On this episode of the Futurum Tech Webcast, host Daniel Newman welcomes Qualcomm’s Nakul Duggal, SVP & GM, Automotive & Cloud Computing for a conversation on Qualcomm’s automotive business and the latest on their partnerships, including AWS, during the IAA Mobility Event in Munich, Germany.
Their discussion covers:
- A review of Qualcomm’s automotive business and its double-digit growth
- The timeline of design cycles, and what it takes to build growth in the automotive computing space
- Recent announcements from Qualcomm on their partnerships with Cadillac and Mercedes-Benz, and AWS
- The growing focus on the micromobility and electric vehicle markets
- How Qualcomm is thinking about AI in their automotive business
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Transcript:
Daniel Newman: Hey, everyone. Welcome to the Futurum Tech Podcast. Daniel Newman here at IAA Mobility 2023. We’re here in Munich, Germany. And I’m joined today by Nakul Duggal. Nakul?
Nakul Duggal: Good to see you, Dan.
Daniel Newman: Good to see you again. A regular here on the show, but it’s been a while. It’s been two years since I’ve been here.
Nakul Duggal: Yeah, I think we talked at our investor day last, which was, when was that, November of last year?
Daniel Newman: Yeah, we did have that conversation. It was a good one too, and that was a big moment for the automotive business.
Nakul Duggal: Yeah, yeah.
Daniel Newman: It’s been a while since we’ve had a conversation about the overall state of the business, so I’m hoping to cover a lot of ground here. You’ve got announcements being made. We’ve got a massive AI boon that’s gone on since the last time, actually right around November. It was when that all started up. And then of course, I want to talk a little bit about the business, the monetization, but let’s just start a quick review. Give me a quick rundown of the state of Qualcomm’s automotive business. It’s been growing double digits every quarter. What’s going on there?
Nakul Duggal: The state is great because I think the great thing about the automotive business is that you don’t necessarily have to go predict what you are going to see over the next quarter or the next couple of quarters. You’ve done the work a few years ago. And really what it comes down to is at what rate are your designs launching on time? At what rate are the volumes picking up? What’s the state of the macro? So we feel pretty good that the strategy that we put in place many years ago and then the strategy that we doubled down on the last couple of years is still very much intact. The size of the market is massive.
One thing that we bet on was silicon content and software content is going to grow. It’s growing beyond our expectations. Modernization is happening very quickly because competition is through the roof, and we are running very hard. We are running very hard. Each program is complex. Each customer is different. Tremendous amount of competition in every part of the globe. So no rest. Just keep going.
Daniel Newman: It’s powerful though to think about the demand and the passion around this industry.
Nakul Duggal: Yes.
Daniel Newman: As I walk these halls and I see people surrounding the cool concept cars, but it’s also been really pretty outstanding to watch the way technology and automotive have really been on this exciting collision course. It’s always been technology, but not necessarily the players of today. Meaning, seeing the Qualcomms and companies like yours and Apples, entering the automotive space in a big way is really, it’s redefining, Nakul, this whole industry. And you said something that I really wanted to … I was going to ask you about, but you jumped ahead and so I’m going to ask you here.
You mentioned about design cycles. A lot of people heard you and the team at your investor day talk about a $30 billion pipeline, but then people look at a quarter and they go, oh, it’s 400 million, 500 million, and they don’t always make that connection. I talked to a number of journalists when they come looking for analyst commentary and they’re trying to put the … How do you explain that to people, the timeline that it takes to build the business then when it starts to really become revenue, and what can you say about how the revenue for Qualcomm is accelerating?
Nakul Duggal: Well, so I think the pipeline converts into designs, and the more that we are doing, especially in compute in both cockpit as well as ADAS, the ASPs are much higher, the complexity is much higher, but those are also designs that we have one more recently so the launches are a little bit farther out.
Daniel Newman: Yeah.
Nakul Duggal: And the way you want to think about the pipeline is through the end of this decade. So we’ve talked about $4 billion in revenue by ’26, $9 million by the end of the decade, and those numbers are things that we have provided based upon the rate at which we have winning designs. We continue to see a massive amount of opportunity because really, a couple of things are going on.
I think one is the rate at which the car is evolving is now actually being dictated by the amount of competition that there is in this market. So the incumbent, the traditional automakers are obviously seeing a lot of competition, not just from the likes of Tesla but also the Chinese. China has really come into its own post-COVID in terms of having a really massive footprint in EV, software companies that are building cars, completely different input cost structure, very different economics, very different speed of execution.
