Research Publication – Automotive Ecosystems – Sitting Ducks – CarPlay 3.0

18th October 2024: RFM deepens its coverage of Automotive Ecosystems with a look at the evolution of Apple CarPlay and how it may enable Apple to take over infotainment completely. RFM subscribers will receive their copy by email. 

Selling a car has never made economic sense for Apple but selling an infotainment unit does. It also gives Apple the ability to monetise digital services in the vehicle at the expense of the OEM. Apple has found a way to safely run the instrument cluster on the iPhone opening the way for a complete takeover of the digital cockpit. This will exclude OEMs from the digital vehicle leaving them with very little with which to offset revenue losses from lower vehicle shipments.

• Apple has become the largest threat. Until 2022, Apple was non-threatening to the OEMs as it was using CarPlay primarily to drive loyalty to its ecosystem. With its 2022 move into the instrument cluster, Apple signalled an intent to run the car on the phone.
• Reliability and safety. The problem is that the smartphone is not reliable enough to be considered safe to run critical vehicle systems such as the instrument cluster, presenting Apple with a problem. The solution to this problem was presented at WWDC 2024
• CarPlay 3.0. is how Apple can take control of the instrument cluster via the iPhone and still meet the reliability and safety requirements of the automotive industry. Apple splits the instrument cluster into 4 layers and renders the vital layers with Apple software and hardware on the infotainment unit while running non-critical layers from the iPhone. These are amalgamated by Apple software on the infotainment and then passed to the OEM system to add overlay items like indicators and hazard warnings.
• Software Development: is executed by the OEM using an Apple software development kit (SDK). Apple offers a lot of flexibility in terms of user experience elements but at the end of the day, the instrument cluster is clearly an Apple product with OEM customisations. This greatly reduces the OEM’s digital relevance in the vehicle and threatens to cut them out from the vehicle digital services economy entirely.
• Consumer preferences. Apple has stated that 79% of US consumers will only consider buying CarPlay-enabled vehicles but a 2023 survey from McKinsey puts the figure at closer to 40%. Regardless of which figure is most accurate, Apple has already gained a meaningful amount of market power which could be enough to convince the OEMs to integrate more Apple technology into their vehicles.
• Infotainment takeover. The logical end game for Apple is to have the OEM buy the entire infotainment unit from Apple and integrate it into their vehicles. Unlike the Apple Car, this is a viable business model that would fit well with Apple’s other businesses and give Apple the ability to monetise digital vehicle services at the expense of the vehicle maker. From an OEM perspective, this is best avoided.

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Research Publication – Artificial Intelligence – AI Ecosystem Part I

The battle for the next ecosystem has already begun and it will look very like the smartphone ecosystem. The AI Ecosystem is at an early stage with most players being very vertically integrated and doing most of the development in-house. This has meant that the platform of choice is the silicon development platform which RFM refers to as AI Ecosystem 1.0. As generative AI matures, developers are likely to become less vertically integrated and will rely on platforms that are based on foundation models (AI Ecosystem 2.0) or services themselves (AI Ecosystem 3.0). With evolution comes opportunity and leadership in the AI ecosystem could easily change hands several times.

• The Digital Ecosystem: is the virtual environment where users live their digital lives, interact with one another and consume digital goods and services. RFM sees the emerging AI ecosystem evolving in a very similar manner to the smartphone ecosystem which evolved between 2007 and 2016.
• Platforms: The optimum location of a platform is the point where creators do things the same way changes to where creators all do things differently. The point of a platform is not to have to recreate the entire product from the ground up and, as such, they tend to become points of control once they become very popular with creators. It is Nvidia’s ownership of CUDA, a key control point in the early AI ecosystem, that is mostly responsible for its recent success.
• The AI Ecosystem 1.0: is where the industry is today and is dominated by Nvidia with its CUDA platform and its ability to release cutting-edge products many months ahead of its competitors. CUDA is the current control point but there are signs that this may be changing.
• The AI Ecosystem 2.0: is where the control point migrates to the foundation model. Many LLM owners are encouraging developers to develop services on their LLMs. This would mean that the silicon development platform would become less relevant. RFM thinks that this is the opportunity for others to take share from Nvidia, but it is going to take some years.
• The AI Ecosystem 3.0: is when development shifts from creating services to combining and refining what has already been created to produce new and more complicated functionalities. Nvidia is targeting its AI Foundry and Nvidia Inference Microservices (NIMs) offering here as a strategy to mitigate the risk presented by AI Ecosystem 2.0
• The Players: largely fall into 3 camps. These are the established digital ecosystems, generative AI start-ups and tool providers. These are the players that are vying to become the go-to place to create and purchase generative AI services because it is through owning one of the control points that high returns on invested capital will be made.
• Part II: will focus on the players, their strategy and their market positioning to estimate how well they are likely to fare as the AI ecosystem emerges over the coming several years.

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Research Publication – Artificial Intelligence – Causality is all you need

It turns out that AI needs a lot more than attention to create hyper-intelligent machines. RFM believes that the missing link is causality which means that the machines still have no understanding of anything that they do. This prevents the development of any form of AGI and there is no sign that the causality problem will be fixed anytime soon. However, even without causality, there are many use cases for AI-enabled by the advances in language performance and the ability to make sense of unstructured data. Unfortunately, this is not enough to meet the hype that surrounds AI and so some form of correction is needed to bring expectations and reality back into balance.

• What AI is: AI describes a range of technologies that enable machines to make decisions. They range from statistics at one end, through rules-based software, deep learning and now, generative AI. Generative AI is a subset of AI and is defined as AI that is capable of generating content such as words, images and now, video.
• What AI is not: Large Language Models (LLMs) have enabled machines to converse in natural language which has led to an extraordinary increase in anthropomorphism. This is the attribution of human characteristics to non-human objects which in this case are statistics-based algorithms. It is here where expectations for AI and reality begin to diverge.
• Causality: is by far the biggest limitation of generative AI as these models have no causal understanding of what it is that they are doing. This is what causes the machines to invent facts, make simple mistakes and remain unaware that they are doing so.
• Reasoning: this is a hot area of debate where owners of models claim they can reason, and the sceptics disagree. Reasoning is crucial because it will be the first sign of LLMs being able to understand causality. The balance of empirical evidence suggests that the machines remain unable to reason and there is no evidence to suggest that it will be solved anytime soon.
• Use cases: despite the limitations, RFM sees many use cases given that generative AI represents a large step forward in both the ability to use natural language and data characterisation, storage and retrieval. These use cases do not replace humans but make them more productive meaning that the workforce is not going to be replaced although some adaption will be needed in many industries.
• AI bubble: There is little doubt that valuations and expectations are too high. The flood of capital into generative AI has been driven by intense public excitement. The result is becoming a flood of supply of LLM services all of which are roughly equivalent in terms of performance meaning competition and falling prices. It is this that RFM expects will trigger the reset to reality. It is important to note that this reset will not be nearly as harsh as autonomous driving because generative AI has products now where autonomous driving still has nothing.

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Research Publication – Automotive Ecosystem – Sitting Ducks Vol. IV – Services

15th December 2023 – Radio Free Mobile extends its coverage of the automotive digital ecosystem with the publication of Automotive Ecosystem – Sitting Ducks Vol. IV – Services.

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The OEMs face a far smaller market for vehicles which will threaten their existence. The good news is that they have a great opportunity to replace lost profits from vehicles with profits from digital vehicle services. However, to achieve this they must control the app store in their vehicles and remain digitally relevant. This will be no small feat as both Apple and Google will be more than happy to turn them into smartphones on wheels. Digital oblivion will be the price of failure.

• Substantial decline. The main driver of vehicle demand is miles driven. EVs can drive 2.5x more miles than a petrol vehicle before being replaced meaning that without a dramatic increase in miles driven, demand for vehicles could fall by 60% over the next 20 years.
• No fix in sight. With miles being much cheaper to drive, demand should increase materially but without autonomy, this is very unlikely. This is because road congestion will prevent miles driven by humans from increasing. Even with a full roll-out of autonomy driving a 40% increase in miles driven, vehicle demand would still be 30% less in 2047 than it was in 2023.
• OEMs need digital services to survive. By 2040 digital services in the vehicle could be worth $1.7tn while digital advertising could be worth around $61bn. Advertising is not big enough meaning that the OEMs must access digital vehicle services to make ends meet.
• Business model. There is a high likelihood that the business model of the smartphone will be replicated in the digital vehicle. There are two revenue streams. First, the monetisation of the ecosystem and secondly the share of revenues earned from distributing apps and services.
• The digital ecosystems view the vehicle as just another device to be digitised as this gives them both a new revenue opportunity as well as greater stickiness for their ecosystems in terms of running across multiple devices. They will be more than happy to turn OEMs into smartphones on wheels.
• Google is the least threatening of the two major Western ecosystems. This is because it will pay a share of the digital advertising revenue that it earns in the vehicle to the OEM in terms of traffic acquisition cost. The problem is that this will be less than 25% of what OEMs need.
• Apple’s business model threatens to turn OEMs into no more than app developers. Should Apple take over the infotainment unit, then the OEMs will receive nothing.
• The app store is the key to success for OEMs as they must control app and service distribution to vehicle users to earn the revenue share that they need to offset falling vehicle sales. To have a relevant app store, they must remain digitally relevant in terms of the user experience. Using Android without Google services as the OS for the infotainment unit remains their best option for both the user experience and the app store.

