Hi All
As we know Brainchip and Tata Elxsi recently announced their partnership and in doing so issued a press release wherein the following was stated by both companies:
“Tata Elxsi’s partnership with BrainChip will be driving Akida™ technology into medical devices and industrial applications by leveraging BrainChip’s first-to-market, fully digital, neuromorphic technology to provide intelligent, low-power solutions to these demanding target markets.
Akida’s fully customizable, scalable, event-based AI neural processor architecture and its small footprint boosts the efficiency of various applications by orders of magnitude. Greater AI performance at the edge, independent from the cloud, unlocks the growth of the Artificial Intelligence of Things (AIoT) market that is expected to be more than a trillion dollars by 2030.
“The combination of our user-centric design expertise with leading-edge technologies is key to helping enterprises reimagine their products and services to improve operational efficiency, reduce costs and deliver new services to their customers,” said Manoj Raghavan, CEO and MD at Tata Elxsi. “This cannot be possible without our global ecosystem of partners. By partnering with BrainChip and implementing Akida technology into medical and industrial solutions, we are able to deliver innovative solutions at a faster time to market than otherwise possible.””
The above when combined with the following information which I have extracted from the Tata Elxsi website provides me with great comfort as to the exciting prospects for this relationship. Reading the above extract carefully before proceeding to the further information you will take particular note of who stepped forward to comment on the importance of this partnership for Tata Elxsi:
1. Tata Elxsi delivers steady performance in Q1 FY’24 with operating revenue crossing Rs. 850 crores and EBITDA margin at industry leading 29.6%
Continues to build capacity for long-term growth; employee base crosses 12,000 Elxsians
Bangalore, July 17, 2023: Tata Elxsi (BSE: 500408 | NSE: TATAELXSI), amongst the world’s leading providers of design led technology services, announced its first quarter results for the period ending 30th June 2023.
Highlights of the Quarter Ended June 30, 2023:
- Revenues from operations at Rs. 850.3 Cr
- Profit before Tax of Rs. 248.3 Cr
- Crosses 12,000 employee mark with 422 net additions in the quarter
For the quarter ending June 30, 2023, company reported Rs. 850.3 Cr of operating revenue, a growth of 17.1% over the same quarter of previous year (YoY). During the period, Profit before Tax stood at Rs. 248.3 Cr, registering a growth of 8.9% YoY.
Business Highlights:
- The Industrial Design & Visualization division recorded a strong growth of 41.1% YoY in constant currency terms. Company’s Design-Digital offerings continues to drive volume led growth in a challenging global market environment.
- Transportation continues to show healthy growth, registering a revenue growth of 17.0% YoY in constant currency terms, and a healthy large deal pipeline across SDV and EV.
- Healthcare signalled a strong recovery, registering 3.2% QoQ growth in Q1 of FY24 in constant currency.
Mr. Manoj Raghavan, CEO and Managing Director, Tata Elxsi, commenting on the company’s performance in the first quarter of FY24, said:
“We are happy to report a healthy growth of 17.1% YoY in the current macro-economic environment, while delivering industry leading EBITDA margin of 29.6%. While the overall global economic outlook remains challenging, our customer focus and targeted efforts to keep the growth momentum going is showing good results.
During the quarter, our Healthcare & Lifesciences business has reported a healthy QoQ growth of 3.4% which is a significant improvement over the performance during the earlier two quarters. This vertical also reported new product development deal wins for medical diagnostics and Smart Hospital equipment.