And that’s frankly, for us, the good thing there is that we just have to compete harder. The products that we are building are much more sophisticated, and the revenue growth that we have projected, really what it comes down to is how much predictability is there in that revenue growth. I think we are on track.
Daniel Newman: Yeah. And I like that you mentioned China as an opportunity because in this era of semiconductor confusion as it relates to US-China relationships, the automotive space should be one where there shouldn’t be a lot of as much headwind as, say, the advanced AI chips that are being used for high performance compute. So what you’re building there and as that market grows and as the opportunity of China grows, Qualcomm has a good opportunity to capitalize on that.
Another thing that you guys have really had quarter over quarter, you’ve made announcements of designs and partnerships. Recently, you made an announcement on that new ESCALADE. By the way, I was like, that was the first SUV fully electric that I saw that I’m like, “This one could work for me. This could work for my … I have a lot of kids. I need a lot of space.” But what are some of the more exciting wins, whether it’s a design from one or new OEMs, anything since the investor day last year?
Nakul Duggal: There are always a lot of different designs. I can talk about our partnership with Mercedes-Benz. We are now in the E-class. You can go buy an E-class with a Snapdragon digital chassis. You can buy it today. The BMWs that you’re seeing on the road all come with Qualcomm silicon. Any BMW that you buy today is all with Qualcomm silicon. We have launched a new program for two-wheelers. We have expanded the digital chassis in the two-wheelers.
Daniel Newman: I saw that.
Nakul Duggal: So we have won Harley Davidson. We have won TVS, Royal Enfield. That’s a global program that has a services element to it, so it’s not just the hardware but also the bike to cloud services built in alongside that. We are announcing a partnership with AWS.
Daniel Newman: Wow. Okay.
Nakul Duggal: This is focused on joint development in the cloud. They started off on the ADAS side. We started building our stack. We had to do a lot of reprocessing in the cloud, and it made sense for us to just start thinking about a partnership where we do a lot of cloud first development, and AWS has been a fantastic partner. BMW is part of that equation as well. So lots of different things going on across many different fronts. And really, I think two ways to think about it. One is the core strategy is working. The other is the strategy is starting to diversify into newer areas, and then our mode of development, the way that we actually develop with our partners, that is also changing.
Daniel Newman: Yeah. You mentioned the two-wheeler, and I’ve got to ask. First of all, there hasn’t been as much talk about it, but just when you started reading off the names, I started thinking TAM, TAM, TAM. How big of an opportunity would it be to really take a leadership role in that two-wheeler space?
Nakul Duggal: I think there are a couple of things going on. I think one is this is another space. It’s about 75 million two-wheelers, all types including micromobility that are sold every year.
Daniel Newman: Yeah, it’s a big market.
Nakul Duggal: A lot in developing markets, but they’re all going electric, right?
Daniel Newman: Yeah.
Nakul Duggal: So that’s I think the other big shift, is that electrification is definitely very much part of the entire two-wheeler narrative. And then the business cases for two-wheelers are several, so delivery services, transportation, rentals, micromobility, ride-sharing, and then of course a lot of passenger vehicles. And there is a massive aspiration in many developing markets for your first two-wheeler to be digital, so that people are used to now a smartphone essentially being something that they use for navigation, etc. This makes it safer. It makes it more integrated. It allows the OEM to be able to have a relationship with their customer. So all of the things that we’ve been talking about in the car extends over.
But what I’ve been pretty amazed by is how quickly the companies that we’ve engaged with have actually not just embraced the concept but launched because it is actually a much shorter timeline in terms of how quickly you can move. It’s also geographically very concentrated. So India has a massive opportunity, so does Southeast Asia, but then a lot of global OEMs like the Hondas of the world, like the Harley Davidsons of the world, they have a very large footprint and a lot of different tiering. So we feel like there is quite a bit of opportunity yet to go on this one.
Daniel Newman: Yeah, it sounds like an exciting opportunity. I look forward. I checked it out here at the booth, and I glanced, and I said, “Good thinking. Good expansion of the market.” Something that, by the way, the silicon providers really haven’t been talking much about, but that’s the thing about whether it’s running around Austin or San Jose, just everything from the little mobile scooters to full bikes, and that market is going to change in a pretty drastic way. I’d love to talk about AI a bit with you.