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May 30th 2023: RFM deepens its coverage of generative AI with the publication of Artificial Intelligence – Animal Farm. 

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There is concern that Microsoft and Google have already lost their edge in AI. The free availability of Meta’s LlaMa models has triggered a wave of innovation in the open-source community. Open-source models are available that are close in performance to those being offered by the big players implying that the lower end of generative AI quickly commoditises. This means that the moats that Google and Microsoft have already managed to create will become key differentiators and RFM thinks that they will protect them while they work out how to adapt to open-source competition.

• Genie escaped. Until recently, building LLMs was only possible for those with lots of cloud compute resources and big bank balances. However, the “leak” of Meta’s foundation model to the market has enabled open source to begin tinkering from which there has been a steady flow of results. This is what underpins fears that the leaders in AI have already lost their edge.
• Self-destructive innovation. The irony is that it is innovations from both Microsoft and Google that have enabled the open-source community to break the dependence on the cloud and begin fine-tuning LLMs at the edge. This has resulted in highly capable models being made available for free to anyone who wants them.
• Innovations: LoRa & Chinchilla. LoRa is a technique invented by Microsoft that enables LLMs to be trained on devices with a fraction of the storage or compute power that was previously required. Chinchilla was invented by Google and is a tweak to training methodology that allows smaller models to perform better than others many times their size.
• Galloping commoditisation. The combination of a freely available foundation model and its weights with these new techniques is how open source is managing to train models on Macs, laptops and PCs with powerful graphics cards. This means that the basic end of this market is going to commoditise extremely quickly meaning that other factors such as developer relationships and user numbers will be extremely important in determining winners and losers.
• Moats. RFM finds that both Google and Microsoft have substantial moats that will protect them from competition from the open-source community. These moats have been created from the fact that both already have well over 1bn users and the fact that ChatGPT is becoming a development platform in its own right. Meta is building its own moat in the open-source community.
• Machiavellian Meta. RFM is convinced that Meta’s “leak” of its LlaMa foundation models and their weights was no accident. “Leaking” LlaMa to open source has meant that LlaMa is now the de facto standard for open-source development and a platform in its own right. These innovations will all be available to Meta to use in its products and services meaning that it has effectively outsourced R&D at almost zero cost.

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May 12th 2023: RFM deepens its coverage of Artificial Intelligence with the publication of Artificial Intelligence – Pandora’s bots. 

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The 4^th hype cycle is in full swing but large language models (LLMs) do have a lot to offer. They won’t deliver superhuman intelligence, but they can greatly enhance the productivity of humans as well as their ability to use language as a user interface. These systems are very expensive to develop which is probably a major reason why it is the large companies like Microsoft (OpenAI) and Google that currently lead the race. The AI ecosystem is at a very early stage and remains dominated by Nvidia but for how long remains to be seen.

• 4^th hype cycle. Generative AI has for the 4^th time in 60 years triggered dreams of super-intelligent machines being just around the corner. Generative AI offers a big step forward in terms of ingesting, parsing and retrieving data but it continues to suffer from problems that are very unlikely to be eradicated in the foreseeable future. Hence when superintelligence fails to materialise, there is going to be another round of despondency and depression.
• No breakthrough. The techniques to create generative AI are not new and mostly stem from Google’s 2017 transformer neural network architecture. In 2012, deep learning suddenly started to work thanks to enough data and processing power becoming available. Generative AI looks like a repeat of 2012 rather than a genuine breakthrough that will change the world.
• Use case 1: Enterprise. RFM’s testing reveals that LLMs are extremely good at ingesting huge amounts of data and being able to usefully collate and amalgamate data to produce useful and easy-to-use answers to inquiries. This has substantial use cases within the enterprise and may even render some current corporate data solutions obsolete.
• Use case 2: Automotive: where the current smartphone-like user interface is woefully inadequate. Voice has always been the leading contender but has not been anything like good enough. Generative AI could substantially improve the ability to control vehicles with voice and offers a way back for OEMs to reclaim some of the ground that they have already ceded.
• Generative AI is expensive but right now no one seems to care. RFM finds that for services with millions of users, the cost of inference will be far greater than the cost of training. This creates a substantial advantage in running inference in end devices rather than in the cloud.
• Generative AI players: Despite its recent gaffes, Google is a leader in the generative AI space alongside Microsoft (OpenAI) having created a lot of the innovation that everyone is now using. Meta Platforms, Baidu and Midjouney make up 2^nd place with others like Alibaba, Amazon and SoundHound nipping at their heels. Apple & Samsung are nowhere to be seen.
• The AI ecosystem is at a very early stage and is currently dominated by Nvidia which has 85%+ share of the platform used to train AIs. However, the popularity of ChatGPT could move the control point away from Nvidia and greatly weaken its position.

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January 30th 2023: RFM deepens its coverage of the digital automotive ecosystem with the publication of Autmotive Ecosystems – Sitting ducks Vol. III – Frankenstein’s monster. 

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Software is an existential issue for OEMs. Fragmentation and a poor user experience are the most pressing problems that need to be dealt with if OEMs are to be relevant in the digital vehicle. The execution of the digital ecosystems is currently far superior meaning that they are winning the hearts and minds of users. OEMs need to reverse this trend or face becoming commodity box-shifters enabling the digital ecosystems to suck almost all the value out of yet another industry.

• Life or death dilemma. Vehicle demand could halve over the next 20 years leaving OEMs needing new sources of revenue. RFM thinks that digital services are the best option, but this requires OEMs to achieve digital relevance in the vehicle. Software is the key.
• ADAS & Digital cockpit are the two domains that really matter as these are the two segments of the vehicle that interface directly with the user. Hence, the battle for the digital ecosystem will be fought almost entirely in software and these two domains.
• Frankenstein’s monster. The complexity of the vehicle and the OEMs’ desire to retain control raises the likelihood that vehicle software becomes very fragmented. This is terrible news for the user experience and the ability of 3^rd parties to bring their services into vehicles.
• User experience: No one offers a great user experience for the vehicle but crucially, Apple, Google and Tesla are a lot better than the OEMs. This is a serious problem that if not rectified will result in OEMs becoming app developers in their own vehicles and little more.
• Industry consortia are supposed to be one route for OEMs to create Linux-based software that is common to all vehicles and harmonise how data is exchanged. However, RFM finds that for IVI software, the consortia are facilitating fragmentation rather than preventing it.
• Apple & Google. This leaves the way open for Apple and Google to bring a consistent user experience to the vehicle and make it easy for developers to address multiple vehicles. OEMs’ failure to execute on this is why drivers constantly express a preference for Apple CarPlay or Android Auto as the user experience in the vehicle.
• Android (without Google) is by far the best option for the OEMs to compete with the digital ecosystems as Android will at least bring greater software consistency and make it much easier for app developers to get their apps into the vehicles. This will relieve the OEMs of one of their most pressing problems freeing them to focus on the user experience.
• OEMs are not in good shape as many are either not using Android or are struggling to execute on it. This leaves the door open for the digital ecosystems to take over the digital vehicle leaving OEMs with everything to do in a rapidly closing window.

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7th November 2022: Radio Free Mobile and Alavan Independent update their coverage of the geopolitical and technological rivalry between the USA and China with the publication of Clash of the Titans Vol. V. 

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The China/USA rivalry waxes yet more fierce. The combination of the 20^th CCP Congress and additional export controls underlines again that semiconductors are central to this struggle. We think the USA intends to do to China what it did to Huawei and that China’s ability to mitigate the impact is limited. Hence, China is likely to focus on lagging-edge technologies and set its own standards wherever it can. The result will be fragmentation and lower long-term growth for all.

• Party over progress: The 20^th Congress of the CCP saw the Standing Committee filled with Xi loyalists as opposed to leaders chosen for their competence. This cements President Xi’s grip on the party and could mean doubling down on big policy blunders like Covid Zero.
• 3 watershed moments: This, combined with the USA’s increased restrictions on semiconductors, and its widening attacks on all of the Chinese technology industry represent three watershed moments that will impact the rivalry for years to come.
• Taiwan: These watershed moments increase the risk of a Chinese invasion of Taiwan where we believe that the early 2025 timeline may prove to be all too prescient.
• New front opens: We think that the new restrictions announced on 7^th October 2022 represent a substantial increase in aggression. The USA now seems to be intending to hobble the development of China’s technology industry, especially where it competes head-to-head with the USA like AI. We also see economic development as a whole being targeted.
• Additional Export Controls are effectively a blockade on modern semiconductors below 18nm in size. This will ensure China remains 10 or more years behind the leading edge. Furthermore, they will limit China’s ability to make chips, buy chips as well as access the talent of US persons.
• China’s limited options, the three Rs: Recreate the semiconductor ecosystem, reverse engineer or copy it or restrict the export of vital materials to force a relaxation of the restrictions are China’s main options for retaliation. They are unlikely to be successful.
• The lagging reality. The failure of retaliation is likely to mean that China will remain restricted to the lagging edge where there is still plenty of business to be done especially at 28nm. Hence it is here where we expect China to shift its investment despite this meaning that it will fall further and further behind the USA and the rest of the world.
• Build the wall 2.0. The Balkanisation of the internet looks more certain than ever. The new restrictions will only make China push harder for self-reliance, meaning that it will create its own standards wherever it can. The splitting of the global network into two pieces inevitably means less growth for all of the technology sector in the long term.

