, especially in view of the fact that Toyota has been considered a very tough nut to crack when it comes to venture capital investments and smart car cooperative ventures in Israel. It should be noted that although Intel was the one that opened the doors to the creation of this consortium, Mobileye's weight is considerable, because it has been developing special algorithms for years that make it possible to produce frontal information from millions of cars, merge and reduce the information for the purpose of wireless communications and processing with today's computing tools, and turn it into highly accurate maps.

The mobile communications industry is also now showing great interest in the hub of smart car technologies created in Israel following the deal. Last week, for example, we saw an interesting headline in the South Korean press: "South Korean telecom operators are aiming at cooperation with Mobileye in order to maximize their presence in the smart car industry and integrate in it their big data capabilities." The story quotes the Mobileye representatives in South Korea as saying, "South Korea's high-speed mobile communications networks enable operators to collect big data from driver assistance systems and develop new safety technologies and high-resolution mapping capabilities."

South Korea is known as one of the most advanced countries in the world in Internet communications and mobile communications speed. In 2019, it is expected to become the first country in the world to deploy a nationwide 5G network. The South Koreans tend to jealously guard their technologies, but the Intel-Mobileye merger gives them access to information produced from vehicle sensors on a global scale, including in South Korea itself. The Intel-Mobileye merger agreement provides the major South Korean telecoms with very early access to the global forefront of communications networks, speed, and a considerable competitive advantage in the auto industry. These are only two examples in just one week of the advantages of putting Israel in the center of global smart car technological events.

In addition to the impressive advantages that the agreement will bring, it is also creating a business and technological giant in the local auto-tech industry with intangible resources, and this will definitely have side effects. It can be predicted, for example, that the merger will considerably speed up strategic investments in Israeli startups having complementary technologies in the smart car sector, and perhaps even mergers and acquisitions.

Creating an ecosystem in the auto industry requires access to other essential parts of the puzzle, for example vehicle cyber security technologies. This is an area far from Intel and Mobileye's core business, but it is critical: you cannot develop a computer platform for an autonomous vehicle that is dependent on high-speed connectivity to the cloud and data centers without protecting its flanks. The fact that the regulators are now making this a mandatory requirement for autonomous vehicle manufacturers will only accelerate the process.

Intel also has gaps to make up in areas such as commercialization of vehicle data, physical communications between the components within the vehicle itself, deep artificial intelligence, etc. All these things are within reach in Israel - all they have to do it reach out and take it. Incidentally, Intel's venture capital fund has already been active in Israel for a long time, and has made investments totaling hundreds of millions of dollars. This is obviously not good news for external investors and investment funds still looking for a good and logical point to enter the market. The merged company will also create considerable difficulty in competition for trained technological personnel, and that is an important problem in the global auto-tech industry, especially in Israel. This has already driven large veteran companies to find outsourcing solutions in India and elsewhere.

The bottom line is a major step forward, and when dozens of test vehicles with advanced autonomous capabilities begin traveling on Israeli roads, as Intel announced last week, our status as a global smart car hub will become consolidated. It is not yet clear what the result will be of the meeting between the autonomous vehicles capable of traveling without the intervention of a human brain and hundreds of thousands of vehicles that have been traveling for years on the roads without the intervention of a human mind, but it will certainly be interesting.

Published by Globes [online], Israel Business News - www.globes-online.com - on August 20, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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