Seeing Machines wins Apple for Back-up Driver Monitoring

According to my sources Seeing Machines will be supplying its new Backup-driver Monitoring System (Guardian BdMS) to Apple and is very likely to win GM Cruise, possibly Waymo also.

In the typically low key fashion in which Seeing Machines delivers good news to the market the announcement was put out more like a product release than an RNS. Hidden away in the third paragraph it stated: “Seeing Machines has signed an agreement with one customer and is in advanced discussions with a number of companies at the forefront of autonomous vehicle development.”

This is outstandingly good news for the AIM-listed minnow and means Silicon Valley has followed global car manufacturers (GM, BMW, Mercedes and Ford) in recognising Seeing Machines’ driver monitoring technology as best in class.

Apple, in typical fashion, has not replied to any of my emails on this subject but its secrecy in such matters relating to Apple Car is well known.

As stated in my previous blog post, I still expect wins with FCA and Toyota to be announced in due course.

The writer holds stock in Seeing Machines.

Seeing Machines will win FCA

I firmly believe Seeing Machines is set to make it 3 out of 3 in the US, when it adds Fiat Chrysler Automobiles (FCA) to its existing customers, General Motors and Ford.

I know this runs counter to the views of the SmartEye analyst Viktor Westman but I’m confident Veoneer with Seeing Machines will be the preferred choice for FCA. My reasoning is simple: FCA is already a key customer of Veoneer and Seeing Machines has not only a superior DMS system but a very close working relationship with Veoneer.

If you were FCA would you choose a DMS system that is inferior to that of your main US rivals?

Japan

Meanwhile, over in Japan, it seems that Seeing Machines has made great progress in cracking that market. Toyota by all accounts is in the bag. Moreover, Seeing Machines is exhibiting its DMS with Japanese Tier 1, Nexty Electronics (that is part owned by Toyota) at the 1st Automotive World exhibition in Nagoya, Japan this week.

Takeover endgame in progress for Seeing Machines

 

I’ve been following the LSE board and I’d like to confirm that I’m as disappointed by the share price fall in Seeing Machines as any other long term holder. I’ve not sold out and would have expected the share price to be much higher by now.

Still, the good news is that I still believe SEE is the world’s best DMS supplier and will be snapped up very soon. Let me explain 5 reasons why:

1) The actions of the company. It doesn’t appear to have made any reasonable effort to mitigate the share price fall. Why would any management allow such a fall when it would have been easy to release positive news on contracts/prospects for the coming year?

2) Canaccord Genuity hasn’t released a broker note since January and then kept on reiterating 21p as its target price. However, in July it removed these reiterations. I wonder “Why?”.  By any logic a detailed note is overdue (and I hope it won’t be released to merely rubber stamp a low-ball takeover price). Anything below 30p would  be criminal in my personal view.

3) Silence from management. I’ve previously found that when the company goes silent on me it is for a good reason. It could be a fundraise but I think the recent bonus to the founders/staff is more likely a golden pat on the back before it is sold. Moreover, if a fundraise was being planned I’d have expected a raft of positive news.

4) I can think of at least 2 Tier 1s that absolutely need Seeing Machines Fovio technology for their businesses. Sources have also previously stated that chip companies will bid for SEE on any move.

5) There have been rumours of share price manipulation by market makers to force the price down. I don’t know the truth of this but AIM is the Wild West of investing, so I’d expect that there is no smoke without fire. Of course selling by Miton won’t have helped. Still, there must have been buying by others so I’d urge Seeing Machines to update its list of top 10 investors on its website.

Would Seeing Machines care to comment on this “press speculation”? If not, I think that might be a deafening silence under the present circumstances.

The writer holds Seeing Machines stock.

Seeing Machines is worth US$10, even £10, but not 10p

At the Automated Vehicles Symposium (AVS) held in San Francisco last week, one presentation made was by the National Transportation Safety Board (NTSB), about the first Tesla crash involving Autopilot. The NTSB said that “steering wheel torque is a poor surrogate measure” for driver attention. In a tweet highlighting the presentation, Colin Barnden, Lead Analyst at Semicast Research commented: “This only really leaves camera-based DMS to fulfil driver engagement function.”. In a subsequent tweet Colin also identified a possible scenario where Waymo buys Seeing Machines, maybe even in a 12-18 month timeframe, for US$10 billion.

Here’s Colin’s reply in full to my asking about his thinking behind these tweets and the jaw dropping valuation.