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RFM & Alavan Independent update their coverage of the USA / China political and technology war with the publication of China vs. USA – Clash of the Titans Vol IV v1.5. RFM subscribers will receive their copy via email. 

China has taken its foot off the regulatory pedal but the dire state of the economy, largely as a result of Covid zero, is going to hamper any recovery. China also continues to languish in semiconductors and not content with its superiority, the USA has decided to increase the pressure. Older semiconductors and technologies where China is doing well are now being targeted to hamper its rise. The result is likely to be the separation of the Internet into two pieces which is optimal for no one.  

• Balance of pain: The regulatory crackdown has wreaked havoc on the technology industry with big players having lost at least half of their value. The Chinese state has pulled back as it has realised that it has gone too far but there is still no confidence in a recovery.
• Covid zero: is a large factor in this lack of confidence as sudden lockdowns and restrictions are playing havoc with the Chinese economy. Fortunately, there is space for economic stimulus but without a relaxation of Covid zero, there is unlikely to be enough of a recovery to bring back belief in the Chinese technology sector.
• Semis: China has no takers: China offers the best terms to build a fab. On a purely economic basis, everyone should be building their fabs in China but there are no takers. This demonstrates how little trust exists between the West and China.
• Semis: China continues to languish: With 7/10 years of the Made in China 2025 program elapsed, China is still failing to launch. Just 6.6% of domestic semiconductor consumption is met by Chinese companies of which a tiny fraction at best is coming from the 14nm node and 0% from anything more advanced.
• Semis: The eagle swoops: There has been an 18-month lull, but the current administration is now showing its talons. In many ways, this administration has become more aggressive than the last one and is making much more use of its semiconductor dominance to slow China’s rise.
• Semis: Aggression spreads far and wide: This includes new restrictions on advanced AI chips being sold to China as well as potential restrictions on less advanced semiconductor technologies like 14nm equipment and deep ultraviolet lithography.
• Other technologies: While China really struggles in semiconductors, it is a world leader in other areas which eventually could allow it to become a challenger for global technology leadership. However, the USA is leveraging its dominance in semiconductors to slow China down in any way it can. AI is the most recent example.
• Build the wall: The result of this ideological struggle is likely to be a Balkanisation of the Internet with separate and incompatible standards for China and the rest of the world. This is bad news for everyone as the total opportunity will fall far short of its potential.

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8th June 2022: RFM extends its metaverse coverage with the publication of Digital Ecosystems – The Metaverse – Vol. II – Pilgrims’ progress. RFM subscribers will receive their copy via email.  

The Metaverse pilgrimage is just beginning, and the journey will be hard. RFM has adapted its digital ecosystem methodology to assess the pilgrims. Meta remains by far the current leader, but Roblox and Fortnite are close behind. Apple and Google have very little at the moment and Microsoft appears to be rethinking its entire position. Enterprise and China will be covered in Vol. III.

• The pilgrimage. The journey to Canterbury or Mecca is just getting started as The Metaverse in 2022 is roughly where smartphones were in 2001. RFM continues to believe that it will be 2028 or 2029 before volumes really start to take off. In the meantime, it is going to be a long, hard and expensive road to the holy land, and many will not make it.
• The pilgrims. Many pilgrims intend to create the Metaverse, and this research puts these offerings under the microscope using RFM’s long-established methodology.
• Digital Life of the Metaverse. The Metaverse is currently used for Gaming and a bit of 3D Media Consumption. If it takes off, most of the other Digital Life services and many new ones are likely to migrate there. RFM assesses how well the pilgrims address the opportunity today and how well their services will be able to cater to growing engagement with the Metaverse.
• The 8 Laws of Robotics of the Metaverse which measure the quality of the digital ecosystem. The key to achieving traction will be improvements in the user experience and so RFM has also looked at the 4 core UX laws separately from the others. This gives a better measure of when one could realistically expect the Metaverse to start replacing smartphones.
• The leaders. Meta with its relatively good user experience and low price is by far the early leader but the thriving ecosystems of Fortnite, Roblox and Minecraft are in hot pursuit. Although these offerings are not available in the Metaverse yet, their 3D environments and their large and engaged user numbers put them in a strong position when it begins.
• The laggards. The big players (except Meta) are at the back of the pack. Apple and Google have said very little about the Metaverse while Microsoft, despite its strong portfolio of assets, appears to be in the midst of a big rethink in terms of just what it intends its offering to be.
• III (1): Enterprise. The Metaverse is likely to make its first appearance in the enterprise due to the much lower bar in terms of the quality of the user experience. As long as there is a productivity gain, RFM thinks that the enterprise will make use of the Metaverse.
• Vol. III (2): China. The ideological struggle between China and the USA is likely to mean that China does a Chinese Metaverse for Chinese users and made by Chinese companies only. Hence, like the mobile ecosystem, China will have its own, isolated version that is not relevant in this volume. China and Enterprise will be covered in more detail in volume III.

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28th November 2021: RFM and Alavan Independent update their trade and tech war coverage to provide subscribers with an in-depth political and technical assessment situation of Chinese regulation and how it will affect the current trade/technology war between China and the USA.  

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The China/US rivalry has now become an ideological struggle which is likely to mean economic decoupling. The problem for the technology industry, fintech, Wall Street and everyone else is that China’s economy is deeply intertwined with the world meaning that economic upheaval is inevitable. We have developed a framework to understand how ideology is now impacting the technology sector and find large disparities from company to company in terms of impact and outlook. We think that, in pursuing his (primarily) domestic political agenda, President Xi Jinping is putting China’s long-term goal of technology independence at great risk.

• Ideology: Since the change of guard at the White House, the strategic rivalry has evolved into an ideological struggle, largely as a result of President Xi’s decision that everyone and everything in China must be subservient to the party.
• The Wall Street shuffle: Wall Street’s increasingly close relationship with China is now under direct assault from both sides. The result is likely to be greater decoupling which, given how intertwined economies currently are, will lead to significant economic upheaval.
• Crypto: We were not surprised to see cryptocurrencies declared illegal in China and still think that any technology that threatens state control of money will go the same way.
• The regulatory framework: To navigate the labyrinth of Chinese regulation we define a framework of three central government motivations implemented through six supervisory categories. This greatly aids both understanding and predicting the current crackdown on tech.
• The regulated. We find that every single company will be affected differently and the range is large going from almost total decimation (Ant Group, Didi etc) to virtually untouched (SMIC, Huawei. Xiaomi etc
• Silicon, AI & Quantum computing: Very little is likely to change in semiconductors where China is going to have to wait for silicon to become obsolete before it has a hope of ridding itself of its dependence on foreign technology. By contrast, it remains in a leading position with AI, autonomous driving and quantum computing and it is here where we think that China can break free of its shackles and compete head-to-head with the USA.
• Own goal: While there was a case for more regulatory oversight of the Chinese technology sector, we think that the central government is going too far for its own good. Fintech, gaming, and education technology entrepreneurs are now incentivised to start up their companies overseas. This means that China runs the risk of falling behind in the technology race as its brightest and best minds may end up contributing to the other side.

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16th November 2020: Radio Free Mobile updates its COVID / Economic / Technology Sector research with the publication of The COVID-19 Webinar v.3.6 – Musical Chairs.

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Cases are rising very quickly but thankfully deaths are not. Studies of the first lockdown seem to suggest that it had little effect in reducing fatalities. This, combined with the fact that excess deaths in Europe are tracking broadly in line with seasonal norms, raises the question of whether lockdowns should be implemented at all. With no answer for this and a vaccine at least some months away, Western economies are locking down anyway which means more deficit spending and a worsening fiscal position. While there is still risk to the US$, Europe looks like it is in much better shape given Germany’s prudent debt reduction over the last 8 years. The technology sector has remained strong and areas, where it was weak, have bounced back in Q3 2020 with the economy. However, the equity market looks as divorced from reality as ever.

