Turning the challenges of manufacturing into new opportunities for success with digital transformation.
The global manufacturing world seems to be travelling back in time. Large production plants and long assembly lines, where goods were mass produced in hundreds and thousands, may become a thing of the past. Instead we are witnessing a growing demand for products that are highly-customized to the needs of individual end customers. This is much like the years preceding the First Industrial Revolution when each product was painstakingly crafted by hand.
But this time, something is about to change.
Instead of workers spending hours creating made-to-order products, industry can now quickly produce millions of goods, in smaller and smaller batch sizes, without compromising on quality or productivity. This transformation is possible in a data-driven digital ecosystem powered by connected devices and solutions that maximize the potential from existing infrastructure.
Simply put, the digital transformation of businesses allows to capitalize on the benefits of digital tools such as smart sensors, cloud computing and the Internet to add value to existing manufacturing processes. Digitalizing a production process opens fresh opportunities by gathering meaningful insights that can be analyzed to better understand the condition of each and every individual piece of equipment. Sensors on a machine continuously track its status and can immediately alert operators in the case of an anomaly in normal working parameters. Digitalization enables operators to move from reacting to incidents on the shop floor to proactively maintaining their equipment to avoid unplanned downtime. This gives manufacturers the ability to meet increasingly demanding deadlines even while producing a greater mix of products.
Building a digital ecosystem
In a world of ever-growing complexity and competition, digitalization can offer a quick boost to the productivity of industrial equipment. Something as simple as installing a sensor on heat-sensitive machines, such as a welding robot, can help an operator to track temperature variations to ensure that the optimum temperature is maintained for the most flawless weld from the robot. Gaining increased transparency of processes in a factory not only leads to higher productivity, but also potentially helps to save significant resources due to fewer unplanned outages and can increase the lifecycle and decrease the power consumption of equipment.
Of course, the greatest value of the digital transformation of industries can be achieved when every piece of equipment along the value chain is connected. Be it directly on the shop floor or through the Industrial Internet of Things. Digitally connected assets that understand the information being passed around the shop floor can interact autonomously, lending a whole new dimension of efficiency and autonomy to industries.
The right digital strategy to choose
The statistics around digital transformation are highly encouraging. A 2019 report by market research firm IDC estimated that direct investment in digital transformation would approach a staggering $7.4 trillion between now and 20231. But on the flipside, it is not uncommon to see digital transformation strategies failing to reach their goals as companies struggle to find the right approach and trained employees who can take on the challenge of a complete recast of their business models.
For some six decades now, ABB has been at the forefront of developing and deploying technology for digital manufacturing. Just one example is the introduction of the world`s first digitally controlled robot in the year 1974. Today, ABB as a technology leader is driving the digital transformation of industries. It masters all elements of the Fourth Industrial Revolution that represents the next wave of innovations including IIoT, artificial intelligence and modular manufacturing to support both big and small businesses. For instance, artificial intelligence is at the heart of a solution that ABB has co-created with Microsoft to help a Nordic salmon fishery remotely track its fish population, thereby reducing the need for human intervention and ultimately making the production of over 70,000 tons of salmon a year more sustainable.
Digital transformation in real-time
One of the cornerstones of digital transformations and the factory of the future is the ability to act in real time, which allows companies to quickly respond to issues before they become problems. That is why I believe that progress that ABB has made with its telecommunication partners Ericsson and Swisscom in the field of 5G communications is so exciting.
At the recently concluded World Economic Forum in Davos, Switzerland, ABB’s collaborative YuMi robot carved a message in a sandbox that was replicated at the same time by a second YuMi robot located 1.5 km away. This demonstration of low latency communication over long distances enabled by 5G can help bring future concepts of more flexible and modular manufacturing to reality. 5G networks over a specified area can connect thousands of automated guided vehicles that move around the factory floor bringing essential parts to production hubs within a very short time.
Much like mass production; paper designs and traditional 2D schematics will find fewer users as the industrial world becomes more digital. Taking their place are concepts like digital twins where a fully functional virtual image of a physical asset is created to help operators iron out details such as to test the interaction of a machine with its surroundings. Digital twins allow businesses avoid losing time in perfecting and testing out product prototypes or modifications and potentially reducing production costs.
A digital transformation of its own kind is happening in industrial services. Advanced monitoring solutions, such as ABB AbilityTM Connected Services, are helping companies monitor their assets in many sites on one system. Connected Services applied to ABB’s robots can help businesses monitor the condition of their fleet, diagnose anomalies, remotely operate them, help plan maintenance schedules by prioritizing the hardest working robots and provide a backup management so as to enable easy and fast recovery from a systems crash or from unwanted changes.