Colin Barnden

The NTSB presentation at AVS. That’s a game changer. If you are a transport executive and you value your freedom, you don’t ignore NTSB recommendations. This even applies to anyone with the first name Elon too.

Level 3 is starting to gain traction so Waymo are looking like they have called the handover problem incorrectly and L3 is possible after all. Time will tell on this. L2/L3 is where the volume will be in my view, at least for the next decade.

Robo-taxis may get investor and press attention, but the volume will be in the mass market. Seeing Machines is the classic ‘pick and shovel’ play, the tech can go almost anywhere in transport applications that humans and machines interact. It certainly isn’t obsolete.

Price… who knows? Could be higher, depends how desperate the bidding war gets (see Sky as a good example). Remember what I wrote to you last week “I can see ten bucks a share persuading the Board to sell up soon, or even ten pounds, but not pennies. That would be stupid, and they (the Board of Directors) aren’t”. [This refers to us discussing privately the likelihood of Seeing Machines’ management accepting a low-ball bid in the next few months].

The current market cap simply reflects that the market is clueless to what SM has achieved. The company isn’t clueless, the executive management are whip smart. The market is coming to them (and Smart Eye too) it just needs patience. Maybe even as little as 12-18 months.”

You can follow Colin at @semicast_res

You can follow me, Chris Menon, at @Penforjustice

The author holds shares in Seeing Machines

Battle of the Titans?

In response to my latest blog post, Colin Barnden, Lead Analyst at Semicast Research, wrote to me explaining why he thinks Fovio is of strategic importance to both Apple and Alphabet. Indeed, his analysis reinforces my feeling that the two may soon battle it out to acquire Seeing Machines — regardless of any initial low-ball bid in the 25p-30p range from another party that kicks off a bidding war. 

I’ve reproduced his comments in full below so you get the benefit of his insights:

Colin Barnden

“Do you hear the thud? That’s the sound of the penny dropping in Silicon Valley that autonomous driving is not easy peasy after all. Witness no robo taxi development stories since March, after the Uber crash. As you report today, witness also the speed of conventional OEMs starting to adopt camera-based DMS. This is a technology which I have repeatedly been told by people at Silicon Valley based tech companies is “at best an interim solution and at worst already obsolete”. Elon might think something like that, but a steady stream of auto OEMs seem to want to work with Seeing Machines anyhow. My view is that every auto OEM will have announced their plans for camera-based DMS by the end of this year, with most implementing the technology for production from 2021 to 2023.

Apple have been trying to get into automotive for several years. Project Titan never really got off the ground, but CarPlay has been well received. For Alphabet, they have to hedge their position that Level 3 is redundant and have already moved to Level 4. There are many articles discussing this, here is one: https://www.wired.com/2017/01/human-problem-blocking-path-self-driving-cars/

I totally disagree with that view and Level 3 is very much possible, but it needs advanced DMS and sufficient human factors research to understand what humans do in the seconds and minutes following handing over driving to machine intelligence. Seeing Machines are underway with this work, led by Mike Lenné and the CAN Drive project. As Tesla have found – and Cadillac proven – you cannot even do Level 2 safely without camera DMS and the recent EC legislation calls for mandatory advanced distraction DMS (camera-based) even for Level 0. Other regions will follow in my view.

Both Apple and Alphabet need it, ideally so the other doesn’t have the technology. Whoever wins gets a minimum 3-5 year lead on the other (automotive qualification alone is 3 years – and Fovio is automotive qualified). Remember Zuck bought WhatsApp for $19 billion so Facebook had a potential rival under control. Conventional metrics for valuing a company won’t apply, this would be a straight Battle of the Titans. I’ll be watching.”

The writer holds stock in Seeing Machines.

A$50m Ford win for Seeing Machines

It’s great news that Seeing Machines, working with its Tier 1 partner Autoliv, has won a A$50m contract to supply its Fovio DMS system to Ford. Even better is that it’s on its new chip.

Once again my sources have been proven to be correct. Avid readers will note that in a previous blog, entitled: ‘Seeing Machines set to win 75% of the global DMS market’ the Ford win was predicted.

Back then, on 16th March, I wrote: “I’m being told that Fovio will soon be contracted to Ford, Volvo and Audi. (That’s in addition to General Motors, Mercedes and BMW). Moreover, those same sources are telling me that by the end of this calendar year Toyota will definitely be committed to using it and, most likely, Honda.”