• Pandemic or casedemic?: The case count continues to rise very quickly but fatalities, thankfully, are not. The global average fatality rate has more than halved since April 2020 and no one has been able to demonstrate any statistical correlation with factors such as health care spending, population age and so on to explain the change. The degree of testing remains a possibility, but there is still no reliable data to demonstrate that this is the case.
• Lockdown II: is unlikely to be as drastic as the first meaning that the hit to the economy witnessed in Q1 2020 and Q2 2020 will not be repeated. However, it will derail the fledgeling recovery and cause significant further economic and social damage. RFM has seen no data that demonstrates that lockdown is an effective tool to reduce fatalities. In fact, most of the evidence is to the contrary raising the possibility that the economic and social damage wrought by lockdown is providing little or no benefit.
• Normal 2021 respiratory virus season?: Excess death in Europe is currently tracking in line with the seasonal increases typically seen every year during the winter for all age groups and there has been no sudden spike in deaths yet. A bad respiratory virus season in Europe would cause around 185,000 – 200,000 deaths in ages above 65 which is what was seen in 2020 (including COVID) (30% higher than 2018). This is what the data is indicating will happen in 2021. This combined with lockdown studies raises the question: should any lockdown action be taken given its very negative economic and social effects?
• Vaccine: The data released by Pfizer and BioNTech is very encouraging but there are some caveats. The full data has not been released nor has it been peer-reviewed which are critical steps in the verification of scientific work. Furthermore, this type of vaccine is completely novel and has never won approval before or been used for widespread vaccination. The signs are good but sentiment and the market is already getting carried away.
• Debt and Inflation: In the absence of a good answer to this question, developed countries are going ahead and locking down anyway. This means much more deficit spending and further erosion of the financial probity of Western economies. The spectre of high inflation continues to loom in the medium term.
• Europe: is best-positioned thanks to Germany which was able to reduce its national debt as a percentage of GDP between 2012 and 2019. This gives Europe headroom to borrow before the situation becomes unsustainable but the southern countries including France are in much worse shape and the appetite in the North for Southern bailouts remains poor at best.
• The technology sector in Q3 2020: was strong with cloud spending continuing to be strong in-home working and business continuity while smartphone shipments recovered from Q2 to post a decline if just 4% YoY. With an effective vaccine still quite far away and more lockdowns, home working and schooling will mean demand for productivity equipment will remain elevated for some time to come.
• Sharing economy: remains in a terrible state as no one wants to share assets while COVID-19 remains a problem. Ride-hailing, house sharing, office sharing, and public transport are the worst hit with demand down 50% – 80% across the board. Uber has fared the best of all of the players having been lucky to have had Uber Eats to fall back on. Uber is now a delivery company.
• The equity market: has very little basis in reality despite the small correction at the end of October. Easy money has caused cash to pour into the market with most of the buying being focused around the technology names who have a good story regardless of fundamental performance. This has many echoes of the 2001-2003 stock market correction when the Nasdaq fell by 78%. The prognosis is not good.

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16th October 2020: RFM updates its COVID-19/Technology coverage with the publication of The COVID-19 Webinar version3.0 – Musical Chairs.

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The pandemic is here to stay and a V-shaped recover is off the table even though the fatality rate is rapidly declining. This is mainly due to better testing and treatment but an effective vaccine remains elusive. The US economy is not in any condition to absorb the deficit spending that another large stimulus package will require but Europe in a much better fiscal condition. The stay at home trend continues to drive the technology sector but the stock market, in general, is being driven by easy money meaning that it is not representative of reality.

• Fatality rate: Although cases continue to rise, the fatality rate has fallen drastically. The global average has fallen 53% to 2.9% from 6.2% in April 2020 although the large discrepancy between countries remains. RFM’s analysis suggests that this figure is still a long way above the real rate and that as the pandemic progresses, it will fall further.
• Treatment and testing: are now the two biggest factors that are affecting fatality rates. 10 months have taught the medical profession how to treat this disease much more effectively and in countries with good health systems, the recent increase in cases has not been accompanied by an increase in fatal cases as it was in 6 months ago. Testing remains erratic from one country to another meaning that in most countries, only a proportion of the positive cases are being identified and counted.
• Lockdown II: is unlikely to be anything as drastic as the first meaning that the hit to the economy witnessed in Q1 2020 and Q2 2020 will not be repeated. However, it will derail the fledgeling recovery meaning that there will be no quick exit to the severe recession being experienced by many countries.
• Debt and Inflation: A longer and deeper recession means that deficit spending and money printing will be on the rise once again increasing the likelihood of heavy tax increases and inflation once the pandemic has passed.
• Europe: is best-positioned thanks to Germany which was able to reduce its national debt as a percentage of GDP between 2012 and 2019. This gives Europe headroom to borrow before the situation becomes unsustainable but the southern countries including France are in much worse shape and the appetite in the North for Southern bailouts remains poor at best.
• The technology sector in Q2 2020: was hit and miss with cloud spending continuing to be strong in-home working and business continuity while smartphone shipments fell by 24% YoY. With an effective vaccine still quite far away, home working and schooling will mean demand for productivity equipment will remain elevated for some time to come.
• Sharing economy: remains in a terrible state as no one wants to share assets while COVID-19 remains a problem. Ride-hailing, house sharing, office sharing, and public transport are the worst hit with demand down 50% – 80% across the board. Uber has fared the best of all of the players having been lucky to have had Uber Eats to fall back on. Uber is now a delivery company.
• The equity market: has very little basis in reality. Easy money has caused cash to pour into the market with most of the buying being focused around the technology names who have a good story regardless of fundamental performance. This has many echoes of the 2001-2003 stock market correction when the Nasdaq fell by 78%.  The prognosis is not good.

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August 17th 2020: RFM updates its coverage of AI with the publication of Reality Bytes – AI: Old school.  

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The pandemic has pushed AI out of the limelight, but a 3^rd AI winter remains inevitable. This is because, despite a deluge of research, deep learning has not materially advanced. However, lottery tickets do promise to move AI at the edge meaningfully forward. Alternative approaches include throwing infinite data and compute at the problem and a hybrid approach marrying deep learning with software. Of all of these approaches, the hybrid approach has the most promise and is especially interesting for autonomous driving.  

• COVID-19. AI is created in the cloud meaning that its makers can just as easily work on it from home resulting in little if any, disruption. However, the pandemic represents a seismic shift in many real-world datasets meaning that widespread retraining is likely to be needed. The availability of enough data to retrain for COVID-19’s changes is also an issue.
• AI Winter. Very little progress has been made in real-world applications which, combined with assistants being as dumb as ever, makes deep learning’s shortcomings even more visible. RFM still sees a lot of disappointment coming which will trigger falling investment and valuations. Winter is coming although efforts to mitigate its impact are swinging into gear.
• The nuclear fusion of AI is the creation of lottery tickets. These are trained neural networks whose size has been cut back by as much as 90% but still function almost perfectly. However, they are prohibitively expensive to create meaning that (like nuclear fusion) they consume far more than they give back. This avenue of research could make the deployment of AI at the edge much cheaper with far less storage and compute being required. However, it does not meaningfully address some of the fundamental shortcomings in RFMs opinion.
• Brute force: is the idea that with enough compute power and enough data, deep learning will achieve everything that is expected of it. OpenAI is the highest-profile proponent of this approach, but RFM finds that its research has too many caveats and does not live up to the hype. Its latest release (GPT-3) is another example of the infinite monkey theorem.
• Old School. The most promising branch of AI is its oldest (symbolic AI (or in layman’s terms: regular software)). RFM find that the combination of deep learning networks and regular software has the potential to mitigate some of the limitations that keep deep learning from really pushing AI forward. Research has demonstrated the potential to produce real progress against two of the most vexing problems plaguing AI: (data quantity and transfer learning).
• Autonomous driving is one of the best potential use cases for this hybrid approach. This is because it is a fairly uniform task across the world where only the dataset changes. RFM thinks that structuring the cognitive piece in symbolic AI with multiple neural nets being used for specific vision tasks is how this technology will be commercially delivered.

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December 3rd 2019: RFM and Alavan Independent update their trade and tech war coverage to provide subscribers with an in-depth political and technical assessment situation in Taiwan and how it will affect the current trade/technology war between China and the USA.  

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Taiwan’s uncertain political status is a hot potato for the technology industry. This is because semiconductors are a crucial element in all technology products and the best manufacturer (TSMC) is predominantly based in Taiwan. The January 2020 general election is likely to result in a government that aims to keep the current status-quo; this might work as long as China can think of TSMC as Chinese. However, as the trade and technology rivalry heats up, Taiwan is at risk of becoming collateral damage.

