Page 70 - The Economist Asia January 2018

The Economist January 27th 2018
54 Business
2 leader. A scorecard issued annually by Na- renberg, another bank, GM may not be the tager, the European competition commis-
vigant, a consultancy, puts GM ahead of one to benefit. The main constraint in sioner, described as its “very illegal
the AV pack of carmakers and tech firms, growing a ride-hailing business now is ac- behaviour” between 2011and 2016. During
with Alphabet’s Waymo in second place. quiring drivers. But when these are elimi- that time, according to Ms Vestager, the
That GM is ahead of Silicon Valley’s nated, capital will be the only limit. And company attempted to shore up its domi-
risk-takersmayseem surprising. Butearlier that could mean huge fleets of robotaxis nant position—it is estimated to supply up
investments, which were once looked on chasing passengers, forcing prices down. to four-fifths of essential types of base-
with scepticism, seem to be paying off. Riders may then choose a brand they re- band chips—by paying Apple, its biggest
Alan Batey, GM’s president for North cognise, such as Uber and Lyft, rather than customer, billions of dollars in return for
America, points to the manufacturing of Maven, GM’s ride-hailingbusiness. beingits exclusive supplier.
mass-market long-range EVs, where the If so, being first would confer little ad- The commission ruled that the strings
firm hasa lead. The ChevyBolt, the world’s vantage. And yet, ifcarmakers do not want attached to these payments—which in-
first such vehicle, has been on sale for over to accept their fate passively, they have lit- cluded a clawback of part of the money,
a year, beatingTesla’sModel 3 and the new tle choice but to remodel themselves. The should Apple use other suppliers—acted to
Nissan LEAF to market. outsized Silverado and the sensor-packed shut rivals out of the market. According to
The Bolt is supposed to be the basis for Cruise AV show that GM has the present in internal documents from the time, Apple
an ambitious autonomous ride-sharing hand—and that it is at least doing its best to had long considered sourcing its chips
business. On January 12th GM announced safeguard its future. 7 from Intel, butitdid notactuallydo so until
the latest version of its Cruise AV, a Bolt- 2016, after its deal with Qualcomm had ex-
based robotaxi without a steering wheel pired. (The chipmaker insists that its prac-
or pedals. GM plans to use it to launch a tices did not violate European Union rules,
commercial scheme in several cities, start- and plans to appeal against the commis-
ing next year. Rival tech firms and carmak- sion’s decision.)
ers are only running, or are planning to Qualcomm’s pricing strategy, too, has
launch, small test projects. won it few friends in recent years. Most
contentious is the way in which it licenses
Revenge ofthe robotaxis its intellectual property to device-makers,
When GM paid $1bn in 2016 for Cruise, an chargingthem a percentage ofthe total sell-
artificial-intelligence startup, many an- ingprice oftheirdevices. Apple alleges that
alysts wondered whether it was throwing such royalties act as a tax on any innova-
away money. But the marriage of cutting- tive features it adds to its products, and is
edge technology and large-scale manufac- yet anotherway in which the chipmaker is
turing seems to be paying off. The carmak- abusing its market power. Apple is seeking
er has learned to be more nimble; Cruise damages of over $1bn from the chipmaker
has picked up how to make its fiddly tech- in lawsuits filed both in China and Califor-
nology robust enough for the open road. nia. Regulators in Taiwan, South Korea and
As a result, GM can now mass-produce China have already extracted penalties for
self-driving cars, says Dan Ammann, sec- the licensing model; an investigation by
ond-in-command to Ms Barra. Scale will America’s Federal Trade Commission,
help steeply to reduce the cost of sensors, launched last year, is underway.
which are the key components ofan AV. In a rare bit of good news for the chip-
The firm isbeingrewarded because, un- maker, regulators in Europe and South Ko-
like other carmakers, it has assembled all rea last week gave their blessing to Qual-
the parts of the puzzle you need to build Qualcomm’s woes comm’s $47bn acquisition ofNXP, another
new transport services, says Stephanie chip-design firm. Qualcomm hopes the
Brinley of IHS Markit, a consultancy. But A fine habit purchase will help it to boost its business
even ifGM is no longer a dinosaur, risks re- in 5G chips and the “internet of things”, as
main. In particular, it may be too bullish in connected devices are collectively called.
its estimate ofthe market forrobotaxis and But Ms Vestager is not quite finished with
it may be placing too much faith in the the firm. The commission is yet to rule on
benefits ofbeingthe first to market. The chipmakeris fined again for whether it also engaged in predatory pric-
The company expects demand to ex- ing between 2009 and 2011 by setting the
pand quickly. Costs of ride-hailing ser- anti-competitive practices prices of certain chips below cost, alleged-
vices, it predicts, will fall from $2.50 a mile HE tech industry hardly needs another ly to force a competitorout ofthe market.
now to about $1 as the main expense—the Treminder that trustbusters are on its The continued uncertainty, and Qual-
driver—is eliminated. In America alone it case. But the European Commission is al- comm’sheftypenaltiesso far, maygive the
would be able to tap a market worth ways happy to oblige. On January 24th Eu- company’s own predator, Broadcom, a ri-
around $1.6trn a year (representing three- rope’s executive body slapped a penalty of val chipmaker, more ammunition. Its
quarters of all miles travelled) as drivers €1bn ($1.2bn) on Qualcomm, one of the $130bn offer for Qualcomm was rebuffed
are lured from their cars to robotaxis. But world’s largest chip-designers, for abusing last year; a heated proxy fight at Qual-
whatMrAmmann callsthis“verybigbusi- its dominance in baseband processors, a comm’s annual investor meeting in March
nessopportunity” comeswith an inconve- critical component in mobile phones. seems likely. Qualcomm argues that regu-
nient corollary. As car buyers become car Large fines are becoming something of lators will never bless the union, which
users, GM’s legacy business supplying ve- a habit for Qualcomm, which will have would be the largest-ever tech deal. But
hicles to drive will decline accordingly. paid out nearly $1bn a year, on average, to Broadcom reportedly plans to end the li-
Critics think that GM may have acceler- trustbusters the world over since 2015. This censing model if it is allowed to make the
ated too swiftly and that it will have to en- week’s penalty, which amounts to nearly purchase, which would probablydrawthe
dure years of losses before robotaxis take 5% of the company’s global annual rev- battle with Apple to a close. That is some-
off. Even if things move fast, points out Be- enue, isa reflection ofwhatMargrethe Ves- thingfortrustbusters to chew on. 7