Nakul Duggal: Yes.
Daniel Newman: So AI has become a big part of Qualcomm’s story. I’ve had some opportunities to talk to a number of your peers. Of course, I’ve talked to Cristiano, and I’ve heard his story about The Edge, but automotive, it is the edge in its own way, but it also has a lot of utilization and use case for AI. Talk a little bit about how Qualcomm is thinking about AI for the automotive business.
Nakul Duggal: So one thing that we actually benefit from a lot is we started to obviously focus on AI in the car from an ADAS perspective many years ago. And for ADAS in the car, you need high performance AI. You need low latency. You need the cameras. You need the sensors. You need the AI blocks to all be working on a very low latency footprint. So the team has been working on this problem statement for a number of years, so we fully understand what it is that we have to go develop. That was a big advantage because as generative AI came along, we already had the hardware in place. So all of our silicon actually has a tremendous amount of AI hardware built in. It just now has to be applied for a different use case.
Now, we are showing a bunch of use cases here at IAA, but to me, the part about AI in the car that is really fascinating and that’s really different is there is so much more context when you are inside a car because you’re in the car because you’re going from A to B. What you are using the car for, where you are, what time of day it is, who you are, what your relationship is with the vehicle, what the car is seen, what time of day it is, that brings so much more context into being able to predict and being able to provide as feedback or as an experience to the customer what it is that they would like to go do. I think that’s where the experiences are.
We have a demonstration around how do you do intelligent navigation? We’re here in Munich. We have a demonstration where we have a simulated drive route around the museum area, and you can basically say, “I’m at this museum because my camera is seeing it. I would like to be able to get a download on exactly what it is that I’m seeing. Are there museum hours? Can I buy a ticket? Where’s the closest parking?” That entire experience essentially becomes much more tightly integrated. And what you’re going to start to see, I think it’s already happening, is the combination of hybrid AI, what you can run locally in the vehicle and what you have to go run in the cloud. They start to interact in a very seamless way.
One experience that we’ve been working with a few OEMs on is how do you make the car manual digital but then train an LLM on that manual and now have context in that if the car is trying to provide you some audiovisual feedback, you can know much better than that. You can actually have a conversation. The car tells you what’s going on. You can ask a question. Information is local. What is not local? You can go to the cloud. So this is actually not a use case. This is how it’s going to start to get implemented because why would you implement it any other way?
So I feel like all the enterprise level modernization that is going to happen in the auto industry for that to make its way back into the vehicle, it’s just going to be very natural. And then all the consumer use cases that you see on the phone, on the PC, etc., the copilots of the world, those will be much richer because the context that you can provide for the use cases is just a whole lot more meaningful in the context of a car.
So I think we are starting. For me, what I really like is that the software platform inside the car is owned by the automaker. It is an experience that needs to be private. Automakers have to be in charge of that specific experience. You need plenty of local onboard AI that has to be paired up with what is going on in the cloud, and you have to have the ability to really serve many different experiences of many different types. So this to me is, in my mind, a super set of all of the various types of generative AI examples that you can think of. Very different from what you can have on a phone, what you can have on a PC. It really is many different things coming together.
Daniel Newman: Yeah. I like the opportunity to take the interactions we have with the vehicle and make them smarter, make them more immediate. I have some pretty extensively complex vehicles, and when I have a service requirement, it is never straightforward.
Nakul Duggal: Exactly.
Daniel Newman: And I know everything is on the computer. You always hear that. Everything is on the computer, but it’s like that light goes on and you almost want to be like, “Well, what do I do?” At best, it’ll tell you you can or can’t drive it, but it’s like what’s actually wrong? Or even just as simple as the other day, we got one of our cars back from service and someone had changed the interior lighting to red. It felt very cold. And my wife is like, “I want to change it back to blue.” And it’s like we’re going through the menu just trying to find how to change the interior lights. Wouldn’t it be great if you could just hit a digital system and say, “Change ambient lights to blue?”
Nakul Duggal: Or just ask a question, “Hey, can you change them to blue?”
Daniel Newman: Yeah. Or what colors can I change it to?
Nakul Duggal: How do I change it to blue? Exactly. And look, all of this, not only is it doable, but I don’t know why you would continue to do it the way that you do it today. You will just do it a different way.
