As I’ve said many times before, I believe fully autonomous vehicles will be one of the most impactful technological innovations in our lifetimes. As the industry grows and autonomous vehicles become more advanced and ubiquitous, there will be an immense market opportunity for those involved in making these automobiles tick. One tech company that has been involved in automotive for a long time (almost 20 years, for that matter) is Qualcomm, who realized, perhaps earlier than any of its competitors, that cars were going to need wireless connectivity. While a small number of very well-entrenched incumbents had traditionally dominated the auto industry, the shift to more advanced, connected cars opened up a niche that the usual players simply could not fill. And the bill of materials just keeps getting higher.
Last week, Qualcomm announced some incredible quarterly earnings with an equally impressive forecast. The company also officially broke out its “growth businesses” for fiscal 2020 and 2019. One of these areas was automotive which the company cited an $8B backlog and a 2020 business that surprisingly, was larger than NVIDIA’s.
Mobile connectivity is, of course, Qualcomm’s bread and butter. You’ve almost certainly used a smartphone featuring a Qualcomm modem at some point. Extending this expertise to automotive was a natural fit, as auto interfaces were increasingly modeled after, and designed to be compatible with, smartphones. It was a big opportunity, and Qualcomm jumped on it.
Flash forward to the present, and the company is leveraging its supply chain rapport with automakers to dive headfirst into the autonomous driving market. Today, Qualcomm is a leader in 5G—the high-performance, low-latency connectivity that is essential to the next generation of automobiles, IoT and AR/VR (just to name a few). The company is leveraging this, and the rest of its extensive IP portfolio, to drive features such as infotainment, ADAS (advanced driver assistance systems), Wi-Fi and Bluetooth connectivity, C-V2X, advanced vehicle positioning (down to the lane), car-to-cloud and more. I recently got the chance to talk with Nakul Duggal, the newly instated lead of Qualcomm’s auto business, and pick his brain on Qualcomm’s trajectory in the industry. Here are my takeaways.
I’ve been seeing Duggal around for years now, on stage at places like CES and Mobile World Congress. He’s not a new face at Qualcomm, having started with the company in 1995. He’s been working in Qualcomm’s automotive business for almost ten years, and frankly, his promotion to business lead did not surprise me.
Duggal refreshed me on Qualcomm’s recent history in automotive. The company is currently on its 9th generation of modems for vehicles, and in 2016, it began working with Audi to bring its infotainment applications processors to the industry. Since then, Qualcomm’s Snapdragon digital cockpits have scored design wins with 20 different automakers. The company unveiled its 3rd generation Snapdragon Automotive Cockpit Platform back at CES 2019 (see coverage here), and though it feels like a lifetime ago, it announced its first autonomous offering, the Snapdragon Ride Platform, at CES 2020 back in January. As it currently stands, Qualcomm is an industry leader in telematics and infotainment, with an impressive design-win pipeline of over $8 billion.
Vast IP portfolio, quick pace, and strategy set Qualcomm apart
When asked how Qualcomm differentiates itself from, say, NXP, NVIDIA and Intel, Duggal’s initial answer was Qualcomm’s intellectual property. With its long history in wireless communications, it has an expansive IP portfolio spanning CPUs, AI, GPUs, DSPs and more. It is also well-versed in low-power solutions, increasingly in demand for IoT applications. He emphasized that Qualcomm sees itself as more of a systems company than a semiconductor company.
Additionally, since Qualcomm cut its teeth in the smartphone business, the company knows how to mobilize quickly when it came to process nodes. That advantage was readily visible in the company’s unveiling of its 7nm components in 2018 and their quick integration into cars earlier this year. According to Duggal, this two-year turnaround would traditionally take 4-5 years. As anyone familiar with the smartphone industry would attest, that is not quick enough to stay on top of the competition. Automakers have a similar competitive need for fast development, with expectations they will roll out a new, more advanced vehicle every year. That said, cars (especially self-driving ones) are much more complicated than smartphones, making Qualcomm’s rapid development and release pace that much more impressive.
On the topic of strategy, Duggal also cited Qualcomm’s commitment to building open, programmable and scalable platforms as an essential differentiator. Openness and programmability are a must, according to Duggal, because of the continuous (and I might add accelerating) evolution of software and algorithms. While Qualcomm offers some of its own software in some areas, it needs to partner with other innovators in others.
I was glad to hear Duggal cite scalability as another significant differentiator. If a business wants to be a long-term player in this industry, it has to offer a multi-tiered, good-better-best solution. That’s precisely the tack Qualcomm has adopted. As Duggal explained, it is very difficult, if not impossible, to scale up in the automotive business unless you’re able to address the sweet spot of the market. You have to service the middle-tier, where most of the volume is, to have the capital and resources to invest and develop the upper-tier (such as autonomous vehicles). If you have a platform that can quickly scale up and down to address the full spectrum of cars, I believe automakers and tier-one players will come running.
