Deal focus: Lightspeed targets solid-state LiDAR

Even though LiDAR – or Light Detection and Ranging – is becoming the standard for self-driving cars, not everyone agrees. Tesla CEO Elon Musk, for example, denounced the technology last May as a fool’s errand: “Anyone relying on LiDAR is doomed. They are expensive sensors that are unnecessary.”

He’s right that LiDAR, which aids navigation by using light to measure a car’s distance from obstacles, doesn’t come cheap. One high-performance system costs over $10,000. Each vehicle needs at least two high-performance LiDARs plus several low-resolution ones, according to James Mi, founding partner at Lightspeed China Partners. But he observes that LiDAR delivers significant safety improvements and 90% of autonomous vehicle manufacturers agree.

LiDAR can measure objects 200-300 kilometers away on a highway. One alternative solution is to use cameras plus millimeter-wave radar, but it cannot handle such long distances, industry experts attest. Meanwhile, cameras alone cannot be relied upon on all weather conditions. They don’t work well in heavy flog, strong sunlight reflections or at night. Tesla’s autopilot program, which is not equipped with LiDAR, has been involved in five deadly crashes since 2016.

Moreover, LiDAR cost concerns may soon no longer be an issue thanks to the advent of solid-state LiDAR. Whereas traditional systems rely on mechanical motors to obtain measurements for navigation, solid-state LiDAR uses semiconductor transmitters to create a directional broadcast. The technology is smaller, less expensive and more resilient to vibrations than its older sibling.

Hesai represents Lightspeed’s solid-state LiDAR bet, following an analysis of some 40 companies in the segment globally. It has become the Hesai’s largest institutional shareholder, having led a $173 million Series C round alongside German car components supplier Bosch Group. Other backers include ON Semiconductor, Qiming Venture Partners, DT Capital Partners, and Axiom Asia. In previous rounds, Hesai raised over $150 million from the likes of Baidu, ZhenFund, and Pagoda Investment.

Hesai has been profitable for the last two years and claims a 50% market share in the US mechanical LiDAR segment, despite strong competition from established US players such as Velodyne. According to California’s Department of Motor Vehicles, over half of the 65 certified companies offering autonomous driving solutions in the state are Hesai clients. About 60% of the company’s products are exported to the US and Europe, with customers including Bosch, Lyft, and Nuro.

Even though mechanical LiDAR systems are expensive, they can still be cost-efficient for business models like robotaxis due to the high rate of usage. Waymo, which started life as Google’s autonomous driving technology arm, is a case in point. The company launched its driverless taxi service in 2018 and had completed more than 100,000 trips as of last December.

Hesai was founded in Silicon Valley in 2013 but relocated to Shanghai the following year. It has two manufacturing centers, a staff of 600 and 364 patents. “Cutting edge R&D plus manufacturing capability has built a high barrier for other competitors,” says Mi.

He compares Hesai to another Lightspeed portfolio company, cloud computing components supplier Zhongji Innolight, which counts Google, Amazon Web Services, Facebook, and Alibaba Cloud among its customers. A US IPO failed to get traction in 2015 so Lightspeed helped the company list in Shenzhen two years later. It now has a market capitalization of RMB38 billion ($5.5 billion).

“Both companies were founded by overseas educated Chinese and are examples of Chinese businesses developing world-class technologies. Both also serve giant corporate customers,” Mi explains. “Our experience helping Innolight become a global leader can benefit Hesai.”

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• Topics
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