The document containing this latest OEM win was published as part of Autoliv’s Investor Day presentation and is here: (Note that Veoneer is Autoliv’s active safety division that will soon be spun-off).

The clues are on page 13 and 17, in which it is revealed that in Q2 2018 Veoneer won a contract with a major global North American OEM for a DMS.

A spokesperson from Autoliv told Safestocks: “We cannot confirm the OEM name, but I can confirm that we will be working with our partner Seeing Machines for this contract.”

That the North American OEM is Ford is beyond argument. Seeing Machines already works with General Motors, Ford is also an important client of Autoliv. Moreover, when questioned Ford did not deny the contract win had taken place. A spokesman said: “Unfortunately, all I can tell you is that we do not discuss our contractual  arrangements with our suppliers.”

The writer holds shares in Seeing Machines.

Euro NCAP agrees camera-based DMS crucial to prevent driver distraction

Last week I spoke with Richard Schram, Technical Manager at Euro NCAP. For those backing camera-based DMS systems he provided a very positive update on the organisation’s plans.

He agreed that the problem of driver distraction could not be solved without cameras but he doesn’t think it is feasible to mandate that by 2021 (for 2020 the coffee cup DMS is what will be pushed for, as it’s easily achievable). By 2022 he expects EURO NCAP to be incentivising the introduction of AEB linked to camera-based DMS. Moreover, Schram agrees that: “by 2024 camera-based DMS will be part of most European passenger cars”.

Given the 3-year lead times for the introduction of technology into cars, it’s clear why the more safety-conscious car manufacturers are moving swiftly to integrate camera-based DMS systems into future car models.

I asked Colin Barnden, Lead Analyst at Semicast Research, to put Schram’s comments into context and he said that it “clearly confirms that Euro NCAP and the EU are in alignment”.

The he went on to explain how:

  • “Drowsiness and attention detection (DDR-DAD) – coffee cup : mandate introduction from 1 September 2021 to 1 September 2023. Euro NCAP 5 star rating starts with these systems in 2020.
  • Distraction detection (DRD-ADR) : mandate introduction from 1 September 2023 to 1 September 2025. The importance of the comment, “[in] 2024 camera-based DMS will be part of most European passenger cars” cannot be overstated and confirms my understanding that distraction detection systems will only be camera based. This will apply also to vans, coaches, buses and trucks – a total of between 20-25 million vehicles per year in my estimation (and that is just the EU28).”

Barnden added: “As previously mentioned the adoption rate for camera-based DMS will be dictated by the rollout plans of the OEMs and they are well ahead of the advisory bodies (Euro NCAP, Consumer Reports) and the legislative bodies (the EC, NHTSA) already. My attention has moved from Europe to where’s next.”

His opinion is that Japan is next. “FotoNation, Seeing Machines and Smarteye are all making a concerted effort there and that is a clear signal of OEM interest. Development of mobility services (eg Waymo) are much more advanced in the US.”

Personally, I’m expecting Seeing Machines to clinch OEM a big contract with Toyota in the next few months (then Honda), as first mentioned in my blog article: Seeing Machines set to win 75% of global DMS market. In that article I also forecast that further progress in the US is close at hand.

I think the evidence is clear that Seeing Machines is set to be the next Mobileye.

The writer holds shares in Seeing Machines.

Seeing Machines is next Mobileye

Yesterday’s news that the EU is to mandate Driver Monitoring Systems (DMS) by 2020 confirms my view that Seeing Machines is set to be the next Mobileye. (Something that respected FinnCap analyst Lorne Daniel first told us years ago).

People are waiting for Euro NCAP to specify that camera-based systems are its preferred option for DMS but I’m confident that this will be the case. (They’ve been ahead of the curve all along).

I’m particularly confident because Semicast’s Lead Analyst Colin Barnden recently explained to me that there are 4 types of DMS:

1. Steering angle sensor (coffee cup)

2. Embedded capacitive touch sensor (steering wheel)

3. Time-of-flight (likely DOA)

4. Camera-based (Seeing Machines, Smart Eye etc.)

This was his conclusion: “The first two are very cheap but not particularly reliable.  ToF fits in between and is unlikely to meet any OEMs needs. Camera-based is what I believe Euro NCAP will specify.”

Of course, the decision hasn’t been announced yet by Euro NCAP.

Market opportunity

While we await confirmation, there is also clearly a debate about the size of the market opportunity for Seeing Machines following the announcement.