Looking to the future
We in the industry love to gaze into the future and imagine what might be possible. So naturally, I asked Duggal where he believes the auto industry is headed in 10 years, in terms of safety and infotainment, and where Qualcomm sees its role in that hypothetical future. Duggal thinks that with the current innovation rate, we already see the beginnings of what we’ll see in 10 years. He predicts the business models of car ownership to change, along with automakers’ definitions of infotainment versus connectivity, who is paying for it, its value over time, etc. Duggal believes we will be consuming experiences in the same way we currently do on a phone or tablet—hence Qualcomm’s natural fit here. To me, what he described sounded a lot like the as-a-service (X-aaS) consumption models that have already barnstormed and disrupted the tech industry.
As far as the safety space goes, Duggal predicted that all the current technology, such as cameras, radar, LIDAR, communications with the surrounding environment, will continue to advance. For example, we’ll have higher resolution cameras, longer-range radars and many more tools that help these vehicles interact with the world around it.
Long story short, there will be more and more sensors and compute inside tomorrow’s automobiles, and that will make them safer. There are technical and logistical issues that still need to be figured out, such as how to build these cars at scale and make them affordable enough for widespread adoption. Duggal says many of the companies in the sector are already working on solutions, which is a nice pivot to the next big question: how does Qualcomm fit into this future?
Qualcomm’s place in it all
Duggal says Qualcomm’s roadmap has the company investing in high-performance SoCs that will support the evolution of sensors, cameras, software, and other technologies over the next ten years. Additionally, he again stressed Qualcomm’s commitment to developing open platforms, which will allow the company to forge partnerships with best-of-breed hardware and software players in the industry. We can expect to see these partnerships across Qualcomm’s four main focus areas in automotive: telematics, digital cockpit infotainment (for autonomous vehicles), C-V2X (vehicle-to-vehicle and vehicle-to-infrastructure communications) and car-to-cloud. In an interesting aside, Qualcomm competes with some of the companies with whom it partners. While one might expect that to cause friction, Duggal says Qualcomm’s differentiation, discussed earlier, enables the partnerships to function without stepping on each other’s toes.
As mentioned earlier, Qualcomm already has design wins with 20 different automakers. Duggal credits the early infotainment partnership with Audi for Qualcomm’s education in-car electronics—the necessary focus on quality and reliability, the DPM requirements, the software requirements (which are considerably different than any other industry) and all the other quirks. In the five to six years since then, Qualcomm and the auto industry have come a long way. The automotive industry has already radically changed. Many of them have begun to morph into fully-fledged software companies themselves. They employ hundreds of people, follow best-in-class development methodologies and enjoy the perks of having their own proprietary infotainment software. Qualcomm is right there with them, co-located with automaker engineers across the world. According to Duggal, these partnerships are necessary for the automakers to deliver on their aggressive timelines—it can take a dozen or even two dozen different companies working together for several years to create one production system. With all that goes into that process, it would be almost impossible for an automaker to repeat it, ad nauseum, for each different tier of vehicles it puts out. What makes Qualcomm and its scalable platforms so attractive is that automakers can quickly adapt one system across different tiers. For this reason, amongst others, I believe Qualcomm has an assured role to play for the industry’s next ten years and onward.
One last thing I wanted to hit on, as far as Qualcomm’s role going forward, is its car-to-cloud efforts. Qualcomm realized a while back that if these next-generation vehicles employ such advanced and complex technologies, there has to be a mechanism for updating the software periodically and keeping it secure. Hence, the introduction of Qualcomm’s car-to-cloud services this past CES. Historically, when you bought a vehicle, you were more or less stuck with what you’ve got. Over that vehicle’s lifetime, there might be many new technologies and advancements that become available. Still, you had to either wait till you buy your next car or, if possible, pay to have these enhancements installed after-market. Car-to-cloud enables automakers to update vehicles throughout their lifetime, which can serve many functions. Automakers can evolve hardware and software capabilities or standardize certain platform features across a vehicle line. Or, say, a situation in which an automaker wants to pay for one tier of features at first and then upgrade somewhere down the line. Here again, we have an innovative Qualcomm technology that could very well become invaluable to the auto industry in the years to come.
Duggal wrapped up the interview with the observation that a car is very similar to a smartphone, but with wheels. And like the smartphone, I might add, they’re only going to get more intelligent and useful with each successive generation. If you look at the first iPhone now, it’s remarkable how far technology has progressed since then. As Duggal sees it, there’s no platform quite like the car—the lifecycle, safety requirements, global ubiquity, all of the regulations, and the looming inevitable disruption of traditional business models. Duggal predicts that the auto industry’s next ten years will be fascinating, and I certainly agree. One thing is for sure—Qualcomm will be riding shotgun.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.
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