Big tech’s auto dreams are stuck in the slow lane
Summary
Tech’s future in cars will likely be more evolutionary than revolutionaryBig tech was going to revolutionize the car market. Then reality happened.
Just a few years ago, Silicon Valley seemed to have Detroit in its sights. Google had self-driving test cars roaming around, while Apple was building its own automated car from scratch. Chip giant Intel made its second largest acquisition ever with Mobileye for $15.3 billion in early 2017, while rival Nvidia was building powerful chips designed to become the central brains of autonomous vehicles. And Amazon.com wasn’t even keeping its dreams on the ground. The e-commerce giant was testing air delivery drones in the U.K. by late 2016.
Most of those efforts haven’t died, but the hype has faded considerably. Apple seemed to make the biggest reversal, reportedly laying off more than 200 workers last year from its autonomous-car effort called Project Titan. Google is still at it, with its Waymo car venture now offering a highly limited taxi service in Phoenix. But Waymo remains buried in parent company Alphabet Inc.’s “other bets" segment, where it doesn’t appear to be generating much actual business. The company’s most recent quarterly filing said Other Bets revenue is still derived primarily from its broadband service once known as Google Fiber and licensing from its Verily Life Sciences venture.
Intel, meanwhile, hasn’t exactly revved up with Mobileye. Revenue for the unit, which makes computer-vision and driver-assistance technology, rose only 6% for the trailing 12-month period ended in September, lagging Intel’s overall revenue growth of 11% in that time. It also still makes up barely 1% of Intel’s overall business.
Nvidia’s automotive segment revenue has fallen over the past three quarters due to the coronavirus pandemic’s impact on auto sales and a decline in “legacy infotainment systems," according to the company. Auto-related sales now make up less than 4% of the chipmaker’s revenue compared with 7% four years ago.
The car market, as it turns out, isn’t so easy to disrupt. Car designs evolve slowly over years and involve thousands of suppliers with deep relationships. Most auto makers are understandably reluctant to hand over the keys to tech giants that have upended many other industries such as telecommunications, media and advertising.
A fully automated car is also a legitimately hard technological feat to pull off, even for companies with deep expertise in computing and cash hoards exceeding $100 billion. Tech news site The Information reported earlier this year that Waymo’s “robotaxi" venture—easily the furthest along of competing autonomous vehicle projects—uses a “chase van" that follows each taxi with a spare human driver.
None of this is to say that big tech companies have no future in cars. More vehicles are becoming connected, which provides opportunities for new software and services without the need for costly and time-consuming physical redesigns. And capabilities such as enhanced driver assistance still demand more computing power, presenting an opportunity for chip makers supplying the necessary components. New Street Research projects that automotive semiconductor revenue will jump 16% next year, recovering from a pandemic-driven slump of 10% this year.
Further out, it remains to be seen which tech giants will be in the driver’s seat for automated cars. Amazon may have the strongest motivation. The company runs a massive, human-intensive delivery network that now runs up more than $52 billion a year in fulfillment costs. Its acquisition of robotaxi venture Zoox earlier this year for $1.3 billion makes sense in this light. But that price was also about one-third the valuation Zoox fetched in a funding round just two years prior—a sign that even the ambitious and long-term oriented Amazon knew when to stay out of a hyped market.
This story has been published from a wire agency feed without modifications to the text.