Enhancing efficiency and productivity, reducing unwanted incidents and creating a more reliable manufacturing process using digital transformation ultimately reduces the consumption of resources and helps build a more sustainable manufacturing process. We are at a point in time where we have come to understand that digitalization is not just a passing fad or a privilege of large companies, but a fundamental element of the future of industries.
Rico Dittrich graduated in International Politics and History from Jacobs University, Bremen, before moving to Ireland to make ends meet by testing video games. Rico changed companies and joined Google and went on to troubleshoot large customers’ issues with some of Google’s most technical and advanced digital analytics services. He currently works as Digital Analytics Specialist at Google, collaborating with large German retailers to set them up for the future of online measurement, attribution and automation. He has lived in six countries, across three continents, in the last six years and is fluent in German, English, and Spanish. At TEDxUniPaderborn 2017, Rico spoke on the topic “The difficulty of digital transformation & how to make it happen”. Born and raised in Germany, Rico Dittrich graduated in International Politics and History from Jacobs University, Bremen, before moving to Ireland to make ends meet by testing video games. Rico changed companies and joined Google and went on to troubleshoot large customers’ issues with some of Google’s most technical and advanced digital analytics services. He currently works as Digital Analytics Specialist at Google, collaborating with large German retailers to set them up for the future of online measurements, attributions and automation. He has lived in six countries, across three continents, in the last six years and is fluent in German, English, and Spanish. At TEDxUniPaderborn 2017, Rico will be speaking on the topic “Why Digital Transformation Is So Difficult and How to Make It Happen”. This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at https://www.ted.com/tedx
Tesla earnings this afternoon follow strong Q2 deliveries
Stock on a roll since falling below $200 a share this spring
Lower product prices raise questions for some analysts
Considering all the big news Tesla (TSLA) delivered over the last two weeks, its Q2 earnings report this afternoon might seem a bit anticlimactic.
Arguably the biggest (and best) news of the quarter is already digested. The company reported better-than-expected car deliveries for the second quarter. Earlier this month, TSLA said it delivered 95,200 total vehicles in Q2, ahead of Wall Street’s estimate for 91,000. That’s the widest beat in at least three years, according to market forecaster FactSet.
It’s also a huge turn-around from the company’s disappointing 63,000 in Q1, and might reflect some buyers deciding to jump in ahead of the Federal tax credit on TSLA’s cars being halved on July 1, Forbes noted. In Q2, the Model 3 posted deliveries of 77,550, surpassing consensus estimates on Wall Street for 74,100. Combined deliveries for the Model S sedans and Model X SUVs were 17,650, beating estimates of 16,600, according to FactSet data.
The delivery data also might confirm that the March quarter wasn’t quite as bad as people had thought, because thousands of the company’s cars were in transit at the end of March, but those deliveries ended up occurring in Q2. In other words, deliveries over time might be a little smoother than the quarter-to-quarter numbers show.
Shares Took Another Wild Ride in Q2
Smoothness isn’t a word often associated with TSLA, either the company itself or its shares. The Q2 was no different, with TSLA bouncing back quickly from a May sell-off that carried shares of the company down below $200 for the first time since late 2016. Shares recently were back above $250.
Where they go from here depends partly on whether TSLA can meet its delivery goals for the remainder of 2019. As Barron’s noted, TSLA delivered 158,000 cars in the first half—a number it might update when it reports earnings. Its goal for the year is 360,000 to 400,000, meaning it has to do a lot better in the next six months than it did in the first six months of 2019.
It might be interesting to listen to the company’s earnings call to see if executives provide investors a road map of how they plan to get to that point, especially considering the falling government tax incentives for electric car buyers.
Vehicle production was another Q2 highlight, rising to a record 87,048, TSLA said. That included 72,531 of its Model 3 and 14,517 of its Model S/X. Customer vehicles in transit at the end of the quarter were more than 7,400.
Even as it tries to grow production, TSLA has been under pressure to cut costs. The company has made workforce cuts this year, and this month it announced a revamping of its vehicle lineup. The company cut back the total number of vehicles available, making its lower-end Model 3 more affordable while raising prices on its higher-end Models S and X.
It did this, it said in a statement, “To make purchasing our vehicles even easier.” The pricing adjustment, it added, is “in order to continue to improve affordability for customers.”