• Hong Kong. The protests and the local elections in have both badly hurt the prospects of a more pro-Beijing stance from Taiwan following the presidential and legislative election on January 11^th The former especially is being seen as a sign that reunification under ‘one country, two systems’ would seriously put at risk the hard-won democratic rights of Taiwanese citizens.
• Presidential election. 12 months is an eon in politics and the last year has seen a complete reversal of the political fortunes of President Tsai Ing-wen such that she is now the firm favourite to win next year. This is a clear indication that the Taiwanese are not keen on reunification irrespective of the ‘system’ in use.
• Legislative election. However, Taiwan’s weak economic performance has also had a big impact and the race of the legislature is neck and neck between the more pro-Beijing nationalist KMT and Ms Tsai’s more pro-independence DPP. This could easily result in the desire to continue with the status quo. Will China be willing to allow that to happen and, if so, for how long?
• Made in China 2025. The trade war and technology rivalry between the USA and China have greatly increased China’s drive for technology independence and its almost complete dependence on non-Chinese technology in semiconductor manufacturing rankles greatly.
• TSMC is the global leader in semiconductor manufacturing by a wide margin. If China were to control this asset, then Beijing could justifiably claim to have achieved independence in semiconductor manufacturing. The issue for TSMC is that 61% of its revenues come from USA clients which puts it in a very delicate position of trying to serve two masters who are increasingly at odds with one another.
• Question of counting. Radio Free Mobile (RFM) thinks that it is very unlikely that China will be able to control TSMC in reality; but, if it could count all of TSMC as Chinese, it would create the impression of greater technological independence. This could tide it over while it works on the real technologies such as Quantum Computing, Robotics etc, where it has a genuine opportunity to be a world leader.

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September 20th 2019: RFM teams up with Alastair Newton of Alavan Independent to provide subscribers with an in-depth political and technical assessment of the current trade/technology war between China and the USA with the publication of Reality Bytes – Clash of the Titans

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This rivalry is going to last. This is because even with a trade deal in place, the USA and China are going to fiercely compete for global technology leadership. This is likely to lead to the emergence of dual standards with other countries being forced to choose. These will be the standards of tomorrow. In semiconductors and handset software, the Chinese are hopelessly outclassed for which Huawei is already paying the price. However, where standards have yet to emerge, the Chinese will invest heavily to be neck and neck with the USA. This can already be seen in AI, but as AI does not cross boundaries very well, it will not help the global ambitions of either party.

• Technology rivalry. Behind the rhetoric and ever-increasing tariffs is a rivalry where the USA and China each seek to create the technology that is adopted by the rest of the world. This rivalry will persist beyond the current administration and will be decided in future technologies rather than those that exist today.
• Economic fall-out. There is very little similarity to the cold war as the economies of the USA and China are deeply integrated whereas the USA and the USSR were completely isolated from one another. This means that a long and drawn out trade war will have economic implications for the global economy as will the technology war that follows any trade deal.
• Dual standards are very unlikely to happen in semiconductors or smartphones where the technologies at play are very well established. Instead, this could occur in 5G with the creation of an incompatible Chinese version, augmented reality or vehicle data and self-driving.
• Made in China 2025 is likely to badly fail in semiconductors. Furthermore, as China is unable to source the capital equipment for the cutting-edge nodes, it is almost certain to remain behind. The emergence of a new system such as quantum computing offers an opportunity but this is years away.
• Artificial Intelligence: is becoming increasingly important as more and more human lives are lived within the digital domain. Hence, AI will be critical but there are no barriers (unlike semiconductors) meaning that AI is a level playing field for anyone who wants to invest. However, the nature of deep learning means that AI developed in China won’t work in the USA and visa versa. Hence, AI means very little when it comes to global technology dominance.
• Smartphone software: Outside of China, it is virtually impossible to sell a smartphone without Apple or Google software installed on it. There are no practical workarounds leaving smartphone makers dependent on Google software to sell smartphones outside of China. Huawei’s collapsing market share is all the evidence needed to make others very nervous.

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May 6th 2019: Radio Free Mobile updates its coverage of mobile ecosystems with the publication of: Mobile Ecosystems – Territorial Waters – Thematic update.

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Media consumption is now the most important digital life segment. However, its rise has also gone hand in hand with content creators wanting to distribute their own content leaving the distributors and platforms under threat. This is enabling new players to gain traction with users. Consequently, RFM has replaced Microsoft, Twitter, and Sony with ByteDance, Fortnite, and KaiOS as ecosystem contenders and offerings to watch over the coming years.

• Humdrum hardware. The smartphone market is well and truly mature. With no new device category or form factor on the horizon, hardware growth has become a thing of the past. Weakening pricing for storage, memory, and displays is testament to this fact leaving all the running to be done by content and services.
• All about media consumption. Fast networks have led users to consume more and more content on their devices resulting in Media Consumption becoming the biggest segment of RFM’s Digital Life Pie. A large part of this is audio where owned music and streaming are the most important. Podcasting is still small but with lots of potential for expansion
• Territorial waters: Media consumption has also become a battleground between the platforms and the content creators with many wanting to distribute their own content directly to users. The result is likely to be fragmentation where the experience for users becomes more disconnected and frustrating.
• New players. Against this backdrop, new players are emerging to challenge the status quo. ByteDance is coming from Media Consumption, Fortnite from Gaming while KaiOS aims to enable smartphone Digital Life services for the very low end.
• ByteDance is the operator of TikTok (Toutiao) with over 500m MaU and uses what it refers to as “AI” to categorise user-generated content and recommend it to its users based on their viewing history. RFM does not see this “AI” as a long-term barrier to entry meaning that ByteDance must continue to dominate with critical mass to keep its place in the pantheon.
• Fortnite is owned by Epic Games and is close to having enough users to be a highly successful ecosystem in its own right. Epic is using this power to attempt to break the oligopoly in gaming as well as Google’s stranglehold on app distribution on Android.
• KaiOS is like Apple in that its key proposition is the distribution of apps and services to users in an easy and fun to use way. Its monetisation is much different having chosen to take the advertising route. This has the potential to work well in the emerging markets where it is focused and where price is critical and privacy an afterthought.

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February 22nd 2019: Radio Free Mobile updates its coverage of artificial intelligence with the publication of: Reality Bytes: AI: Winter is coming.

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Winter is coming. AI and deep learning have delivered great things but only under very controlled conditions. The main limitation of deep learning is that it has no understanding of the task it is performing and is simply matching statistical characteristics to outcomes. This means that it can neither deal with changes in the environment nor new situations. This means that it will fail to live up to most of the hype. The result will be disappointment and falling investment: i.e. a 3^rd AI Winter.

• The 2^nd industrial revolution may end up being more like the 1^st than many would like. Steam power was properly invented in 1698 and took 140 years to change the world. So far, AI is following the same time-line and the emerging challenges may see it continue to do so.
• Hype. RFM thinks that the biggest problem facing AI is the expectations that have been set. Confident predictions of advanced cognitive ability in machines being just around the corner are looking like they will not be fulfilled anytime soon. This has not entered the general consciousness of commentators, consumers, regulators, technology companies or investors as VC investing remains at an all-time high and conference tickets still sell like hotcakes.
• Deep Learning algorithms have no understanding of the functions they perform as they simply match statistical patterns to outcomes. This means that if the data set changes for any reason, the algorithm will often catastrophically fail. In a world of infinite perfectly labelled data and infinite compute power, this would be less of a problem. Unfortunately, this is not reality.
• Compute power. AlphaGo Zero was trained using 300,000x the compute resource compared to AlexNet which set a standard for image recognition in 2012. RFM thinks that AlphaGo Zero does not offer 300,000x the value of AlexNet strongly implying diminishing returns from investments in compute This is significantly exacerbated by the ending of Moore’s Law.
• Perfect data. Deep learning does best in environments which are both finite and stable (e.g. games) as even most sophisticated deep learning algorithms are incapable of extrapolation due to their lack of causal understanding. This is why they struggle in the real world which most of the time is both infinite and unstable. Awareness of this problem is extremely low which has led to confident predictions that the achievements made in finite and stable environments will soon be replicated in the real world.
• AI Winter. The limitations of deep learning are likely to result in it falling far short of the expectations of commentators, technology companies and investors. The result will be disappointment, disillusionment and falling investments. This is exactly what has characterised the 1^st and 2^nd AI winters. RFM sees no reason why a 3^rd would be any different.

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January 4th 2019: Radio Free Mobile updates its Automotive Ecosystem research product with the publication of Automotive Ecosystems – Sitting Ducks – Thematic Update.

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The real threat to the OEMs today is the smartphone. If they fail to drive usage of the infotainment unit in the vehicle then they will be unable to capitalise on the opportunity and other players will simply come in over the top. However, should the OEMs come through, they only have to win a small portion of the $1.6tn opportunity to survive as digital services should be much more profitable than selling cars. The rewards are high but so are the risks and many still may not make it

• Issues and opportunity. RFM finds that there is a substantial opportunity in automotive digital services but to make the most of this opportunity, OEMs must bring their user experiences into line with the smartphone as well optimise them for the vehicle. This is a big challenge.
• Financial mechanics. As long as OEMs move their revenues to digital services, they should be able to withstand big revenue declines. RFM estimates that a good quality digital service should be 4x more profitable than selling a vehicle. Hence with a switch to digital services, an OEM could withstand a 75% decline in revenue with no change in profit or cash generation.
• The smartphone gap. RFM finds that vehicle experiences today remain uncompetitive when compared to the smartphone. Unless this is rectified, users will prefer to use their smartphones in the vehicle, rendering any digital strategy centred on the infotainment unit moot.
• User experience. To fix this problem, the vehicle makers need to make the infotainment development cycle much shorter and ensure that both infotainment hardware and software are upgradeable. This is the first step that needs to be followed by an easy and fun to use user experience that is tailored for the vehicle. Many seem to think that voice and gestures are the answers to this problem but most of these remain clunky and unreliable.
• Digital Ecosystems. Furthermore, the Digital Ecosystems have realised that there are significant rewards to be had and most of them already have an offering for the vehicle. Google, Alibaba and Banma are the most advanced with an offering that completely replaces the software in the head unit and deeply embeds their services within the vehicle. RFM continues to believe that offerings such as Car Play, Android Auto, Car Life etc excludes digital ecosystems from this opportunity as they have no real access to the vehicle or its data.
• The opportunity. RFM estimates that the opportunity could be worth $1.6tn by 2047 and will really begin to emerge as the trend to electric vehicles and autonomous driving begins to take hold. As consumer spending on transportation declines, there is a great opportunity to entice consumers to spend the savings from transportation on useful and innovative services. As long as OEMs make good margins on their services, they only have to capture a small piece of this opportunity to survive.

