Interest among investors all over the world in Israel's auto-tech sector is as lively as ever, despite its lower profile and the fact that the consensus date for mass appearance of driverless cars has been postponed to the middle, or even the end, of the next decade.
Auto-tech technologies developed in Israel are also likely to have a major impact far beyond the auto industry. Yet it appears that the combination of global interest and strategically important breakthroughs is liable to create the most difficult barrier encountered by the auto-tech sector so far.
Investments: The heavy guns are moving in
The open and official index for global interest in the local sector consists of official announcements of completed financing rounds, and there are plenty of those. Since October 2018, Israeli companies operating directly and indirectly in smart auto technologies announced financing rounds totaling $150 million, but this is only what has been disclosed. Under the surface, tier-1 investors continue to invest in general funds and those specializing in auto technology.
Last week, for example, the Maniv Mobility venture capital firm held an investors' conference under the media radar on the occasion of the closing of its new fund. Almost all of Maniv Mobility's portfolio is now focused on Israeli auto-tech companies, and the same is true of its new fund, which is planned to exceed $100 million and bring Maniv Mobility's total investments in the sector to over $250 million.
Although Maniv Mobility is a private specialist fund, the event drew unprecedented global attention. The only public announcement that coincided with the event was by US tier-1 auto supplier Lear Corporation, which announced its investment in Maniv Mobility. Lear, a company with an $8.8 billion market cap and nearly 150,000 employees working on production of components and technologies for the auto industry, directly acquired Israeli company EXO Technologies last year. It is definitely a prestigious addition to the fund.
Sources inform "Globes", however, some heavy guns joined Lear in the new fund, such as the venture capital fund of Hyundai Motors, the investment arm of Jaguar-Landrover, and the new investment fund of BMW, which has not previously operated in Israel, in addition to the $1 billion venture capital fund of Renault-Nissan, which joined Maniv Mobility last year.
This information has not been officially confirmed although judging by the senior rank of the international representatives who attended the conference, however, including Renault-Nissan, which is visiting Israel for the first time, the sector is still red-hot and arousing interest.
Autonomous cars are only the beginning
Investors' interest in the sector is a direct result of the accelerated progress in Israeli auto-tech, the potential of which is now expanding beyond the auto industry. One especially prominent example is technology in the general category of edge computing, which aims at bringing computer power closer to where it is really needed.
In an autonomous vehicle, for example, this technology is of critical importance. Edge technology makes it possible to equip a vehicle with a brain-on-chip that is able to merge and process an enormous quantity of visual information, and after it streams in from the vehicle's sensors, to turn it into real-time decisions, without wireless transmission of the data to the cloud and processing of the information there.
The decisions involved are critical ones, such as avoiding obstacles, drivers, and pedestrians, and decisions about driving policy, such as merging into road traffic. Up until now, the consensus in the sector was that artificial intelligence (AI) was needed to perform the heavy task of simulating the decisions of a human driver. AI programs, however, require very strong processors with a big appetite for electric power, and that is a real problem.
In recent years, the world's best IT giants have been trying to overcome the paradigm under which AI = processing power = electricity consumption. The really big breakthrough, however, is coming right now from Israeli auto-tech companies like Hailo, Cortica, Brodmann17, IonTerra, and others.
Each of these companies has a different technological approach to solving the problem. Some of them use thin AI algorithms, others offer a revolutionary electronic architecture. The final result in every case, however, is designed to be the same: chips that can handle massive quantities of information without complicated, expensive, and electric power-hungry hardware.
The moment the breakthrough from theory and software to hardware is achieved, and it is taking place right now, it is clear to investors that an autonomous vehicle will be only an intermediate stop - an important and prestigious stop, but one that is overshadowed by the inherent potential of these technology outside the auto industry.
The bottom line is that the sector is now developing the missing link likely to utilize and realize the full potential of AI in a way that is independent, relatively cheap, friendly to electricity consumption, and able to accommodate mass production.
Competition between countries has begun
The problem is that a considerable proportion of the technologies being developed by Israeli auto-tech, especially edge computing technology, are classified as dual-use technologies, meaning that they have the potential to change the rules of the game in both the civilian and military markets.
There is a great similarity between autonomous vehicle technologies and those that make it possible to manufacturer autonomous weapons. For example, imagine a completely autonomous assassination drone equipped with a very efficient electric battery that is not controlled by an operator or control carriage in real time. It independently navigates itself to a target set without any wireless connection with its home base. It uses micro-radar and miniaturized LiDAR to detect obstacles, protect itself using cyber security technologies on a chip, and uses machine vision to identify a target selected in advance, whether a person or a vehicle. It carries out targeted killings independently according to field conditions, which are recorded and processed by its sensors, while obscuring its direct connection to whoever sent it on the mission.
These components are already being developed now in Israel and elsewhere by auto-tech companies, with the missing link being AI-based edge computing processors that can identify and map the surroundings and make real-time decisions using a drone's limited micro power sources. This was impossible two years ago, but it is definitely possible now, thanks to the autonomous vehicle.
This technological duality and the threat posed by its reaching the wrong hands is currently of great concern to many decision-makers all over the world. Just last week, at a conference in Berlin, German Minister of Foreign Affairs Heiko Maas called on the major powers and international regulatory agencies to immediately impose tight international supervision on such technologies.
"Killer robots that make life-or-death decisions on the basis of anonymous data sets, and completely beyond human control, are already a shockingly real prospect today," Maas said. "Fundamentally, it's about whether we control the technology or it controls us."
His remarks may sound like a script for a sequel to "The Terminator," but almost all of the major powers are now in a race to obtain technologies that can be used to produce "fire and forget" autonomous assassins, while at the same time attempting to prevent, or at least delay, the obtaining of such key technologies by competing powers.
Since the defense export channels are usually blocked and protected against leaks of strategic technologies, the dual-use auto-tech channel is ideal for obtaining the bits of technology needed to complete the jigsaw puzzle of autonomous weapons.
Who dares to limit the Chinese?
The Israeli regulator has had trouble in keeping up with developments in this area, and perhaps did not want to. The US, however, which is in a race to deny the Chinese access to strategic Western technologies, is pushing behind the scenes to halt, or at least restrict, Chinese entry through this side door.
This policy was officially voiced by Israel Security Agency director Nadav Argaman at a conference concerning the establishment of a supervision mechanism for the matter, and by US National Security Advisor John Bolton during his recent visit to Israel.
It is unclear what is happening behind the scenes, but according to data from the IVC research company, Chinese investment in the Israeli technology sector grew to $325 million in the first three quarters of 2018, compared with $274 million in 2016.
As far as is known, one quarter of this amount went directly or indirectly (through participation in general funds) to the auto-tech sector. If Chinese investments in Israeli auto-tech companies with dual-use technologies are restricted, it is likely to constitute an important bottleneck in the VC pipeline. This, however, is the result of straddling the nether region between the defense and civilian sectors.
Published by Globes, Israel business news - en.globes.co.il - on March 21, 2019
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