https://tataelxsi.com/storage/financial-statements/July2023/TataElxsi-Earnings-Jul17-2023.pdf
2. EXTRACTS FROM SHAREHOLDER PRESENTATION FOLLOWING RELEASE OF 1STQUARTERLY RESULTS 2023 -2024 (FOLLOWED BY QUESTIONS & ANSWERS)
“During the quarter, our Healthcare and Life Sciences business reported a healthy quarter-on quarter growth of 3.2% in constant currency terms, which is a significant improvement over the performance during the earlier 2 quarters. This vertical also reported new product development deal wins for medical diagnostics and smart hospital equipment. In the Transportation business, we continue to see good traction and a strong deal pipeline, especially in software-defined vehicles and electric vehicles.” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED page 2 of 17
“On the people front, we continue to invest in our talent base with a net add of 422 Elxsians in this quarter. The Elxsi family is now 12,000-plus strong” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED page 3 of 17
“Yes. I think I've answered that question. So, the deal pipeline is pretty strong. We still have pretty large opportunities that we have placed bids on and what was supposed to be closed in early part of Q1 is still open. So, customers are definitely taking their time, especially on large bids and so on. So, I think it is natural during the current macroeconomic situation. Customers are being careful before they roll out, especially the large deals and so on. So, I think the fact is that we have a good pipeline, and we see closures happening in Q2. That's the discussion we've had with a number of our customers. we really hope that additional revenues will kick in during Q2. So that's the confidence that we have.” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED Page 5 of 17
“I think over the last 2 quarters, I think the Healthcare and Life Sciences business did not show the growth that we were expecting, and I think that is also because of the transition in the Euro MDR activities and that has taken us a couple of quarters to get over that. But I think this quarter, we have demonstrated good new deals and good product wins there. So that has really helped us to show a good growth. We are pretty optimistic that we will be able to show this continued growth in the subsequent quarters also. But I will not be able to give you a number for the financial year. We don't give that projections. But I think we are on the recovery path, and we hope to grow back to our earlier growth rates in this business pretty soon.” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED Page 6 of 17
Absolutely. This is Nitin here, Bhavik, maybe I'll take that. The way we see it, is twofold. On one hand, in products per se, especially because of the fact that we deal with physical products, whether it's a car, whether it's network equipment, boxes and services on medical equipment, the direct impact of generative AI on such products is very limited. Why? Because they all deal with, if I may use the word specific AI. So therefore, the kind of training that you do, the kind of models that you build, the kind of algorithms that power an autonomous car, or medical diagnosis, or recommendation engine are quite different from what would classically use ChatGPT or generative AI for. So, to that extent, AI becomes more and more relevant. AI becomes more and more predominant within the portfolio of customers, but it's not coming from generative AI per se. In our view, generative AI has some impact on product development to the extent that we are working on how can you aid coding, especially as a starting point rather than starting from scratch, how we can improve testing using generative AI, especially where you had to spend time on creating test cases, describing use case scenarios, there are certain benefits to using generative AI, which are already in the works for us in each of our segments. But the overarching comment would be that in the product engineering business, it has lesser impact. It has far greater impact when you talk of areas like marketing, customer experience, customer care and so on. These are typical BPO/KPO activities. You can straight away imagine that the impact there is far, far higher, and we have no play in those. - MR. NITIN PAI – CHIEF MARKETING AND CHIEF STRATEGY OFFICER Tata Elxsi Limited Page 7 of 17
“Having said that, the medical business is also pretty strong in North America. So, we're really hopeful that, that piece will pick up. So, we look at it, both North America and Europe as very, very key strategic geographies for us. And we continue to invest in those geographies. You would have seen the press releases and we talked about opening a new office in Troy. So, we continue to invest in these geographies. And we are hopeful that growth will return eventually.” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED Page 7 of 17
