For region's tech and IT offices, a different role

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1 Page 1 of 5 Carmakers are expanding technology and IT offices in Silicon Valley, and tasking them with functions that are different from the roles played by traditional R&D centers Silicon Valley has a long history in the transport industry stretching back nearly a century, notably in aerospace, aeronautics and defense. Along with the private sector, government and military investment in research has also played an important role in developing the area into the technology center it is today. The mass-production automotive industry has also had a presence in the Bay area, including Ford, Chevrolet or Dodge factories long since faded into the landscape as malls and office parks. The last, most obvious remnant is the factory in Fremont, which opened in 1960s as a GM plant, was shuttered in the 1970s, and later became the GM-Toyota NUMMI plant in the early 1980s until

2 Page 2 of 5 financial troubles led to its closure in Today, of course, it belongs to Tesla and is the only example of large-scale vehicle assembly in the region. Even with production largely gone, carmakers began to establish research offices in Silicon Valley in the 1990s. These labs usually employed a handful of researchers, engineers or designers tasked with engaging tech firms, mostly related to consumer electronics and infotainment. There were also tech scouts and corporate venturing for new technology. Premium-brand presence Today, car companies are expanding work in these and other areas. Germany s Mercedes-Benz, which first opened an office in the area in 1994, moved to a new Sunnyvale office in late 2013 as its North American R&D headquarters. Its workforce has roughly trebled since then to around 320 people, covering areas that include artificial intelligence and machine learning, automated driving, UX and consumer research. Rival premium car maker BMW arrived in the late 1990s to connect with tech firms. Today, its BMW Group Technology Office in Mountain View is home to roughly 50 engineers, software programmers, designers and chemists working on automated driving, UX, advanced powertrain, software development and other IT innovations. BMW has also based its global investment fund, i Ventures, between the Mountain View office and another in San Francisco. Ford s Research and Innovation Center in Palo Alto had just 10 employees in 2015; today it has around 220 and is part of a triad of Ford innovation centers including Dearborn and Aachen, Germany. In May 2017, a Porsche subsidiary, Porsche Digital, opened its own center for around 100 employees in Santa Clara. In November last year, Hyundai, which had a modest corporate venturing group in Menlo Park since 2000, Hyundai Ventures, expanded this division into the Center for Robotic-augmented Design in Living Experiences (Cradle), which is increasing competencies and will eventually be part of global network of innovation offices in South Korea, China, Germany and Israel. Volvo Cars has expanded its offices in Mountain View since opening them in Initially researching autonomous driving and connectivity, the carmaker added a digital product organization in 2017, and this year it created the Volvo Cars Tech Fund to invest in AI, storage, safety, security and mobility services. This past spring, it acquired a California-based firm specialized in advanced sensors.

3 Page 3 of 5 Executives at the Volkswagen Electronics Research Laboratory in Palo Alto also confirm that the company is expanding facilities there. General Motors has a small office but has ramped up autonomous driving testing following several acquisitions. Other large carmakers with a presence include Honda, Toyota Motor and Nissan. About 18 months ago, France s PSA Group initiated a small business lab in San Francisco with focus on talent scouting and corporate venturing in new technologies, as well as UX design. There are many more R&D centers for startup autonomous and electric vehicle carmakers, from Alphabet s Waymo to the struggling, but still standing Faraday Future. China s Nio has a sizeable technology office for autonomous driving, HMI and other areas in San Jose. Other EV car-, bus- and robo-taxi manufacturers dot the region, including Lucid, Byton, SF Motors, Proterra, Zoox, EVelozcity and others. Suppliers make their mark Automotive suppliers have a presence in Silicon Valley even larger than some carmakers, as they often collaborate and compete with their customers to develop new technology and IT. In April 2017, Continental opened a facility in San Jose to house up to 300 employees for automated driving, electromobility and software, expanding an existing center for intelligent transport that opened in This past March, Schaeffler Group opened a new office in San Jose for innovations in the internet of things, big data, cloud computing and new business models. Aptiv, the automated driving and high-tech spinoff from Delphi, has significant facilities in Silicon Valley, while ZF Friedrichshafen has a digital office in Sunnyvale. This past April, Bosch expanded its presence with a $40m center in Sunnyvale replete with labs, workshops and garages focused on AI, human-machine interfaces, robotics and sensors. As well as corporate research and other divisions, Bosch is expanding its venture capital activities here. While carmaker executives in the Valley stress that they are not here to manage traditional relations with suppliers, collaboration between the technology arms of these firms is important. For example, Bosch employees can be found co-located with Mercedes-Benz researchers in Sunnyvale, working together on machine learning and AI for autonomous driving. BMW has based employees at Santa Clara alongside Intel and Mobileye to work on a shared platform for autonomous driving, and is bringing other automakers and suppliers into the mix. Ford often helps technology startups it finds in Silicon Valley to partner with established suppliers. Free to create