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November 12th 2018: Radio Free Mobile updates its flagship research product with the publication of Mobile Ecosystems – Privacy-as-a-product.

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Something has to change in Silicon Valley. The start-up mentality of move-fast-and-break-things has led to a series of blunders and mishaps that have badly damaged the reputations of the digital ecosystems and brought them to the attention of regulators. A move to a slower, but more meticulous approach to product development as well as being clearer with users about the use of personal data is needed. Google & Apple are the least affected while Facebook has real problems.

• Broken Valley. Too much has gone wrong for too many users for the problems to slip past the general consciousness. The result has been severe damage to the reputations of the digital ecosystems and the intense scrutiny of their methods for making money from notionally “free” services. This has largely been caused by the “move-fast-and-break-things” culture.
• Move-fast-and-break-things is broken. The requirement for start-ups to get to market as quickly as possible before they run out of money has led to the traditional product development model being abandoned. Almost all testing is done on real users with live This culture is endemic in Silicon Valley and for small companies with a few thousand users, it works very well. However, it has no place in giant global corporations because when hundreds of millions of users are affected, people will notice. This cultural issue is at the core of many of the problems being suffered in Silicon Valley and at Facebook in particular.
• No free Internet. RFM believes that a large part of the problem is also the perception that the advertising-driven ecosystems offer “free” services. These services are not free and never have been. Where the user does not pay in cash, he pays with his personal data. The digital ecosystems have not explained this well at all which also needs to change in RFM’s opinion.
• A clear choice. RFM thinks that something along the lines of: “We are able to provide you with this service by using your data and sending you advertising. If you would prefer us not to do this, the service costs $x per month”, will serve as a simple and clear offering to users as well as satisfy any opt-in requirements imposed by regulators.
• Privacy-as-a-product. Migration to a subscription-based model will also have the benefit of creating a clear contract between the user and the ecosystem where the usage of personal data will have to be defined. In effect, users’ privacy will have been productised and as a result, protected by a legally enforceable contract.
• Subscription: RFM has looked at the practicalities of the digital ecosystems to move to subscription from an advertising business model. While RFM thinks that both Google and Facebook will have great difficulty in making the switch, Twitter and Snap would be able to do so with much less effort.

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April 23rd 2018: Radio Free Mobile addresses the issue of 5G with the publication of Reality Bytes Issue No.3 – 5G – Greed and fear.

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Fear is likely to be the driving force behind the 5G roll-out. This is because most use cases being used to justify rolling out 5G do not stand up to scrutiny in RFM’s opinion. This is largely because 4G or fibre optics are good enough to support most digital services to a high level of quality. Hence it is fear of being left behind and losing customers that it likely to drive spending on 5G equipment rather than any fundamental advantage that the technology provides. The result will be a spending cycle desperately needed by the infrastructure vendors followed by a lull while everyone tries to figure out what to do with their new toys.

• Promise vs Reality. 5G makes the same promise as all of it predecessors: to offer all the mobile data the user will ever need. Until 4G, this was a promise that was never kept but Gigabit LTE takes mobile access into the realm of being good enough. This leaves to the possibility of ultra-low latency and spectral efficiency to make the case for 5G.
• Low Latency. 5G promises to deliver latency as low as 1ms compared to 4G which RFM has recorded at 10ms in optimal conditions. Hence, the case for 5G hangs on 9ms of latency making a material difference to the use case under examination.
• Efficiency. Mobile operator economics are largely driven by how much traffic can be crammed into each MHz of spectrum. 5G is more efficient than 4G, but particularly so at frequencies above 30Ghz. Hence, 5G is a good contender any green field roll-out above 30Ghz.
• Gaming, VR and AR. Online gaming is notoriously latency intolerant but RFM has found that even the most demanding games can function optimally with latency of up to 100ms. This is also true in VR and AR but user head movement is an issue. Tests have shown that anything more than a 20ms delay in the environment reacting to head movements causes nausea. Hence, where VR is running in the cloud and the unit is wireless, a case can be made for 5G.
• Automotive is another buzz word for 5G. However, RFM research indicates that digital vehicles and autonomous driving are far more latency tolerant than one would expect. Hence RFM sees no use case for 5G in digital and autonomous vehicles.
• Industrial IoT where machines are reacting in real-time are surprisingly latency intolerant and require 5G in order to make them viable.
• Fixed Wireless Access USA is the best use case for 5G in RFM’s opinion. 5G offers plenty of performance to act as a last mile competitor in USA where prices look extremely high. Fixing the terminal can also solve some of the propagation and battery issues with 5G radio.

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January 5th 2018: Radio Free Mobile updates its research on Artificial Intelligence with the publication of Reality Bytes Issue No.2 – Practitioners and Pretenders.

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Noise and speculation remain as high as ever but under the hood real progress remains painfully slow. The three goals of AI and Moravec’s paradox remain far from solved and may even cause progress to grind to a complete halt. Google DeepMind has produced what RFM considers to be real progress as its algorithms can thrash the best of the rest using far less than 1% of the resources. This has real implications for AI running in battery powered devices. Google Assistant has closed a lot of the gap to Amazon Alexa while Facebook will suffer financial pain from its weakness in AI.

• Three goals & Moravec’s paradox. Progress has been slow with the big issues still unsolved. These are: 1) the ability to train AIs using much less data than today, 2) the creation of an AI that can take what it has learned from one task and apply it to another and 3) the creation of AI that can build its own models rather than relying on humans to do it. Moravec’s paradox refers to the fact that tasks that are hard for humans are easy for machines and visa versa. Progress remains very slow even by the best in the field.
• Practitioners vs. pretenders. RFM continues to separate the practitioners from the pretenders by assessing understanding of and focus upon the three goals of AI as well as Moravec’s paradox. The practitioners are the ones that are likely to create the algorithms that result in long-term differentiation and profitability in digital ecosystems.
• Dead end? Almost all AI is based on a technique called backpropagation which has been around since 1986. It requires vast amounts of data and is poorly understood. This raises the possibility that progress grinds to a halt until a new technique is developed. This would lead to commoditisation as the laggards would have time to catch up with the leaders.
• Google & Deep Mind have made more noise than progress in 2017, but remain the real leaders in this field. RFM thinks DeepMind’s biggest achievement is the creation of an algorithm that can thrash anything and anyone at Go, Chess and Shogi but uses less than 1% of the resources. This has substantial implications for running AIs in smartphones.
• Digital Assistants. Google Assistant has made up a lot of ground on Alexa, leaving Amazon’s only edge as shopping via Alexa. This will be very difficult for Google to compete against but given its superiority everywhere else, RFM sees a possibility that Amazon gets squeezed out.
• Facebook’s weakness in AI will hurt financial performance as it has to recruit humans to do work that is much better done by machines. The result is likely to be only a minor improvement and a meaningful decline in profitability. AI remains the key risk to Facebook’s ambitions.

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August 9th 2017:  Radio Free Mobile deepens its coverage of digital ecosystems with the publication of: Automotive Ecosystem – Sitting ducks.

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Transport is the next industry to be digitised and almost all vehicle makers are unprepared. Electric Vehicles (EVs) and autonomy could reduce overall USA transport spending by 65% which needs to be supplemented with digital services by players wishing to survive. RFM thinks that sensor data is the one area where vehicle makers have an edge and hence is critical to their future. They must control this asset or face becoming sitting ducks for those that would reduce them to handsets on wheels.