At one extreme, ABI Research previously stated 65m by 2020.

At the other end, John-Marc Bunce, analyst at house broker Cenkos yesterday doubled his estimate saying: “Our long-term forecasts for Seeing Machines previously envisaged 4m vehicles globally in the financial year ended June 2022 rising to 15m by 2027 and we believe this EU mandate could easily double our expectations.”

Now Colin Barnden on May 16 (before the EU announcement) estimated 20m units by 2021. Today I asked him for his latest view. Here it is. (What follows below is all him, unedited by me).

“I await further details from Euro NCAP before changing the forecast, so a worldwide market for camera-based DMS of about 20 million units in 2021 still stands. That includes just passenger cars and light trucks, so there will be further volume in busses, coaches and heavy trucks too.

The broad effect of yesterday’s announcement is to move all of Europe to “Level 2” on the SAE automation taxonomy as of 1 September 2022, with both longitudinal and lateral correction provided by autonomous emergency braking (AEB) and lane keep assistance systems (LKAS). This is a step change in vehicle safety and the EC is to be applauded for its decisiveness. I expect the EC would have been influenced in its decision making by recent events in the US, with some members of the tech community moving too fast and breaking things, in their efforts to be first to deploy “Level 5” driverless vehicles. In comparison, the EC has gone for the simple and sensible approach of just making humans drivers into better drivers, by mandating systems which are proven, easy to understand and cost effective for immediate mass-market deployment.

Mobileye

I note your post about Mobileye earlier this week. If you were to take a market size of 20 million units for camera-based DMS and apply your other estimates, you would have a revenue for Seeing Machines just in automotive of about USD 375 million in 2021. If you compare that to Mobileye’s revenues of about USD 360 million for 2016 then some interesting conclusions can be drawn. If your reader’s are interested, the full Mobileye 20-F filed with the US SEC can be viewed at:

https://www.sec.gov/Archives/edgar/data/1607310/000157104917001997/t1700397_20f.htm

The part of the Seeing Machines business model which seems to me to be completely overlooked by the market is the recurring revenues provided by the Safety-as-a-Service (SaaS) component of the Guardian business unit.  It won’t take much for SM’s revenues and profits to pass those of Mobileye on a three-to-four year horizon in my opinion. Mobileye were of course bought by Intel in 2017 for USD 15.3 billion.”

EU mandates DMS for 2020

As part of a move to make European roads safer the EU today recommended making driver monitoring systems mandatory for new cars. It’s a momentous decision that is great news for Seeing Machines, causing its share price to shoot up today and Cenkos to upgrade its price target from 10p to 16p.

I asked Colin Barnden Lead Analyst at Semicast Research for his reaction and this is it:

Colin Barnden: So the paint is still wet from the announcements today, but I can draw some basic conclusions.

The EC has today announced the WHEN for a series of automotive systems to become mandatory, a list which includes distracted & drowsiness driver monitoring systems (DMS). My reading of the timeline is as follows:

  • 1 September 2020 for Type Approval (the certification process for new models, facelifts, major changes etc.).
  • 1 September 2022 for all other new cars, irrespective of Type Approval.

That is a two year phase-in period, and from today to the beginning of September 2022 gives a little over four years. That is a sensible timeframe over which to introduce a new technology like DMS.

The EC appears to have left the WHAT of a DMS to be defined by Euro NCAP and I expect the specifics of DMS requirements to follow in short order. This doesn’t guarantee that camera-based DMS will be mandated, nor specified by Euro NCAP. However looking at some of the other systems on the list (AEB, LKAS, ISA, EDR) these are all electronic systems so it would not follow that a mechanical (and very poor) DMS would be specified, even more so for a primary safety feature. Also the entire focus of this regulatory announcement is road safety. I regard AEB, ISA and LKAS as systems needed to compensate for distracted and drowsy drivers, so the obvious way to improve road safety is not so much to correct speed and steering errors, but to keep hands on the wheel, eyes on the road and minds on the task [of driving]. The very best DMS is the obvious way to do that and that points to a camera-based system, from the likes of Seeing Machines for example.

There are two excellent articles I would suggest as backgrounders for your readers for DMS:

http://www.thedrive.com/tech/20843/elon-musk-reportedly-rejected-driver-monitoring-for-tesla-autopilot-but-why

https://www.eetimes.com/document.asp?doc_id=1333236

If I were to also speculate on the WHERE; my view is that Japan will go next for mandatory DMS, probably followed by South Korea. Also, OEMs in the US are on a voluntary agreement (not mandated by NHTSA) to introduce AEB by 2022. I would speculate that they would be highly likely to add DMS on the same timeline.