Sure Satadru. This is Nitin again. So, I'll take that. If you look at the premise on which we, in fact, even built a focus around the medical devices and the health care industry, it was based on the fundamental presumption that in general, the health care industry has been fairly conservative. Product life cycles are very, very long. In fact, there are devices that were designed 15, 20, 25 years back that continue to run. And the advent of cloud, AI connected devices essentially means that you can actually afford to deliver a far more superior customer experience, far more data-led insights that directly affect patient outcomes and health. And therefore, it is essential that all products actually pivot to, in some sense, equivalent of the car. You need to be connected, you need to be automated, I'll not call it autonomous, and you definitely need to look at electronification because a lot of the previous generation medical devices were electromechanical rather than electronic. So that's the premise on which we've built the business, and you'll see that over the last 5 years, from the time we started, we have moved from 0 revenue to about 15%, right? And that's been a business that's grown almost 10% quarter-on-quarter for a few years. So to that extent, I think there is confidence that the industry is actually behind the automotive industry in terms of the transition that it needs to make, even though there are no regulations that are driving it, unlike in the automotive industry, where you have sustainability, you have ESG concerns that put stakes in the ground as far as countries are concerned. This is really an opportunity to change because that is what will sell in the future. That is what will create monetization in the future. So, to that extent, I think there is great confidence that, that pivot has to continue. Software, cloud, IoT, connected devices, intelligence. That is an inexorable path for medical devices. All of them have to get there. The pharma industry has to adopt it to some extent, too, in the sense that as pharma industry moves from prescription-based billing to outcome-based billing, you will need to then monitor patient vitals, you will need to provide for patient tracking and so on. All these are devices that will do it, because the drugs will be then decided based on the markers and that will be personalized based on the actual patient profile. So, in our view, I think the fundamentals of electronics and software becoming the dominant part of what medical devices company you need to do, is a given. The rate that we'll do it at is not driven at the same rate as automotive because automotive has priorities coming from regulatory and regional or country-based decisions that have been made on when they will stop or turn off eyes and so on. The medical device industry does not have that trigger but has a trigger of ‘how do I make money in the future’. So that is what creates absolute confidence. And I think this is just the start of that. We know it's the conservative industry. It's difficult to get in. There are barriers of entry, but we have a marquee set of logos that we work with, we are quite confident of our ability to stay incredibly relevant to these companies.” MR. NITIN PAI – CHIEF MARKETING AND CHIEF STRATEGY OFFICER Tata Elxsi Limited July 17, 2023 Page 9 & 10 of 17
Question: ”Because I'll be very frank, I haven't seen another company like Tata Elxsi doing so diverse verticals and still having so great returns over so many years. So how do you guys look at talent management and these 3 diverse verticals in general?” Answer: So, Nitin, again. Again, just like Coke or KFC, I'm not going to reveal all our secrets. But having said that, maybe I'll start with the fundamental point, right, that when you have been doing this for 25 years and more, and this is the only business that you do, believe me, there's a whole lot of ingrained company knowledge that reflects in its processes and its quality systems in the way we both hire and manage talent. So that's the first fundamental building block that we build on. Equally, we also acknowledge the fact that these 3 industries are so different that the domain knowledge, especially as we move quickly up the seniority and experience levels, demands that you have training programs, you have training methodologies, you have quality systems, you have everything that is different for each of these verticals.
And to our advantage, I think that's also a core competency. That's also what makes it very difficult for a generic IT player who depend on fungibility, who depend on training that is industrialized. I mean you would have trainings that people take us for 15 days, 1 month and they are ready for billing. For us, it's nowhere close to that. For us, it's multiples of that timelines to get people ready. But I think that's the way we do business. And hopefully, that's the secret sauce that we bring. “MR. NITIN PAI – CHIEF MARKETING AND CHIEF STRATEGY OFFICER Tata Elxsi Limited Page 11 of 17
“Regarding the Industrial Design business, as I said, it's a smaller business. It's a very, very critical business for us. As compared to last financial year, it has grown significantly. But however, on a quarter-to-quarter basis, we see some amount of flatness and some amount of ups and downs. It's still in the early stages to see how we can have a steady quarter-on-quarter growth there, but that's something that we are working on. We definitely are hopeful that the Industrial Design business will also continue to grow significantly over the next 3 quarters for the financial year.” - Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED Page 12 of 17