• Digital differentiation. Transport is ripe for disruption. Furthermore, there is a real possibility that demand for vehicle shipments falls substantially over the next 10-15 years. RFM thinks that embracing digital, controlling sensor data combined with a completely new way of thinking is required by vehicle makers wishing to survive for the long-term.
• Sensor data will be the new vehicular currency. RFM thinks that Digital Life services from smartphones will become ubiquitous and unlikely to offer value for vehicle makers. However, sensor data is unique, required for autonomy and critically, they still have a lock on access to it. RFM sees sensor data as the opportunity for vehicle makers to avoid severe disruption.
• The infotainment unit could become the most important part of the vehicle as it is where all the sensor data can be accessed in one place. Furthermore, it is the main digital interface with the user meaning that the digital user experience will be defined here.
• The gatekeepers. Despite the threat, RFM believes that the fact that OEMs are the gatekeepers to sensor data will give them a seat at the table as well as the opportunity to differentiate. How they execute on this is likely to define who survives and who does not.
• Monetisation. RFM calculates that Digital Life (smartphone only) in the vehicle could be worth $112 per user per year in USA or $32.1bn in revenues. The use of sensor data could drive that figure higher. Potential substantial falls in both the radio advertising ($17.7bn) market and transportation ($2.6tn) market provide a plentiful source for spending on new digital services.
• EVs and autonomy have the capacity to cause substantial declines in both vehicle shipments and transport spending as a whole. RFM calculates that manual EVs could reduce cost per mile to $0.40 per mile from $0.88 where it is today. Autonomy promises to reduce this still further to $0.29 per mile. There is huge economic incentive for consumers to switch to EVs which together with autonomy, could cause a 44% reduction in USA vehicle shipments.
• Sitting ducks. While vehicle makers are aware of the threat, many are in denial and few have any real idea how to address it. Most are easy targets for those that would reduce them to handsets on wheels.

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February 23rd 2016:  Radio Free Mobile launches a new product category looking at shorter topics relevant to the ecosystem. Issue No.1 deals with the issue of voice usage in digital ecosystems.

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Voice is where much excitement and hype is to be found. Every ecosystem is developing a voice controlled digital assistant with which it hopes to enrich Digital Life and control the homes of its users. However, RFM finds that voice suffers from significant limitations meaning that the user experience and functionality that it can offer is way behind that that can be achieved using a visual device. This combined with the fact that the intelligence of voice based systems remains rudimentary at best means that voice is unlikely to replace screens any time soon.

• Three stages of understanding. RFM defines three stages in a machine’s development to be able to understand voice commands. These are: 1) High word accuracy, 2) understanding of the request in multiple word orders and formats and 3) understanding of context and circumstance. RFM thinks that it is not until machine understanding reaches stage 3 that voice can have any hope of challenging the established man machine interfaces of screen, touch, keyboard, haptics and mouse.
• Defining voice. Despite these limitations, voice usage in ecosystems is growing very rapidly. RFM research indicates that voice usage is really growing only as an alternative to typing a request rather than as a rich two-way voice interaction with the ecosystem. Hence it is important to separate the two types of voice usage to understand voice’s place in the Digital Lives of users. RFM has termed these as one-way voice and two-way voice.
• One-way voice is where voice is used as an alternative to using a keyboard. Most ecosystems have reached stage 1 making this use case viable. While, input is voice based, the response is delivered through the usual visual method. RFM thinks that the vast majority of voice requests in digital ecosystems use this method which will have no effect on the monetisation methods currently used by Google, Facebook etc.
• Two-way voice is where voice is used as both input and output. It remains almost exclusively the realm of home speakers such as Amazon Echo and Google Home. RFM finds that the rudimentary AI of digital assistants combined with the limited amount of information that voice can convey, often has these systems falling back on displaying results on a screen.
• Voice in ecosystems. Digital assistants and voice based interfaces are driven entirely by the artificial intelligence that powers them. Although the search engines are leading the development of AI, all systems are far too rudimentary to replace visual based devices for the foreseeable future. Facebook is still the laggard when it comes to advances being made in AI.

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December 16th 2016:  Radio Free Mobile updates its flagship research product with the publication of: Mobile Ecosystems – Artificial Intelligence – Men and boys.

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The difference between men and boys will be the brains of their toys. Artificial Intelligence promises to substantially improve the Digital Life services offered by the ecosystems which has underpinned a period of feverish investment. Despite this activity, developments are at a very early stage with none of the big challenges of AI being close to being solved. It is the search engines that are ahead in AI followed by Apple, Microsoft and Amazon. AI remains the Achilles heel of Facebook.

• Artificial Intelligence appears at last to be coming of age. The prospect of making real returns on investment has driven all of the ecosystems to invest heavily.
• Three goals for AI. AI is still in its infancy with three big issues to be solved. These are: 1) the ability to train AIs using much less data than today, 2) the creation of an AI that can take what it has learned from one task and apply it to another and 3) the creation of AI that can build its own models rather than relying on humans to do it. Performance in solving these three problems is likely to separate the men from the boys in the long-term.
• Early days. RFM finds that most claims to AI are simply advanced statistics and that true AI is at a very early stage. Even the best have made little headway with the three goals of AI.
• Law of Robotics. There is no doubt that good quality AI has the potential to significantly improve the quality of Digital Life services offered by the different ecosystems. Consequently, RFM sees AI being a major differentiator and now includes an assessment of AI as Law of Robotics No. 8: An ecosystem must have good artificial intelligence.
• Digital Assistants are the first real deployment of AI in ecosystems and are being offered free in order to generate the data that is needed to continually make them better. Consequently, digital assistants are a good first yardstick of each ecosystem’s competence in AI.
• Search engines. AI still requires vast amounts of human labour, great skill and copious data to develop which hands a substantial advantage to those that have been doing it the longest. Understanding data has been the livelihood of the search engines for many years. This is the main reason why it is Google, Baidu and Yandex that are the global leaders in AI and all of them are aggressively investing to maintain their advantage.
• Fast followers are made up by Microsoft, Apple and Amazon. Both Microsoft and Amazon have scope to earn a return on AI in their businesses that are not part of the ecosystem. Apple appears to have voluntarily hobbled its AI development with differential privacy.
• Facebook is the laggard with one of the weakest positions in AI globally. RFM research indicates that Facebook has real problems with automation. These have to be fixed otherwise providing customised services to 1.8bn users manually will be cripplingly expensive

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June 13th 2016:  Radio Free Mobile widens its coverage of global ecosystems with the publication of China Ecosystems – BATmen.

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Baidu, Alibaba and Tencent (BATmen) dominate the scene in China. Almost every smartphone is user in China has an active relationship with all three of these companies. This means that none of them have yet developed fully-fledged ecosystems but remain focused on one or two services only. This is where the big battle will be fought and while Tencent has best armoury, Baidu demonstrates the best understanding of how to use it.

• China has grown up as a mobile first market. In many ways it is more advanced than its counterparts in the West and the usual rules do not apply. Internet control has meant that China is a huge market offering Chinese services for Chinese users almost exclusively by Chinese companies.
• Services are highly developed but the ecosystem is not. Between them the BATmen dominate the Digital Life pie but unlike Google and Apple, none of them outright control the Digital Lives of Chinese users.
• Ecosystem. Consequently, all of the BATmen need to expand beyond their areas of strength. This will lead them to start competing fiercely with each other as long term growth depends on them developing a thriving ecosystem where users spend almost all their time with one player rather than bits and pieces with all three.
• Baidu is the smallest of the BATmen but RFM thinks it has the most potential to surprise. It is not a leader in Digital Life but critically it demonstrates understanding of exactly what it needs to do to evolve into a thriving ecosystem. Even with serious shortcomings in corporate governance, the ADR is very attractive.
• Alibaba is the weakest of all the BATmen when it comes to the ecosystem. It is an e-commerce powerhouse but beyond that its understanding of the ecosystem appears limited. There is no sign of this changing which, combined with poor corporate governance and an expensive ADR, leads to potential downside.
• Tencent is in pole position with a dominant position in Digital Life and the greatest resources to invest. Unfortunately, Tencent does not demonstrate deep understanding of the ecosystem and RFM fears that much of its potential may go unrealised. There is a lot of upside should things change, but of this there is no sign.
• Xiaomi and China Mobile are the also rans as Xiaomi’s ecosystem has not seen real development for 18 months while China Mobile appears to be more interested in providing capacity. The BATmen are fortunate, as China Mobile is a heavy weight that could cause them real problems if it decided to get serious on the ecosystem.

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 February 21st 2016:  Radio Free Mobile updates its ecosystem monetisation model with a new slide deck.

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Thanks to price erosion, the value of the smartphone and tablet markets are likely to decline this year. This will place even more emphasis on monetising ecosystems through advertising and subscription as revenue growth using these methods is based on subscriber numbers which are still growing nicely. This means that the fundamentals of Google, Facebook, Yahoo, Twitter, Amazon and increasingly Microsoft, will perform better than those of Apple, HTC, Samsung, LG and so on. However to access that growth, execution in growing the scope of the ecosystem has to be first class and here there are huge differences between the different players.