The key is now what Euro NCAP announce.

Chris Menon: What exactly is the difference between ‘Type Approval’ cars and other new cars?

Colin Barnden: Okay. So, as an example, take the VW T-ROC. It was just launched and would have gone through Type Approval probably late last year. Type Approval is a bit like a new car MOT, someone looks over it and says: “Yes it has seat belts, yes, it has airbags, yes, it has brakes etc.” If it meets all the legislation in place at the time it gets… ‘Type Approval’. Provided no changes are made to the car it maintains Type Approval and no more need be done. Sometimes this can last for four or five years until the model is refreshed. However, from 1 September 2022, new T-ROCs would need to have DMS added, not for Type Approval (which it already has) but to be legal for sale.

Now take a next generation Golf going for Type Approval on 2 September 2020. The list will have another entry “yes, it has DMS” and you get Type Approval. If it doesn’t have DMS, it doesn’t get Type Approval and cannot be sold in the EU.

So on 1 September 2020, only cars going through Type Approval will have to have DMS (or a bit before most likely). By 1 September 2022, it will be in 100% of new cars sold in the EU. This is how the phase-in is managed.

Seeing Machines set to win 75% of global DMS market

Multiple industry sources are telling me that Seeing Machines’ Fovio technology is so advanced compared to rival systems that it is set to dominate the global auto market for DMS.

This market is growing fast and last year was estimated by ABI Research to be around 65m cars a year by 2020. Although I personally think this figure is now likely to prove an underestimate, given the fact that a driver monitoring system is becoming a standard feature in forthcoming car models. This trend is being driven (I love my puns) by increasing autonomy in cars, higher safety standards and legislation to reduce road deaths caused by driver inattention and drowsiness.

By my calculations, just using the 65m figure for 2020: Fovio will have at least 75% of that. As Seeing Machines (SEE) gets approximately US$25 for each car that uses its Fovio chip it should obtain annual revenues from autos of US$1.2bn.

How can I be so sure of this 75%+ figure?

Ford, Volvo and Audi

Admittedly, it is an estimate. But based on research.

I’m being told that Fovio will soon be contracted to Ford, Volvo and Audi. (That’s in addition to General Motors, Mercedes and BMW). Moreover, those same sources are telling me that by the end of this calendar year Toyota will definitely be committed to using it and, most likely, Honda.

Don’t expect absolute confirmation immediately. When they are eventually announced these contracts will be released as nameless wins, contracts for ‘premium’, ‘mass market’ country-specific OEMs. Seeing Machines will also have to be very conservative about the revenues forecast.

For those who know Seeing Machines as a perennial disappointment, a ‘jam-tomorrow’ stock, I urge them to look again at its growing dominance in the global automotive sector. This dominance in DMS now rivals that of Mobileye in external auto vision.

Fund Manager

If you don’t believe a dumb ‘ol journalist, maybe a super smart fund manager may make you look again at Seeing Machines?

Max Ward, Manager of The Independent Investment Trust, recently took a 4.46% stake in SEE. I wanted to know why and he kindly furnished me with the answer: “What attracted me to the business is the scale of the potential in the automotive division together with the evidence of clear market leadership in the DMS field.”

Previously, SEE successfully flew beneath the radar.  This was partly helped by its not having a PR agency in London, the harsh non-disclosure terms prevalent in the auto industry and the fact it was an AIM-listed minnow.

Fortunately, all that hasn’t prevented the global auto industry rushing to knock on its doors as increasing automation and safety concerns have led to tightening regulation, making its Fovio technology a vital ‘must have’ feature in future car models.

Now, at last, Seeing Machines is about to have the spotlight focused directly upon it. For dominance in global DMS makes it a very attractive strategic acquisition for big industry players.

Takeover time

Just as Mobileye was snapped up by Intel for US$15.3bn, Seeing Machines is likely to be bought fairly soon.

Indeed, I believe numerous companies now have Seeing Machines in their sights as a target this year. Who will pull the trigger first, I wonder? Names that have been mentioned to me recently include: Intel, Nvidia, Xilinx, Autoliv and Bosch.

Let the takeover battle begin.

The writer holds stock in Seeing Machines.