To The Moon

It was previously reported that $Tesla Motors(TSLA)$  purchased 4D imaging radar from Arbe Robotics, making the company a topic of interest. But is $Arbe Robotics Ltd.(ARBE)$ radar really that impressive? And which other companies are also involved in automotive radar?

Market Participants in Automotive Radar

Currently, mass-produced cars generally use millimeter-wave radar, which has the characteristics of a long detection distance, easily reaching over 100 meters, fewer environmental restrictions, and being unaffected by weather conditions. Several major players in this industry include Aisin, Aptiv, Autoliv, Bosch, Continental, and Denso, all of which have over 20 years of experience and have close collaborations with traditional automakers.

In contrast, Arbe Robotics, founded in 2015, is a start-up company that finds it difficult to penetrate traditional automakers. Therefore, its customers are typically new startups, particularly in China, where many companies or automakers are involved in self-driving vehicles. However, because orders from new startup automakers are small, major radar companies may not be interested in dealing with them.

Is Arbe Robotics' 4D Imaging Radar Impressive?

What are the advantages of Arbe Robotics' radar? According to the company's official website, it features 4D imaging radar. While 3D radar can detect distance, direction, and relative velocity and perceive surrounding objects from the horizontal plane, 4D radar adds the vertical dimension and can roughly outline the detected object, producing a LiDAR-like effect. When detecting with 3D radar, image assistance is often required to correctly interpret the results due to its poor resolution. 4D radar improves angular resolution, with a forward 4D radar angle resolution of up to 1° azimuth and 2° elevation.

When radar with this capability appears, the reflection points of cars and people will be images composed of multiple points, displaying the entire object outline. This technology is essential for L3 and above applications. However, this technology is not unique to Arbe Robotics. All of the major players mentioned earlier are developing in this direction, and the key technology should be in chip design and manufacturing.

In recent years, there has been an increasing demand for radar in the automotive industry as the market for autonomous driving and advanced driver-assistance systems (ADAS) continues to grow. As a result, many companies are investing heavily in research and development in this field. In addition, the automotive industry is shifting towards electrification and connectivity, which also provides new opportunities for radar applications. Therefore, in the future, the automotive radar market is expected to continue to expand and be a competitive field for companies.

The low profit of automotive system manufacturers

The radar-related automotive system market is a highly competitive market with numerous major players that have the financial resources, experience, and established partnerships with traditional automakers. Perhaps Tesla chose Arbe Robotics because it did not want to work with large manufacturers, or conversely, Tesla's offering price was too low and the order volume was too small, causing large manufacturers to feel that they couldn't earn profits. Automotive system manufacturers are like little brothers to automakers, responsible for purchasing components, assembling them, and creating specific functions. It is a business with relatively low gross margins, lacking the brand value of automakers and the moat that chip designers and manufacturers possess. Automakers can choose from multiple system manufacturers that offer good quality and low prices, while system manufacturers that are caught in the middle of the chip supply shortage often suffer the most severe profit losses.

Investment opportunity

In my opinion, chip manufacturers, rather than automotive systems, will benefit the most from this wave of automotive revolution. Currently, the market for automotive radar chips is mainly dominated by chip design companies such as NXP, Infineon, and Texas Instruments. Although Arbe Robotics owns its own patented chips, which can indeed differentiate itself from other automotive system manufacturers, it still cannot compare with the diversified applications of chip manufacturers. However, if you want to gamble on Tesla's large orders to Arbe Robotics, that's a different story.

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