Tesla said it’s reducing the price of the Model 3 by $1,000 to $38,990. The company will no longer sell the standard range versions of the Model S and Model X, raising the minimum amount people have to pay for those cars. The base version of the Model S is rising to $79,990 from $75,000, while the price of the Model X is increasing to $84,990 from $81,000.
However, lower prices for the Model 3 could mean lower margins for TSLA, which might lead to pressure on profitability. Speaking of which, analysts don’t expect a profitable Q2 despite the big deliveries. This would be the second “red” quarter in a row for the company, a troubling sign after it posted consecutive profitable quarters in the second half of 2018. The decision to lower prices also has some analysts questioning whether demand is there for TSLA’s vehicles.
In a sign that TSLA continues to work on expense control, it said it made “significant progress” in Q2 “streamlining our global logistics and delivery operations at higher volumes, enabling cost efficiencies and improvements to our working capital position.”
The company’s cash position is usually something analysts monitor at earnings time, and this quarter is no different. Tesla’s wallet looked lighter at the end of Q1 due to a bond payment, expansion costs, and a high number of vehicles in transit, analysts said. One question is whether that improved in Q2, and whether management can meet its forecast for positive free cash flow in the quarter. That might help soothe chronic worries about how quickly TSLA goes through cash.
Among investors, TSLA shares continue to see a lot of love from the Millennial generation. The company’s stock has been a long-time favorite of younger investors, according to the Investor Movement Index, or the IMX, a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of retail investors.
For TSLA, the “magic” price point in early June seemed to be $200 a share. When the stock fell below that, retail investors appeared to become buyers and come back into the stock in a heavier way.
It’s pretty impressive how TSLA continues to attract younger people to its stock. People are buying what they know, but, like anything, it’s also important to do the research before buying. Caveat emptor applies to any stock, not just TSLA.
200 CLUB: Shares of TSLA appeared to get a lot of buying interest earlier this year when they fell briefly below $200 a share. Data source: Nasdaq. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
Tesla Earnings and Options Activity
For Q2, TSLA is expected to report adjusted earnings of negative-$0.42 per share, up from negative-$3.06 the prior-year quarter, on revenue of $6.42 billion, according to third-party consensus analyst estimates. That revenue would represent a 60.4% rise from a year ago.
Options traders have priced in an 5.5% stock move in either direction around the coming earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform. Implied volatility was at the 21st percentile as of this morning.
Weekly options activity has been higher in the 240- and 245-strike puts and the 275- and 285- strike calls.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.
Kenji Ando is Senior Executive Vice President of Mitsubishi Heavy Industries (MHI), President and CEO of MHI Power Systems and President and CEO of Mitsubishi-Hitachi Power Systems (MHPS). MHPS is an energy joint-venture established in 2014 by MHI and Hitachi. Ando is a 40-year veteran of MHI. Turbomachinery International recently visited him in Japan and enjoyed a tour of several MHI facilities. He discussed the state of the gas turbine market, the extent of the current downturn, new technology and alternative technologies………
Turns out, a better refrigerator and autonomous driving technology have something in common. They are both features that could help increase the number of semi truck drivers on the roads in the U.S. Because people like Malcolm Bryant don’t come around that often. I recently visited the Volvo Trucks Customer Service Center in Dublin, Virginia the day that Bryant (not pictured above) was honored by Volvo Trucks and Southeastern Freight Lines for a career that has lasted more than 50 years – and his spotless safety record with zero accidents during that time………….
Quanergy Systems Inc. found itself in the center of a sudden frenzy over self-driving cars in 2014. It makes lidar, which bounces lasers off objects to help autonomous cars know what’s nearby. That September, the fledgling company announced a partnership with Mercedes-Benz that would put its devices on cars the automaker was using to test autonomous driving features. The deal established an enviable partnership with one of the world’s most prominent auto brands. In January 2015, the two companies showed off a Mercedes E350 sedan outfitted with Quanergy’s lidar devices at the Consumer Electronics Show in Las Vegas.
At the time, the lidar industry was dominated by Velodyne Lidar Inc., which provided the bulky, expensive sensors Google was using on its autonomous cars. Quanergy made the kind of promise Silicon Valley was built on: it’d shrink existing hardware through science, then sell it at a fraction of the price. Quanergy led the pack, as investors poured money into companies describing new techniques for lidar devices. It has raised $160 million to date at a peak valuation of more than $1.5 billion. Last fall, Quanergy began talking to banks about a potential IPO, setting it up to be one of the first public companies to emerge from the wave of firms making tech for autonomous vehicles.