• Money Talks. Rapid growth in the past has been driven by ecosystems monetising their assets more and more efficiently. Once the existing assets are fully monetised, growth returns to baseline unless either coverage of the Digital Life Pie is expanded or more users are added. This is difficult to achieve and many ecosystems are likely to see growth fall before their new strategies are in place drive the next leg up. Twitter is a great example of this problem.
• Google’s long-term ability to control Android looks increasingly doubtful. This is because Google Play is no longer heads and shoulders better than anything else at emulating what the Apple App Store has to offer. To counter this, and to fix the chronic fragmentation within its ecosystem, RFM thinks that Google will take complete control of Android and turn it into a vertically integrated proprietary OS like iOS or Windows 10.
• Facebook has almost completely monetised the opportunity open to it with its current assets. This is why RFM sees Facebook engaged on expanding its coverage to include gaming, media consumption and search. With these in place Facebook has a chance to become by far the largest ecosystem with a revenue line to match. This will take some time to come to fruition and there is scope for a slowdown before this kicks in. Facebook is now Google’s biggest threat.
• Twitter has no respite in sight. It is attempting to develop a live video offering in order to expand into the media consumption segment. Unfortunately, Facebook and Google are already there with their own offerings. Twitter continues to lack a bold strategy to return the company to growth which RFM thinks is exacerbated by having a part time CEO.
• Yahoo has given a knee jerk response to its problems by cutting staff and assets. Yahoo Games and (RFM assumes) Maps are to be closed bringing Yahoo’s coverage down to 41%. Even with 41% coverage of Digital Life, Yahoo’s underperformance of its potential is startling with 88% of the opportunity being missed every quarter.
• Apple and Microsoft serve as the do and do not of monetisation via hardware. Apple generates 5-10x the amount of “ecosystem revenue” via hardware than it could if it used advertising. By contrast Microsoft generates no “ecosystem revenue” raising questions about the viability of its consumer ecosystem.

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January 6th 2016:  Radio Free Mobile updates its flagship research product with the publication of: Mobile Ecosystems – Money Talks.

 Low to zero device growth means that revenue is becoming increasingly critical to the ecosystem. RFM’s new monetisation model benchmarks ecosystems that monetise via advertising and allows assessment of those that monetise through hardware. Although Google has benefitted from iOS’s recent strength, there are real cracks appearing in its ecosystem which need to be urgently addressed. Elsewhere, Twitter remains gridlocked while Yahoo fails to execute. Facebook is the one with the most potential.

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• Corporate Subscription includes:
  1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
     1. This includes the current long-form version and all historical versions and updates.
     2. Quarterly updates
     3. Long-form research on an annual & ad hoc basis.
  2. Corporate licence for all other research and the right to distribute within your firm*
  3. Access to excel models for markets and companies.
  4. Access to presentations, figures and chart data from research products
  5. Analyst inquiry time to be used at clients discretion
• Price: 1-5 US$25,000 per annum.
•             1-4 US$12,500 per annum .
• Please email richard@radiofreemobile.com to enquire or subscribe.
• *The legal entity with whom you are employed and nominate for your corporate subscription.

September 21st 2015:  Radio Free Mobile updates its flagship research product with the publication of: Mobile Ecosystems – Gated communities

The days of walled gardens have passed and users can now come and go as they please. This results in users being able to pick and choose the services they want from different ecosystems. RFM’s analysis clearly indicates the number of services that a user takes from any one ecosystem will have a non-linear impact on the amount of value that the ecosystem owner can extract in the long-term. The iPhone 6 has allowed the iOS ecosystem to extend its lead over principal competitors Google and Microsoft. Facebook and Xiaomi are the two emerging players that warrant close observation.

 CLICK HERE FOR FULL PREVIEW

Purchase Options

Corporate subscription

• Corporate Subscription includes:
  1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
     1. This includes the current long-form version and all historical versions and updates.
     2. Quarterly updates
     3. Long-form research on an annual & ad hoc basis.
  2. Corporate licence for all other research and the right to distribute within your firm*
  3. Access to excel models for markets and companies.
  4. Access to presentations, figures and chart data from research products
  5. Analyst inquiry time to be used at clients discretion
• Price: 1-5 US$25,000 per annum.
•             1-4 US$12,500 per annum .
• Please email richard@radiofreemobile.com to enquire or subscribe.
• *The legal entity with whom you are employed and nominate for your corporate subscription.

 June 15th 2015:  Radio Free Mobile updates its in depth research of Android with the publication of: Android – Bits and bytes – An update to the in depth analysis of the ecosystems based on Android.

Click here for a full preview

Purchase Options

Corporate subscription

• Corporate Subscription includes:
  1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
     1. This includes the current long-form version and all historical versions and updates.
     2. Quarterly updates
     3. Long-form research on an annual & ad hoc basis.
  2. Corporate licence for all other research and the right to distribute within your firm*
  3. Access to excel models for markets and companies.
  4. Access to presentations, figures and chart data from research products
  5. Analyst inquiry time to be used at clients discretion
• Price: 1-5 US$25,000 per annum.
•             1-4 US$12,500 per annum .
• Please email richard@radiofreemobile.com to enquire or subscribe.
• *The legal entity with whom you are employed and nominate for your corporate subscription.

May 11th 2015:  Radio Free Mobile deepens its flagship research product with the publication of: Microsoft – Mission Impossible – An in depth analysis of the Microsoft ecosystem

Microsoft’s position is difficult but not impossible. Nadella’s mission, which he has decided to accept, is three fold. 1) Control legacy, 2) Bring the ecosystem to life and 3) Merge Digital Work and Digital Life. Microsoft must reverse its share declines in mobile, make its ecosystems delightful and fix its marketing in order to succeed. Fortunately, the shares of Microsoft are attractive even it blows Missions 2 and 3.

 Click here for a full preview

Purchase Options

Corporate subscription

• Corporate Subscription includes:
  1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
     1. This includes the current long-form version and all historical versions and updates.
     2. Quarterly updates
     3. Long-form research on an annual & ad hoc basis.
  2. Corporate licence for all other research and the right to distribute within your firm*
  3. Access to excel models for markets and companies.
  4. Access to presentations, figures and chart data from research products
  5. Analyst inquiry time to be used at clients discretion
• Price: 1-5 US$25,000 per annum.
•             1-4 US$12,500 per annum .
• Please email richard@radiofreemobile.com to enquire or subscribe.
• *The legal entity with whom you are employed and nominate for your corporate subscription.

February 24th 2015:  Radio Free Mobile updates its flagship research product with the publication of: Mobile Ecosystems – Devil in the details

• Purchase Options

  Corporate subscription

  • Corporate Subscription includes:
    1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
       1. This includes the current long-form version and all historical versions and updates.
       2. Quarterly updates
       3. Long-form research on an annual & ad hoc basis.
    2. Corporate licence for all other research and the right to distribute within your firm*
    3. Access to excel models for markets and companies.
    4. Access to presentations, figures and chart data from research products
    5. Analyst inquiry time to be used at clients discretion
  • Price: 1-5 US$25,000 per annum.
  •             1-4 US$12,500 per annum .
  • Please email richard@radiofreemobile.com to enquire or subscribe.
  • *The legal entity with whom you are employed and nominate for your corporate subscription.

2. Single user license: US$699.

•  This license is for personal use only.
•  You will receive one watermarked copy by email.
•  Your copy will be watermarked with your name.
•  You may use the document on any device that is personally owned by you or assigned to you by your company.
•  Further distribution of this document is prohibited.
• This license is upgradeable to a corporate license for $1,100.

•  This license is for corporate use
•  You will receive a watermarked copy by email.
•  Your copy will be watermarked with your company’s name
•  You may use the document on any device that is owned by you or your company*
•  You may distribute the document within your company* only.
•  Any other distribution is prohibited.
•  *company refers to the legal entity by whom you are employed. Queries regarding distribution under this license should be addressed to richard@radiofreemobile.com

October 6th 2014:  Radio Free Mobile updates its flagship research product with the publication of: Mobile Ecosystems – Tick of the clock

The heady days are over. Growth is slowing and competition is growing. There has always been opportunity for change in the mobile industry but both Apple and Google seem to have found the holes in the armour and are moving to address their weaknesses. This puts a time limit on any challenger as the risk is that these two become so big and so ubiquitous that users cannot be bothered to look elsewhere. 

Click here for a full summary

Purchase Options

Corporate subscription

• Corporate Subscription includes:
  1. Subscription to Radio Free Mobile  research (and the right to distribute within your company*).
     1. This includes the current long-form version and all historical versions and updates.
     2. Quarterly updates
     3. Long-form research on an annual & ad hoc basis.
  2. Corporate licence for all other research and the right to distribute within your firm*
  3. Access to excel models for markets and companies.
  4. Access to presentations, figures and chart data from research products
  5. Analyst inquiry time to be used at clients discretion
• Price: 1-5 US$25,000 per annum.
•             1-4 US$12,500 per annum .
• Please email richard@radiofreemobile.com to enquire or subscribe.
• *The legal entity with whom you are employed and nominate for your corporate subscription.

2. Single user license: US$699.

•  This license is for personal use only.
•  You will receive one watermarked copy by email.
•  Your copy will be watermarked with your name.
•  You may use the document on any device that is personally owned by you or assigned to you by your company.
•  Further distribution of this document is prohibited.
• This license is upgradeable to a corporate license for $1,100.