Will Ambarella's New Robotics Platform Widen Its Moat Against Intel?

Ambarella (AMBA 3.18%) recently unveiled its new robotics platform at CES 2020 in Las Vegas. The platform, which serves as a unified software infrastructure for Ambarella's CVflow computer vision system on chips (SoCs), targets automated guided vehicles, industrial robots, and emerging smart factory applications.

Ambarella states that the platform provides "easy access and acceleration" for common robotics tasks, including stereo processing, keypoints extraction, neural network processing, and Open Source Computer Vision Library (OpenCV) functions. It claims that pairing those features with the native multi-camera support in its CV chips will enable "robotics designs that are both simpler and more powerful than traditional robotics architectures."

This new computing platform indicates that Ambarella is aggressively expanding beyond its core business of image processing SoCs -- but will that sufficiently widen its moat against Intel (INTC 0.64%), its main rival in the computer vision market?

Image source: Getty Images.

Understanding Ambarella's struggle

Ambarella generates most of its revenue from image processing SoCs for security cameras, dash cams, action cameras, drones, and other gadgets. GoPro was once Ambarella's top customer, but the action camera maker's declining sales forced the chipmaker to aggressively diversify its product portfolio and customer base.

That transition was rough. Ambarella initially pivoted toward the drone market with its top customer DJI Innovations, but drone sales weren't strong enough to offset sluggish sales of action cameras. It also prioritized SoCs for security cameras, but two of its top Chinese customers -- Hikvision and Dahua -- were added to the Trump Administration's trade blacklist last year.

To make matters worse, Intel expanded into Ambarella's backyard by buying the computer vision chipmakers Movidius and Mobileye in 2016 and 2017, respectively. Major Ambarella customers -- including DJI, Hikvision, and Dahua -- subsequently started installing Intel's Movidius chips in their devices.

Image source: Getty Images.

The reason was simple: Movidius' visual processing units (VPUs) could process images and analyze them in a single package. Ambarella's image processing SoCs lacked those computer vision capabilities. In response, Ambarella developed its own CV line of computer vision chips with the technologies it acquired from VisLab in 2015.

However, Ambarella didn't unveil its first computer vision chip, the CV1, until late 2017. It subsequently launched new chipsets like the CV2, CV22, CV25, and S6LM, but those chips didn't meaningfully offset the softer sales of its basic image processing SoCs until last quarter:

YOY = Year-over-year. Source: Ambarella quarterly reports.

During the third quarter, CEO Fermi Wang stated that Ambarella's family of CV chips "all contributed to the early revenue ramp" as it "shipped pre-production parts and development systems to more than 50 customers."

During the conference call, Wang noted that sales of its chips to the automotive and industrial markets were strong, and that it was seeing "strong interest" in its new CV4 AI chips in the commercial vehicle market -- which indicates that it's pushing back against Intel's Mobileye CV chips for semi-autonomous and autonomous vehicles.

As for robotics, Wang stated that Ambarella had launched a robotics SDK (software development kit) for select developers and that it was evolving with the work of "multiple robotic customers for different applications." Wang estimated that the robotics market would likely start generating meaningful CV revenue within the following 12 months. That's why it wasn't surprising for Ambarella to launch a unified robotics software platform for its CV chips.

Widening its moat against Intel

Intel remains a major threat to Ambarella in the computer vision and robotics markets. It's won over some of Ambarella's top customers, enjoys a strong position in the auto market with Mobileye, offers open-source robot operating systems (ROS and ROS 2) to developers, and has much deeper pockets for R&D and marketing.

Nonetheless, Ambarella is still leveraging its "best in breed" reputation in image processing chipsets to expand its computer vision business. Therefore, launching a new unified software platform for robotics applications could lock in its growing customer base and widen its moat against Intel.