This July, Daimler AG, the parent company of Mercedes, made another announcement. Daimler said it was running a test program for autonomous vehicles on urban streets in the Bay Area, which included a handful of partners, none of which was Quanergy. For lidar, the robo-taxis would use Velodyne. Daimler declined to comment on its relationship with Quanergy.
It was a troubling sign for the lidar industry’s first unicorn—and it wasn’t the only one. Quanergy has struggled to deliver products along the timelines it has set out for itself, and has shipped devices that don’t work as well as advertised. Numerous employees have left over the last 18 months, including several at key positions. But Quanergy’s biggest challenge is that its autonomous car business hasn’t developed the way it thought it would. The company has increasingly focused on other applications for lidar, including a plan to help build a digital border wall along the Mexican border, a project that has left some employees ill at ease.
Quanergy has stopped talking about an IPO and has been pursuing new investments in recent months. It has had talks about finding a buyer, according to people with knowledge of the situation. Quanergy backers Samsung Ventures and Sensata Technologies Holding Plc, an auto sensor maker, have expressed disillusionment with the startup, according to people familiar with those firms. Alexia Taxiarchos, a Sensata spokeswoman, said the company remained excited about Quanergy.
“Developing these lidar sensors involves solving difficult technical issues that take time to overcome,” she added. In an email, a spokeswoman for Samsung’s investment managers said the firm believed Quanergy was ahead of its competitors making lidar for cars, and had shown meaningful results in the security sector. She said Samsung was aware that Quanergy was about to close a new funding round. In an email, a spokeswoman for Quanergy said it “unequivocally denied” that it was seeking a buyer.
In August, Louay Eldada, the company’s co-founder and chief executive officer, invited Bloomberg News to visit his headquarters and assembly line, which he says is capable of shipping a million lidar devices a year. In a sweeping interview, Eldada admitted faults with earlier products that have since been corrected, cast some criticism as broadsides from competitors and insisted that automotive partners remain optimistic about Quanergy. “People understand we are the real deal,” he said. “We are the veterans.” The company also demonstrated its latest technology to a reporter, although only in controlled conditions that didn’t replicate the needs of automotive companies.
Eldada denied that there were problems with Quanergy’s relationship with its investors or with Daimler, and added that Quanergy was “one of the finalists” to provide the carmaker with lidar going forward. Quanergy has more than 5,000 customers, according to Eldada. He said he couldn’t name them for competitive reasons.
Quanergy is seeking new capital, and Eldada said about a third of the investment would come from China. He declined to name the potential investors. Asked if Samsung and Sensata would participate in a new funding round, he said, they had “grabbed all they intended to grab.”
Bloomberg also spoke to a half-dozen former employees, all of whom asked to remain anonymous, most of them citing the fear of retaliation. They said execution was a consistent problem at Quanergy. Several former employees described Eldada as a combustible and intimidating presence, stymying debate about product development and seeing any disagreement as intolerable dissent. When asked about this, Eldada pointed to a framed placard listing the firm’s core values, which include teamwork, transparency, intellectual honesty, and empowerment. “You will find that the level of happiness is high,” he said.
Bloomberg News also spoke to current and former business partners, as well as more than a dozen people in the industry, who also described signs of trouble at the company. Most asked to remain anonymous to speak frankly about sensitive business arrangements.
Quanergy’s critics said the distance between its rhetoric and reality have widened. One former employee said he never saw a single device come off the line at Quanergy that met all of its stated specifications, an allegation the company denies. Morale has been flagging for well over a year, said several former employees who are in contact with current staff members. In July, Ryan Field, a senior employee who was in charge of Quanergy’s development of a chip designed specifically for lidar, told the company he was leaving. Eldada described Field’s departure as a blow, but said it was amicable. Field declined to comment.
In the meantime, Quanergy is pursuing other markets. Eldada has become set on building sensors for an electronic barrier along the U.S.-Mexican border, which he sees as a humane alternative to the border wall being pushed by President Donald Trump.
The challenges facing Quanergy point to a broader reckoning looming for the autonomous vehicle industry. Investors have poured about $750 million into lidar companies since 2013, peaking last year at $350 million, according to CB Insights, a firm that tracks venture capital activity. Companies working on automotive mapping, software, and other technologies have also raised money from investors determined not to miss a fundamental revolution in transportation. But a full-scale autonomous driving industry still seems years away, making business prospects questionable. Startups that attracted interest based on the promise of future breakthroughs are struggling to solve difficult scientific and commercial problems.