4 Page 4 of 5 Even as they expand in Silicon Valley, the leaders of these automotive research and software development units stress a distinction, even independence, from typical engineering and corporate hierarchies. In some cases, manufacturers have set up these offices as separate entities, partly in an effort to give researchers the room to experiment in the mode of garage -style startups. They create concepts or minimum viable products to hand over to other departments. In April last year, Honda turned its existing Silicon Valley Lab unit in Mountain View into Honda R&D Innovations, splitting operations from its North American engineering division to give it a more global remit, reporting to Japan. An Innovations group sits alongside research operations in the office, including an arm for developing and integrating apps, the Honda Developer Studio, and another for incubating startups, called Honda Xcelerator. John Moon, managing director of strategic partnerships at Honda R&D Innovations, who leads the Honda Developer Studio, says this global remit allows the group to operate at its discretion, without going up the chain of command, while also pursuing projects that can scale in other regions. We report more to R&D in Japan, but as a separate entity with operating space to really look at and think about what the future might bring, he says. He points to recent projects that use virtual reality entertainment in the vehicle, as well as tokenization systems that allow customers to make payments from their vehicle using Apple or Android pay. Hyundai Cradle was recently regrouped out of Hyundai-Kia s R&D organization, and is now part of a global Strategy and Technology division that looks at new technology and software, along with adjacent markets and business models. This independent grouping will allow Cradle offices to work outside of normal vehicle development cycles, says John Suh, vice-president and founding director of Cradle. Porsche Digital, meanwhile, is an independent subsidiary of the sports car maker, with its Silicon Valley location part of a growing global network. Thilo Koslowski is managing director and himself a 20-year Silicon Valley-veteran, where he spent most of his career at market analysts Gartner. There is always a link to the mother ship, but we are self sufficient enough to do things ourselves, from ideation and scouting to building industrial solutions, he says. The PSA business lab has been formed as the French carmaker plots an eventual return to the US market, starting first with mobility services. While supporting the carmaker s nascent North America organization which will be based in Atlanta the group reports to Paris and supports European

5 Page 5 of 5 technology and IT research. Independence Simon Euringer, who heads the BMW Group Technology Office, says that although it reports to the main Research and Innovation Center (FIZ) in Munich, the Mountain View center does not work according to common development plans. There are no service level agreements or requirements, no contracts with milestones, but more focus on collaboration with tech companies and startups. Success stories from the office include concepts for miniature heads-up displays, integrating features with smart watches and energy storage innovations. Now, Euringer says the technology office is playing a key role in autonomous driving, notably around reinforcement learning, which deals with decisions that are not based on deterministic behavior, for example in traffic situations such as American-style four-way stop signs. While schedules and financing are not an issue the FIZ pays for all research pressure comes in the need to blow away executives in Munich, says Euringer. Likewise, his office usually has to hand over its minimal viable product and system ideas early enough for others to take the lead. That is the secret sauce of the office to find something which is genuinely born here in Silicon Valley, but which has to be let go in order for our core engineering team in Munich to shine with it, he says. That is the challenge in project management: knowing when the right moment to let go is. -By Christopher Ludwig Editor s note: Inside Silicon Valley is a series of stories that looks at the auto industry s growing presence in California s high-tech region. Other parts of the series are: The high demand for IT talent: The maturing relationship with Detroit: Has Silicon Valley reached its peak? An interview with Ford s Silicon Valley tech leader:

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