is shutting down – what will happen to its LiDAR unit?, an autonomous vehicle (AV) unicorn, announced on October 26, 2022 that it would end operations at its locations in Pittsburgh, San Francisco, New Jersey and Munich. It affects approximately 2,100 employees and, more importantly, emphasizes the feasibility and business model of autonomous transport on public roads. The company was founded in 2013 by alumni of the DARPA Grand Challenge 2006, Google and Uber AV initiatives and gained significant backing and funding from Ford in 2017 ($1 billion) and later from Volkswagen in 2020 (2. $5 billion). Both investments took place under the auspices of former CEOs, who have since been replaced (Ford CEO Jim Hacket in 2020 and Volkswagen CEO Herbert Deiss in 2022).

It is not surprising that the new management saw things differently and did not want to inherit the strategic bets of its predecessor. One reason is that AV technology is complex and requires a lot of time, management and money. Another underlying factor is that a compelling business model for AV transport services is not evident, despite major investment banks and strategy consulting firms confidently projecting trillions of dollars of opportunity. over the past five years. At this point, these projections seem unrealistic and other priorities are imposed on the automotive industry, such as electrification, ADAS and limited range.

Mobileye is the only company that has demonstrated that there is money to be made in ADAS (Advanced Driver Assistance Systems), with revenues of $1.4 billion per year and an almost profitable income statement (losses of $75 million). Intel bought the company in 2017 for $15 billion. It was released last week with a similar valuation, although the market reacted favorably and raised the valuation to $21 billion. Mobileye intends to leverage the ADAS experience to grow its AV expertise and products. At this point, they probably have the most credibility in the AV space to deliver on that vision.

Prominent AV unicorns (Waymo, Aurora, Mobileye, Argo) have invested in in-house LiDAR (Light Detection and Ranging) imaging technology which uses lasers to create 3D perception around the car. They viewed LiDAR as a key differentiator for their AV hardware and software stacks. Separately, venture capitalists and Tier 1 automotive suppliers have invested billions of dollars in this technology since 2015, with more than 70 companies competing. LiDAR is considered essential for AV implementations (some, like Tesla and Nissan, would disagree). acquired Princeton Lightwave, a New Jersey-based LiDAR company, on October 25, 2017. Ironically, they announced their closure on the fifth anniversary of this acquisition. (Disclosure: I started and led the automotive LiDAR effort at Princeton Lightwave until it was acquired by Argo). At the time, Princeton Lightwave was the only company in the world with expertise and capability in high power laser diodes and Geiger Mode Avalanche Photodiodes (GmAPDs) at wavelengths > 1200 nm (which are significantly safer for the eyes than those at 800-900 nm wavelengths). Argo touted the value of its acquisition and its impact on the success of AV implementations as recently as May 2021. As CEO Brian Selesky explained, the technology’s ability to operate at lengths eye-safe waveform (>1400 nm) and deploy Geiger mode avalanche photodiodes (GmAPD) allowing ranges of 400 m, which provided the artificial intelligence (AI) stack with perceptual advantages significant. As draws to a close, an important question is the fate of the LiDAR division in New Jersey.

The main options are:

  1. Ford or Volkswagen could absorb parts of the entity to support their internal LiDAR developments, but this is highly unlikely. Automotive OEMs generally do not focus on the development of sensor products. They could order their Tier 1 suppliers to take over. Innoviz is a Volkswagen Tier 1 LiDAR provider and could be an option.
  2. Other independent LiDAR companies may play a role for Argo-LiDAR. However, these companies are going through an unfavorable business environment in terms of valuation, revenue, earnings, funding and market outlook. Luminar is an exception – they are one of the LiDAR companies with a large market cap and could afford to acquire the company. There is also a synergy in that Luminar currently offers a high performance 1550nm LiDAR with linear mode APDs and fiber lasers. These APDs could be replaced by GmAPDs and allow the use of diode lasers to reduce costs., another 1550nm LiDAR company that currently uses simpler detectors and fiber lasers, could also be a contender as it could integrate its Micro-Electro-Mechanical Systems (MEMS) adaptive scanning with GmAPDs and lasers. diode.
  3. Argo uses contractors to build its LiDAR. They could acquire the LiDAR unit in conjunction with other Tier 1 companies interested in integrating LiDARs into their OEM customer platforms.
  4. The current management of the Argo-LiDAR unit may buy out the company and lead it in the future. Potentially, the buyout could be through equity deals with Ford, Volkswagen and other investors. However, since the LiDAR effort was captive, there is likely no current revenue. Obtaining financing without having engaged customers who want to buy products is tricky.
  5. Non-auto players could participate. Princeton Lightwave was a leading defense premium GmAPD supplier for airborne LiDAR imaging applications before Argo acquired them. DARPA has invested significantly in the company to produce and commercialize GmAPD technology for airborne LiDAR and mapping. Ball Aerospace received an exclusive license for GmAPD technology based on Princeton Lightwave technology after acquiring Argo for their airborne LiDAR efforts.
  6. Asset sales are a final option – Argo intellectual property and investments in equipment/processes and their manufacturer under LiDAR contract. This option is essentially a distress sell if options 1-5 do not pan out.

Aurora Technologies, founded by Chris Urmson (who led the AV effort at Google, now Waymo), is one of the unicorns of the AV space (although their valuation has fallen about 80% since the company was became public in 2021). The company recently sounded the alarm about its ability to continue to operate independently and raised the possibility of selling the company to Microsoft or Apple. The CEO also announced the sale of his in-house LiDAR effort (which he created through acquisitions of Montana-based Blackmore in 2019 and Berkeley-based silicon photonics company OURS Technologies in 2021).

A key consideration for Options 1-5 above is the sale price that Argo and its investors would require for a successful acquisition. Current valuations of public LiDAR companies range from $20 million (Quanergy) to $3 billion (Luminar), with most companies like Innoviz, Ouster, Cepton, and Velodyne ranging between $300 million and $600 million. However, these companies have actual products, revenues and, more importantly, production contracts with non-automotive and automotive companies for ADAS and L3 (limited autonomy in specific ODD or operational design areas) applications at volume raised.

Argo-LiDAR products support high performance, mechanical scanning and 360° field of view. They are designed for L4 or L5 autonomy in cost, size, and power consumption, with a single internal customer determining performance, cost, and platform integration requirements. Significant development resources would be required for wider deployment to external customers in price-sensitive automotive and non-automotive LiDAR markets. Support for marketing, sales, business development, and application engineering is also essential (although some acquirers may already have the infrastructure to perform these functions).

It is essential to motivate and retain key engineers who understand the key technologies on which Arog-LiDAR was built to leverage the experience and intellectual property of the current design and product. Moving from a culture of serving an internal customer to a culture of demanding external customers in a highly competitive landscape is not easy. It is a change of perspective and mentality, and the right management must be put in place to better focus on products, markets, revenues and profits.

Argo acquired Princeton Lightwave in 2017 for a reported price of $52.5 million. Will they at least get what they paid for? Probably not, since LiDAR and AV technologies are at the “disillusionment trough” stage in the Gartner Hype Cycle timeline. The current economic and investment environment does not help, especially with investment opportunities that lack market-leading revenues, profits and products today.

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