“The hype is falling,” said Mike Ramsey, a transportation and mobility analyst at Gartner. “The closer you get to implementation, the clearer it is how difficult it will be to commercialize.” Ramsey said some self-driving tech companies are lowering their expectations, pivoting from building their own software to consulting, and expects to see significant consolidation among the 50 or so companies currently making lidar. “There are not enough musical chairs out there for everyone,” he said.
Eldada is an intense, confident man whose preferred wardrobe—a black suit with an open-collared white oxford shirt—is at least one step more formal than typical for dressed-down Silicon Valley. When he arrived at an interview with a Bloomberg News reporter, he wore a pin honoring Quanergy’s “Best of Innovation” award from 2017’s Consumer Electronics Show on his lapel.
Eldada traces the idea for Quanergy back to his doctoral research at Columbia University. After graduating, Eldada went on to work at Honeywell and DuPont Photonics, a manufacturing specialist, then a handful of telecom and energy firms. During this period, Eldada said, he began working with technical experts that would make up Quanergy’s core founding team. “Together we developed unique capabilities, designed tools you cannot buy, designed rules they do not teach you in school,” said Eldada.
Jim Disanto was one of first to give Quanergy money. Disanto had just started his own investment fund when he met Angus Pacala, a Quanergy co-founder, in 2012. Eldada pitched Disanto, and the investor’s ears perked up at his description of a specialized computer chip that would contain the entire lidar system. “There’s a race going on,” Disanto remembered thinking. “We’ve got to get into this lidar stuff.”
Lidar sensors work by shooting lasers into the world, then determining the position of objects by measuring how long each beam takes to bounce back. It is widely seen as the most promising technique for autonomous vehicles to sense the world around them. But it also has its unique challenges. Lasers must fan out in various directions, extending a sensor’s field of view beyond a single beam. Velodyne does this by putting its sensors on motorized turntables, shooting lasers in a 360 arc, a technique known as mechanical lidar. Quanergy and other upstarts promised to develop novel ways to steer the radar beams with fewer moving parts, simultaneously making the devices smaller, more durable and cheaper to make. Devices without any moving parts, like the ones Quanergy was developing, were known as solid-state lidar.
Eldada was a fantastic evangelist for this idea. A person who saw his presentation while working at an auto company in 2013 called it “one of the best pitches I’ve ever heard.” In a pitch deck from the same period viewed by Bloomberg News, Quanergy said it would sell to manufacturers of self-driving cars, to dockyard operators looking to automate, and even military contractors searching caves for terrorists. The company was also planning to construct an automated manufacturing facility and design its own specialized chips. Quanergy projected sales to grow from 100 units in 2013 to over 200,000 by 2017.
At the time, Quanergy was selling spinning mechanical devices that worked much like Velodyne’s. But Eldada said his company would have a solid-state lidar by the beginning of 2016. And he delivered, sort of.
Quanergy introduced the S3, its solid-state lidar product, at CES in 2016. One person who received a demo was Evan Ackerman, a contributing editor for the website of the Institute for Electrical and Electronics Engineers. “We can’t tell you much about the demo (it’s under NDA), but we can certainly say that the S3 definitely works as a solid-state LIDAR,” Ackerman wrote in an article at the time. “However, we’re obligated to point out that Quanergy has not yet demonstrated a version of the S3 that performs to the specifications that they announced at their press conference.”
Eldada acknowledged this was true. “Back then it didn’t meet spec,” he said. “That’s absolutely correct.” He dismissed it as run-of-the-mill CES puffery. But there were other signs that things weren’t going according to plan. Months before the 2016 release, Pacala suddenly left Quanergy and later started a competitor, Ouster. (The name could be interpreted as a sly reference to Pacala’s departure, but Ouster’s website says it actually refers to a group of characters in a series of sci-fi novels.) Eldada diminished Pacala’s importance to Quanergy. “He’s a mechanical engineer, and that’s all he does and all he knows. He’s never had a hand in the solid-state lidar,” Eldada said—even though Pacala shares credit on a patent entitled “optical phased array lidar system” that describes Quanergy’s approach to solid-state lidar. Pacala declined to comment.
