Smartphone x Automotive

In previous articles I have drawn parallels between thee automotive and smartphone world. And I question myself, is that way of thinking warranted? Over the past few years, the automotive industry has been coming closer to the smartphone world. And there are many reasons for that, some of which I have written about in this article. But there's more to that.

The cross-pollination between these industries have been quite interesting to watch. Here are a few examples of major deals and acquisitions and my thoughts on it.

Automotive buying into the Smartphone world

1. Geely buys Meizu: Meizu was one of the earliest smartphone manufacturers that emerged from China during the smartphone boom. But eventually it lost to it's Chinese peers like Xiaomi. As cars are becoming more like phones, it makes a lot of sense to buy a phone manufacturer. Even just for it's expertise in maintaining the required software stack.

Ryan Pyle via Getty Images

2. Denso buys InifiniteKey: Denso is a well known automotive parts supplier headquartered in Japan. The company that it acquired, InfiniteKey, focuses on a key piece of technology that enables phones to be used as a key to unlock a vehicle. Now it might seem so trivial, but 5 years ago, this was still a bit of a stretch for an automotive firm to realize.

3. Honda buys Drivemode: Drivemode is a startup that builds smartphone-based connected services. They have expertise both in developing the mobile front-end, the application itself and backend cloud technologies. Connected services are an integral part to Honda's 2030 Vision and acquiring companies like this gives them a head start for assembling their value chains.

4. VW buys PayByPhone: PayByPhone is a leading parking payment provider. In 2016, PayByPhone has already processed payments worth US$250 million. They definitely have a thriving business. To be clear, it is the financial services subsidiary of VW that has done this acquisition. I see 2 potential plays here. The first one is the obvious one of owning the mobile payment provider irrespective of which brand and location means they get a cut for every payment made. The non-obvious play is this could enable business models where with VW vehicles, you could integrate payment and detection in a much more seamless way. There could be solutions where the car could pay for you, all by itself. Since cars these days have cameras, GPS and an internet connection; it would very well be possible for such a solution.

Smartphones buying into the Automotive world

1. Samsung buys Harman: One of the earliest and largest acquisitions where a smartphone company bought into the automotive world. Harman is a leading automotive Tier-1 supplier. They have high expertise in in-vehicle technologies including Audio, Infotainment, Telematics and Security. There are 2 gains for Samsung from this deal. One, they get to influence and introduce more Samsung hardware and software into automotive products for various OEMs. The second gain is that they get to buy the long-standing relationships that Harman has managed to build with OEMs from all over the world. Which is really hard to put a price on.

2. Xiaomi buys Deepmotion: Deepmotion is a Beijing-based startup that develops digital mapping technology for autonomous vehicles. It is no secret that Xiaomi is planning to expand into the automotive sector of China. And this acquisition is a clear indication of them ramping up to meet that demand. Deepmotion was founded by former Microsoft Research Asia. Xiaomi prior to the acquisition had already claimed that they have a 500 person autonomous driving team including automotive engineers.

3. Apple buys Drive.ai: Drive.ai was a startup in it's final stages. They were laying off staff and preparing to close down when Apple acquired them. Drive.ai is a startup started by machine learning researchers from Stanford and they are an autonomous driving startup. They even had prototypes and tested them in public roads without a safety driver. The fleet was mainly modified Nissan NV200 featuring LED screens on the hood to signal the intention of the vehicle to pedestrians. This fits quite well into what I wrote previously here.

Source: drive.ai

4. Intel buys Mobileye: Mobileye is a leader in computer vision for autonomous driving cars based out of Israel. They cover all kinds of technologies ranging from camera tech, sensor fusion, HD maps, just to name a few. They had both SW and HW expertise to begin with. This move by Intel was mainly to build up ground in new areas of computing. Now [Mobilieye's](https://www.mobileye.com/technology/) goal is to build the full stack for self driving vehicles right from the silicon all the way up to end application software.

5. Qualcomm buys Arriver: Last year, Qualcomm acquired Arriver, an autonomous tech startup working in advanced driver assist systems, sensors and software. The plan similar to the Intel-Mobileye acquisition, they too want to integrate their software stack with Qualcomm's latest automotive platform, Snapdragon Ride.

Interesting and Honorable Mentions

1. Chinese Automaker NIO Is Reportedly Developing A Smartphone: This is a very interesting idea for an automotive OEM to manufacture smartphones. The phone is reported to cost less than an iPhone, could utilize the Snapdragon series chip and have a form factor of a traditional smartphone. The interesting part about this is that they are attacking the ecosystem problem from the other end of the spectrum. Instead of fitting into any of the existing smartphone and digital appliance platforms, they want to build their smartphone. The benefit I see is that they can achieve far more seamless integrations and user experiences that other OEMs will take a while to catch up to. And knowing that the demand for such features in the Chinese market is quite high, it could well enough be their unique differentiator and worth every penny.

Source: NIO

2. Sony Honda Collab: I have written about this in a previous article. I see two macro trends at play with the Sony-Honda Collab. Firstly, the ecosystem play. Sony has said that they will allow playstation games in the infotainment of the vehicles. This is the ecosystem offering that is unique to Sony. They own the playstation and all related IP. And that will always be their unique selling proposition. Secondly, consumer tech wanting in on the auto industry. And I think this has to do with the fact the assumption is, in the next decade most vehicles will become more autonomous. Then a new use-case emerges for consumer tech that is in-vehicle entertainment. There is some potential attention void to be filled and tech companies are racing to fill that future void.

3. Xpeng-Alibaba: Xpeng, the Chinese automaker and Alibaba the e-commerce giant are planning to open a computing center to train SW for autonomous cars. The cloud division of Alibaba will supply with the necessary technology needed for this endeavor. There are 2 reason why this made the list. Firstly, this was announced last week, and the recency bias was enough for me to feature it. Secondly and more importantly, Alibaba themselves are not taking a stake in the core business of selling vehicles. Instead they want to be their digital/cloud ecosystem partner. This is an interesting model for cloud/infra tech companies to adopt. From an OEM's point of view, instead of partnering with multiple firms and OEM's then having to mix and match them to build their SW stacks, pipelines and workflows around it a digital partner makes a lot more sense. In some way, you can also view this as outsourcing your IT needs to a single company, but they do a bit more than "just" IT by providing the physical compute as well for the OEMs.

Industries like the smartphone and automotive have a few things in common.

1. They serve a very large market. So scale is either inherent or is an acquired quality.

2. They are capable of moving the needle from an economy and GDP point of view both in terms of the economic activity that is part of the industry but also the enabler to individuals and business through the internet and transportation.

3. They are both technology intensive.

The above list of acquisitions show that there is still quite a bit of knowledge transfer that happens between these two industries. And I believe the smartphone industry is at least one technological epoch ahead of the automotive industry in terms of connected and digital features. And the trickle down of that know-how is what we see with these acquisitions.

Let me know in the comments on what you think!