Daniel Newman: So I want to bump into generative a bit because you just indicated a number of generative use cases, but generative AI is the hot button right now. So for Qualcomm, I’m hearing a digital assistant in the cockpit makes sense. Within the automotive business, talk about monetization though. One of the things I’ve been trying to understand is as you add all these really valuable capabilities, does it change the monetization, the business size opportunity? Is this something that’s going to be an add-on when people are buying silicon or is this going to be like Qualcomm does with its phone where it’s all inclusive? Because people I know are clamoring, Nakul, to understand not only everyone gets that Qualcomm is a leader in AI, but now people are saying, “Is Qualcomm going to see growth because of its leadership in AI?”
Nakul Duggal: So look, I think all of the silicon that we have, and especially in automotive, the strategy that we’ve had is AI is always something that is over and above the base platform. And so we certainly monetize the hardware, but it is not going to be just about the hardware. It is actually about how does the hardware get used across a wide variety of different scenarios? So for example, if you’re able to drive a much better quality of experience as an OEM because you’re able to increase the productive use of your resources, for example, the relationship that a service advisor can have with the vehicle. Because if something goes wrong in your very complex vehicles, for example, and the service advisor just knows exactly what that is without actually having to go traverse through a variety of different steps, that changes the entire experience. It changes the experience for you.
It’s not possible to do that if you did not have something that was intelligent at the edge, but it requires an integration. It is something that requires the automaker to be able to say, “I have to be able to integrate these experiences differently than I’ve done them traditionally.” And that modernization, we are already in the middle of.
Look, I think the consumer monetization is probably going to follow typical consumer parts that they do, but I feel like what AI is going to do is to open up a lot of different types of opportunities. We are playing around with a lot of different models. What can we charge as a service? What can we charge for orchestration? Of course, there is the hardware and then, of course, where are we providing value that otherwise cannot be provided any other way? So more to come.
Daniel Newman: And I’ll say to everybody out there that there is value in having the differentiated features that enable you to win all these designs. And a lot of people want to discount, well, if you can’t charge more for it, but having these capabilities or what has driven GM, BMW, Mercedes, seeing that not only what you’re doing today but understanding how this approach, this building blocks approach that you’ve taken is enabling them to say, “Whatever we’re doing in our design now will be able to be modified quickly in speak of design for our future so that we’re never behind.” And that’s why a lot of the OEMs have turned to you instead of trying to do this on their own or use the previous tier ones that didn’t have leading edge technology capabilities.
Nakul Duggal: Look, there are so many different types of OEMs out there. We are working with OEMs that are building generative AI experiences as we speak. They don’t need us to tell them. They just basically tell us, “Please show us how. What’s it going to cost us?” And then there are others who are still thinking about this in terms of how much more am I going to have to pay?
I had a conversation very recently earlier this week, which was mostly about us having educated the OEM for a long time and then they came back and said, “We’ve been thinking about how much headroom we need. All wrong. We are not future proofing for generative AI. Can you please share with us once again what we have to go through?” So that shift is happening. It is a bit difficult in the automotive space because the entire organization has to buy into how it is going to change the organization and how far down it is going to go. Does the change in the enterprise become something that actually gets pushed all the way down to the product? It’s already starting to happen because people are so concerned about making sure that the platform is future-proof. And for us, this is like, hey, this is what we’ve been talking about all this time.
So it’s validation of the fact that the strategy that’s been put in place as far as the platform goes, we’ve been putting a lot of AI tech inside the SoCs and now here is one killer use case that everybody is going to need. It’s right there for you.
Daniel Newman: All right. Well, we’ve pretty much covered it all. Having said that, we’re here at IAA Mobility 2023. We’re in Munich. What’s the one or two things you’re most excited about making sure everybody knows before they leave the event this week?
Nakul Duggal: Snapdragon Digital Chassis, this is where it’s happening. I think a lot of OEMs globally have validated our strategy by essentially betting on the fact that what we are pulling together is something that is actually very much needed by the auto industry because you need to have, at some level, a one-stop shop. There is a lot of competition and not much time, and you need to be able to work with experienced players. I think we find ourselves in a really good position.
Daniel Newman: Well, congratulations on all the success. It’s always good to sit down with you.
Nakul Duggal: Thank you.
Daniel Newman: It’s been a while. I’m sure we’ll do it again soon, Nakul. Have a great IAA.
Nakul Duggal: Great to see you, Dan.
Daniel Newman: Thanks everyone for tuning in.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