Employees who were at Quanergy at the time said Pacala’s departure shook morale, especially after Eldada began criticizing him and his new company in front of other staff members. They saw Eldada’s continued reproach of Pacala as indicative of the CEO’s hunger for personal loyalty. This made it hard to fix technical issues, said one person who held a senior position at the company. “You expect a certain number of failures when you’re building a business, because it’s new stuff, and nothing is perfect. But when it goes on for a while, you think that is a problem,” this person said. “And when you combine that with an environment where passionate debate is not tolerated, it’s difficult for you to step in and say, ‘Why are we having this problem?’”
Quanergy’s own public statements about its technology hint at technical frustrations. It first described the potential of its mechanical lidar device, the M8, in a December 2014 press release, when it said it had a range of 300 meters. By January 2017, the company said the device had a 200-meter range. Six months later, it revised its claim again, saying it had a “maximum range exceeding 150 meters.” By November 2017, it issued a press release describing its range simply as “long.”
Eldada said the stated specs in press releases vary because they refer to different versions of the product. He didn’t dispute the PSL study, but said it was out of date. “I’m sure that’s what they saw,” he said. “We’re actually going back to the customers who tried our product three years ago and saying, ‘Forget about it. It’s a totally different product,” he said. Eldada said he created three different versions of the M8 this year and that 94 percent of the sensors now have 200 meter range. In any case, the future of the company, in Eldada’s eyes, has always been the S3.
For now, the officially stated specifications of Quanergy’s S3 sensors fall short of the performance needed for general-use autonomous driving. A commonly cited benchmark for the needs of highway driving is a 200-meter range, which would allow a car driving at 70 miles per hour just over 6 seconds to adjust to an obstacle. A current spec sheet viewed by Bloomberg News shows a range of 150 meters. Quanergy also measured its range on highly reflective objects, which are easier for lidar to see at long distances but aren’t usually the type of things autonomous cars need to spot. This elides how well the S3 might sense many of the objects autonomous cars would seek to avoid.
There’s a consensus within the industry that no one has yet figured out the perfect formula. “There’s been some delay, the technology in general is difficult,” said Eugene Zhang, a partner at TSVC, another Quanergy investor. “I believe in the team. They have a good shot at it.”
Disanto, the early investor, said that the company’s new devices remain a work in progress, but that he believes the company is ahead of the rest of the industry. “I’ve been to the company. I’ve seen the new samples,” he said. “We’re really close.”
One auto company that has expressed interest in the S3 is Japan’s Koito Manufacturing Co. In 2017, Quanergy announced a collaboration with the firm to make headlights with built-in lidar sensors. But Daisuke Sato, a Koito spokesman, said this month that the deal wasn’t final. “We still haven’t decided which suppliers we should buy parts from,” he said.
Eldada expressed confidence that he could win Koito over. He said Quanergy’s devices could outperform their stated specs in certain conditions such as highway driving, when sensors need to see at longer ranges. He said Quanergy’s device was on par with competing products. In a demo conducted for Bloomberg News, Eldada showed an S3 operating in a conference room that was about 12 meters long. When asked to see the device work outdoors he declined, citing a firmware update.
Quanergy has consistently said its tech would be important for more than just cars. In 2016, the company floated the idea of using lidar to secure the perimeters of prisons, and later engaged with oil companies, on plans to use its sensors to detect intruders.
People throughout the industry have noticed a distinct shift toward these kinds of applications over the last 18 months. The most notable project is Quanergy’s attempt to build technology for a digital border wall. In Eldada’s vision, lidar sensors could be deployed along the border, monitoring remote regions for movement, then determining whether there were people attempting unauthorized crossings. Two former employees said many workers found the idea repellant.
Eldada acknowledged that a contract for a virtual wall would be controversial, but he described it as a kind of protest against Trump’s version of border security. “I hate the word ‘wall’. We are anti-wall. We have a technology solution,” he said. A digital border project could be lucrative, but could also help open up other markets, like selling technology to cities or airports, said Eldada. It would also require addressing challenges that don’t arise with cars, like operating in extreme heat without consistent access to power or data networks. Quanergy sells sensors to Cisco for urban planning, but Quanergy declined to elaborate on the deal.
In an email, a spokeswoman for Quanergy denied that the company is primarily focused on the security market. But none of the deals that the company has announced this year are with auto companies. “We don’t want to put all of our eggs in one basket, and be subject to delays that no one can control,” said Eldada. Not that he’s giving up. “Ultimately, when it takes off in a big way, it will dwarf everything else,” he said.