“Rajak Kumar Just 2, 3 macro questions. The first one is on the ADAS technology. So, I just want to know, given that we are part of the Tata Group, how do you make insights with other vendors given our exposure with JLR and others, with competition like Samsung who are better placed compared to Tata Elxsi. So how do we overcome this? Nitin Pai: Yes. So maybe I'll take that. Technically, we don't compete with Samsung. We are a potential supplier to Samsung. And when you say Samsung, I presume you mean it in the context of HARMAN. So, to that extent, HARMAN is a customer rather than a competitor. So, in that sense, there is no conflict of interest here. And it's not to do with whether we work with Tata Motors or JLR or not. The question is, do we have capabilities on the software side that add to what they are trying to do in terms of product engineering and product development. And to that extent, we're incredibly relevant. Rajak Kumar: Okay. Got it. And second thing, are we developing any robots linked to the Da Vinci, over on the medical side? Because I've seen your website, it talks about the industrial robotics. So, I just want to know what work we are doing on the medical side? Nitin Pai: Yes. So there is automation - I'm not call it fully robotized surgery or fully automated surgery, but there is a fair amount of work that we're doing, both with AI as well as robotics that has to do with automating and bringing in precision surgery. But at this time, that is all that I can tell you. Rajak Kumar: Currently, that is the only US FDA approved robotic system, right? Nitin Pai: That's right. So, to that extent, that's why I'm hesitant to say that we are working with fully robotized systems. But there is some level of automation and precision surgery that happens in multiple other spaces. Think about eye care, for example. You will see that there are laser guided surgeries that work on cataracts and so on so. It's not that there is no robotic surgery in other areas. If you look at cancer there are equally guided robotic treatments that happen for chemo, radiation and so on. So, I would encourage you to look at is the fact that robotics and automation applies in many levels, just like in cars, from Level 1 to Level 5. Rajak Kumar: Okay. No, my question is more from a strategic standpoint. So, like on a 3-5-year standpoint, will we be challenging Da Vinci systems? Nitin Pai: No, no. So please note, again, like we made the comment on Samsung and so on. We would hope that we work with Da Vinci and create many more Da Vincis by supporting them.” MR. NITIN PAI – CHIEF MARKETING AND CHIEF STRATEGY OFFICER Tata Elxsi Limited July 17, 2023 Page 14 & 15 of 17
3. EXTRACT FROM INVESTOR PRESENTATION SLIDES RELEASED WITH 1ST QUARTERLY REPORT 2023 - 2024
Tata Elxsi won a design-led New Product Development (NPD) deal from a Global Healthcare company to innovate a new line of next-gen Smart Hospital equipment.
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The question becomes how quickly will Tata Elxsi start to deploy Brainchip AKIDA technology solutions in Healthcare or Industrial use cases?
If you believe that the relationship commenced shortly before this recent announcement then the answer is a minimum of one year to a possible a 3 years.
If you believe that Tata Elxsi was introduced to Brainchip by Tata Consulting Services the research arm of the TATA Group of companies then you might believe that the relationship between Brainchip and Tata Elxsi has been in place for a longer period of time and that the announcement has been made because of an impending change of circumstances.
In 2019 Arpan Pal the head of the research group at Tata Consulting Services that has been researching AKD1000 published an interesting paper titled ‘Using Ai on IoT Sensor Data for predicting health of man and machine.’
When it was first published it was publicly accessible but no longer. It is interesting that it was published in December, 2019 at the same time that Brainchip and Tata Consulting Services were demonstrating the use of AKD1000 for identifying hand gestures in real time.
It is also interesting because it covers the two areas Health and Industrial use cases that Tata Elxsi is now partnered with Brainchip to in the words of Manoj Raghavan – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – TATA ELXSI LIMITED - “
implement(ing) Akida technology into medical and industrial solutions, we are able to deliver innovative solutions at a faster time to market than otherwise possible.”
https://www.researchgate.net/public...GFnZSI6InByb2ZpbGUiLCJwYWdlIjoicHJvZmlsZSJ9fQ
The use of the words “faster time to market than otherwise possible” may be highly indicative of a much earlier relationship than the recent announcement implies, even as early as 2020 or 2021. There are clear statements from Brainchip about medical applications being a strong potential growth area for Brainchip dating from at least 2021. In the extracts from the Shareholder presentation I have provided above you will have read about how long Tata Elxsi spends training its people before unleashing them on new applications.
As we well know the AKIDA technology is Science Fiction and no one has yet graduated from the Universities engaged with Brainchip so to make the statement about speed of implementation at the very least Tata Elxsi has finished training its staff. How long would that take well we were told by Douglas Fairbairn that it took MegaChips 18 months to bring their engineers up to speed with the AKIDA technology.
Regards
FF.
Remember do not believe a word I say and DYOR.
brainchip.com
www.freedomholdingcorp.com
