Baidu Announces v1.5 of its Autonomous Platform and $1.5bn Fund to Invest in Projects (Sep 21, 2017)
Bloomberg reports that Magic Leap is trying to raise additional funding, which might include an investment from Singapore’s Temasek fund (which was one of two sources of the money that recently bailed out SoundCloud), and would value it at $6 billion. It also says the company hopes to launch its product within six months, that it will cost $1500-2000, and that it will sit somewhere between glasses and today’s VR headsets in format and require the user to also carry a puck to provide processing. Though the funding is certainly interesting, it’s the other details that are far more interesting to me – those suggest a device which will be out of reach for all but a few consumers if it launches at that price, and which may sit awkwardly between other products in the market, not quite glasses-like enough to be wearable all the time. By all accounts, the technology is pretty amazing, though whether Magic Leap can really squeeze it into a production device with these parameters remains to be seen. But it’s another indication that truly wearable AR is many years away and we’re in for another few years of attempts that fall short in various ways.
Apple Announces $1.4bn Iowa Data Center Project (Aug 24, 2017)
Essential, Android founder Andy Rubin’s fledgling smartphone outfit, has announced additional funding from companies including Tencent and Amazon, but still refuses to say exactly when its smartphone will go on sale, saying only that a date will be announced in a week or so. It’s also announced that Amazon and Best Buy will be the retail partners for launch, while Sprint was announced earlier as the exclusive US carrier partner. If you’ve read any of my previous pieces on Essential, especially the first one, you’ll know how skeptical I am that an effort like this can succeed. The market is so mature at this point and the distribution and other battle lines so clear that breaking in with yet another Android phone will be a real challenge, one further exacerbated by what’s going to be limited distribution on the weakest carrier in the US. The funding is therefore intriguing, because it suggests these backers see something in the phone that I don’t. Importantly, it’s Amazon’s Alexa Fund specifically that’s making that company’s investment, something the Journal piece I’m linking to here doesn’t dig into at all, but which suggests that the phone will major on Alexa integration, something hinted at earlier by Andy Rubin as part of a statement about the phone’s ecumenical approach to voice assistants, but not made explicit. And backing from both Foxconn and Tencent is intriguing in the context of a phone that’s mostly being launched in North America for now. Recent conversations I’ve had suggest Amazon’s smartphone sales business is going very well, but of course many of its sales are of the kind of low-end prepaid handsets people buy outright anyway rather than the higher-end premium hardware Essential will be selling. I continue to be very bearish on Essential, but at least it sounds like we might finally see the hardware hit the market soon.
GM has filed for and received a tax credit in the sum of $8 million from the state of California in return for investing $14 million in office space and related items this year and committing to hire 1163 employees over the next five years for its self-driving tech subsidiary Cruise. Given how the importance of autonomous driving technology will grow in the coming years and the fact that California is the hub of much of the testing, it’s logical that GM would want to increase its base there significantly. However, these 1163 employees represent a more than three-fold increase in its employee base in the state, and the average salary GM is projecting for those employees is $116,000, so my guess is they’ll mostly be skilled engineers.
LG Confirms Interest in its Display Business, Doesn’t Mention Google – Android Authority (Apr 12, 2017)
Comcast invests in Plume, a Wi-Fi wall plug startup – Axios (Apr 11, 2017)
This is an interesting investment for Comcast, which already has a big focus on WiFi, as evidenced by its Xfinity Mobile launch last week. Its home broadband routers double as WiFi hotspots for other Comcast customers, and it’s been investing in home automation technology too. So investing in Plume, which offers a service-based approach to WiFi, is a logical next step. Smart home systems are increasingly going to require management and control over the WiFi and other networks in the home for quality and security purposes, so going deeper into WiFi technology and management is going to be important for companies like Comcast that want a role there. The other intriguing part of this is that Plume has been working on a model where it would charge a monthly fee for that WiFi management service, something I could see Comcast doing in time either separately or as part of a smart home service. Yet more evidence, though, that the future mainstream version of the smart home is likely to be service-based. (Incidentally, read this smart piece by Stacey Higginbotham for more on Plume)
China’s Tencent Buys 5% Stake in Tesla – WSJ (Mar 28, 2017)
Tencent has been one of the most active Chinese investors in the US tech industry, and here’s another investment. It already has stakes in both Uber and Lyft, and although Baidu has been making bigger direct investments in autonomous driving in the US, Tencent’s indirect investments in transportation in the US are growing. This is a nice vote of confidence in Tesla at a time when it’s trying to raise money to fund the Model 3 manufacturing ramp, and it also gives Tencent decent exposure to what has been a nice growth stock so far this year.
I think it’s safe to say that Tesla’s plans for Model 3 manufacturing represent the biggest test the company and Elon Musk have faced by a long way. The ramp contemplated is so rapid and takes the company so far beyond its historical production rate that it seems almost impossible for it to meet its targets. And yet here it is raising more money to fund what’s going to be a massive capital spend in the first half of the year to prepare for that production run that’s scheduled to begin in July. In the first half of last year, the company spent around half a billion dollars on capex, and it plans to spend $2-2.5 billion in the first half of 2017, which gives some sense of just how big the leap is from anything the company has done in the past. That’s going to cause a massive cash drain, hence the new funding. Musk continues to execute extremely well on his long-term plans eventually, but hitting short-term targets continues to be his big weakness, and it feels like the Model 3 is either going to be the worst example of that flaw or the biggest possible exception to the pattern. I’m betting it’s the former.
Depending on your perspective, this is either the broadband industry’s dirty little secret, or a natural consequence of the investment characteristics of fiber broadband. What’s happening here is that broadband providers like AT&T tend to invest the most in broadband infrastructure in areas where they’re likeliest to see a return on that investment, in other words those areas where takeup is likely to be highest, which in turn are disproportionately going to be more affluent. In the past, some cities have required universal coverage as part of franchise agreements to avoid this kind of redlining, but that has changed in recent years, at least in part because of Google Fiber. Google’s big innovation in deploying fiber was to encourage municipalities to bend over backwards to get the service, which turned the usual model of cities extracting concessions from providers on its head. AT&T then said to the same cities that it was happy to deploy fiber on the same basis if it was offered the same inducements and benefits, thus enabling its rapid deployment of fiber-to-the-home infrastructure in recent years. This FTTN infrastructure predates that model, but we’re going to see a lot more of this redlining in the years to come, and cities only have themselves to blame if they allow companies to operate in this way. Meanwhile, this ability to redline is the single biggest driver of faster broadband deployment in the US today, even if access to that faster broadband remains very uneven.
This didn’t get a ton of coverage on Wednesday, but it’s one of the first concrete statements we’ve seen from a major tech manufacturer that it is considering building new infrastructure in the US – all other reporting on this topic has either been unconfirmed by the company or has turned out to be something announced earlier. Samsung is fascinating in this context – unlike Apple and Amazon, it was never singled out for criticism during the campaign, and of course Trump himself uses a Samsung smartphone. But the company nevertheless seems keen to curry favor by building capacity in the US.