The global automotive industry is dominated by around a dozen large car manufacturers (OEM), of which Toyota, VW and GM are the three largest, each with annual sales of around ten million passenger cars and light commercial vehicles.
Besides the large car manufacturers, the industry also consists of large and smaller subsuppliers. The subsuppliers show a clear division into large players, called the Tier1 suppliers, and smaller Tier2 suppliers. Tier1 are large global companies that provide system solutions to OEM. Tier2, such as Smart Eye, deliver via Tier1, but not directly to car manufacturers.
When the large OEM develop car models with autonomous driving, they rely on Tier1 companies to provide a system solution with autonomous driving functions. The OEM creates a specification of the functionality required and a number of Tier1 companies are invited to submit bids. Since eyetracking is a key element of autonomous driving, each Tier1 company must offer a solution for this.
Smart Eye's objective is for revenue from the Automotive Solutions business area to exceed SEK 200 million by year 2020, with license revenue accounting for the largest share of revenue. How soon license revenue can increase depends on how quickly car manufacturers introduce eyetracking in their model programmes.
Smart Eye fully owns its eyetracking software, giving a 100 per cent gross margin on the license revenue. As this licence revenue increases, this will ensure good profitability conditions for Smart Eye.