September 9, 2022
Image: Michael Fousert/Unsplash
Hello and welcome to Protocol Enterprise! Today: why electric vehicle makers are closely watching the development of silicon carbide chips, the economic slowdown might be coming for enterprise tech startups and the second-order effects of the aggressive strategy to deny Chinese access to advanced chips.
A bulletproof material called silicon carbide will likely be a key part of making electric vehicles a global reality. Chips forged with the difficult-to-work-with compound can help extend the range of cars, and make fast charging considerably more efficient.
Wolfspeed is making a $5 billion bet that silicon carbide is that future. The company announced Friday that it plans to build a new factory in North Carolina that will enable a tenfold increase in the company’s manufacturing capacity.
Making the wafers is just the beginning of the problem. Because silicon carbide is so hard and heat resistant, Wolfspeed and other manufacturers have had to adapt the fabrication process.
Tesla already uses silicon carbide to transmit the energy stored in a vehicle’s battery to the motors that make the wheels turn, and many of the largest automakers are set to follow.
Why on-demand talent could be exactly what companies need right now: If you thought the rise of remote work, independent contractors and contingent workers rose sharply during the pandemic, just wait until the next few months when you see a higher uptick in the on-demand talent economy.
With the economy forcing enterprises to consider slowing hiring, layoffs and other cost-cutting measures in addition to lowering their expectations, enterprise-focused technology startups are feeling the heat.
“By extension, that is going to come back and impact the startups in terms of what growth rate they're going to be seeing and what their top-line goals are going to be moving forward,” said S. Somasegar (“Soma”), managing director of Seattle’s Madrona Venture Group, which invests in technology startups in the Pacific Northwest. “We've already seen some of the portfolio companies adjust just their top-line growth for next year.”
The venture capital landscape also is changing. And with some firms taking a step back and slowing their investments, Soma has some advice for entrepreneurs focused on enterprise customers.
“You should be thinking about, ‘How do I make sure that I have enough funds so that I have a long enough runway for me to be able to make the progress I can make?” Soma told Protocol in a recent interview. “The second is think about, 'How do I look at efficient growth, not just growth at all costs?' Keep unit economics in mind.”
One benefit of current market conditions is the impact on “crazy high” company valuations, according to Soma.
“Valuations for companies are coming down to a more rational level,” he said. “You're starting to see that in the last eight months in the public market, and I would say in the last six months in the private market, where the valuations are becoming a little more reasonable.”— Donna Goodison (email | twitter)
The fallout from new U.S. export restrictions blocking makers of AI chips from selling in China may not affect a young AI software startup going after the U.S. market, or even its China-based chief technology officer.
But it could hit some of the people using its software.
“That will have a big impact on the researchers and engineers in China,” Yang You, founder of AI optimization startup HPC-AI Tech, told me from his home base in Singapore this week.
“Nvidia GPUs in China will be older than the Nvidia GPUs in the U.S. Basically, they are using a worse product,” You said.
HPC-AI Tech makes software called Colossal-AI. The company behind the open-source tool, which streamlines the compute-intensive process of training deep neural networks to make it faster, less expensive and more efficient, recently scored funding from Kai-Fu Lee’s VC firm Sinovation Ventures. The company got a shout-out from Nvidia in July.
Registered in Delaware and Singapore, HPC-AI Tech’s CTO is based in China and the company has an office in Beijing.
You said the coming chip supply cut-off won’t affect his company because the software functions using any kind of GPU. But with a global open-source community, Colossal-AI’s users in China could feel it.
Now, You said he expects the U.S. blockade to kick GPU investment in China into a higher gear.
“Chinese GPU companies will get more funding,” You told me. “And in the next few years, maybe these big GPU users like Tencent, Alibaba — they’ll want to develop their own chips. They may have this motivation.”
“Alibaba, ByteDance — they are essentially global companies. They can build some data centers in Malaysia, in Singapore — [outside] of China. Maybe they have this kind of plan,” You said.
It's already starting. Alibaba said last year it would build its own server chips based on technology licensed from Arm. ByteDance is also reportedly working on its own chip-building efforts.— Kate Kaye (email | twitter)
Intel hosted a groundbreaking ceremony at the future site of its chip manufacturing facility in Ohio, which included attendees such as President Biden.Pendo laid off 5% of its employees in what appears to be another case of an enterprise SaaS company assuming the pandemic spending boom was the new normal.
Why on-demand talent could be exactly what companies need right now: The biggest benefit of leveraging on-demand talent is often tapping into the talent and skills that businesses can’t find elsewhere. Upwork’s recent report highlights that 53% of on-demand talent provide skills that are in short supply for many companies, including IT, marketing, computer programming and business consulting.
Thanks for reading — see you Monday!