By Ucilia Wang

Automakers are now building vehicles with technologies that take control of the braking system before impact, and do other nifty things like help drivers see what’s in their blind spot.

Technologies once developed for the military are moving into bumpers, side-doors, airbags, and other parts of a car, thanks to companies like Infineon Technologies, NEC Electronics, and Delphi, the troubled General Motors spin-off.

Tyzx, Mobileye, and Canesta are some of the startups getting in on the act.

Saving lives is big business. The collision-warning market, which includes electronics that rouse dozing drivers and alert them to approaching hazards, is expected to reach $1 billion worldwide this year and $2.5 billion by 2009, according to research firm Strategy Analytics.

“There is a prevailing sense now that safety sells,” says Mitchell Hourtienne, marketing manager at Infineon Technologies, Germany’s big name in semiconductors. Currently, Infineon is developing chips for radar-based automotive safety systems, but doesn’t expect to see them in use before 2010 at the earliest.

In the last 10 years, basic sensors have come into use as parking aids, emitting beeps when drivers back in too close to what’s behind them. More recently, luxury car makers have been installing sensors that raise the alarm over an impending collision.

Lexus, BMW, and Mercedes-Benz offer them as options and they can add thousands to the sticker price. But prices will come down and as they do over the next 10 years, sophisticated sensor systems will start appearing in mid-range and economy cars.

One feature of the automotive business, as the Infineon example shows, is its almost glacial pace. While safety technologies are being tested now, automakers require more than five years of product development, and still more testing, before they feel comfortable about fitting new components into their cars.

“The industry has a long design cycle, but the flip side is that, once the technology is adopted, it goes on for 20 years,” says Tony Sun, general partner of Venrock Associates. The venture capital firm is invested in Sunnyvale, California-based Canesta, an image sensor startup that develops camera systems that overcome blind spots, help with parking, and do other things—including determine the age and postures of front-seat occupants before deciding whether deploying airbags will do more harm than good.

“Our technology can ‘see’ a wide area very well. It can accurately determine the turn of an object and how far away it is from the vehicle,” says Canesta CEO Jim Spare.

The startup, founded in 1999, won key support from Honda, which invested $5 million in the company. Canesta began developing sensors for the car market in 2004, but they won’t see the inside of a production-line vehicle until 2010.

Other companies make camera-based safety features, too, and some are already in vehicles. Ultrasonic sensors that use high-frequency sound bounced off objects, like those offered by Valeo and Bosch, are now used in cars to gauge distance between vehicles. Radar technology developed by companies like Delphi and Autoliv uses radio waves to determine the direction, speed, and distance of an object. And more sophisticated versions of these technologies are in development.

Car manufacturers themselves are working on systems, too. BMW, for instance, is developing a second-generation night vision system that will let drivers know whether there are animals or pedestrians within 300 meters of the car, says Tom Baloga, BMW’s general manager of safety engineering and intelligent transportation systems. It’s also working on a system to read speed signs—and a self-parking system that can be tailored for assigned parking spaces and operated by the driver using remote control.

High-Risk Segment

Auto manufacturers usually buy the systems from established players like Delphi, Bosch, and Valeo. But they also hunt for promising startups. BMW doesn’t have a venture group, but it does deploy technology hunters in Silicon Valley—which is how it came across Tyzx, a camera sensor and system developer based in Menlo Park, California. Tyzx designs chips and camera modules used by German video recording company I.M.A. to develop test kits for improving safety systems in BMWs.

The auto segment is a high-risk one for startups because, apart from having to go up against established players, they need deep pockets to endure the lengthy product development process. Car makers require years of testing before they’re satisfied that a new component can withstand extreme temperatures, and the toughest driving conditions, for periods of 10 years or more.

Little wonder VCs are hard to find in this market—unless they’re bluebloods like the Carlyle Group and can afford to sink a dollar for a while. Carlyle Venture Partners, a Canesta backer, did that in a couple of other cases and the bets have already paid off handsomely. Indigo Systems was one, and it went on to win a $200-million order from BMW, before it was sold to Systems for $165 million in 2004. Then there was SMaL Camera Technologies, which Cypress Semiconductor bought for $42.5 million last year. “It can take a while to incubate these technologies, but they can be very lucrative,” says CVP Managing Director Allan Thygesen.

There’s more to this than getting people to cough up more for their cars. Regulators all over are requiring safer cars. A new U.S. regulation, for instance, will require all cars by 2012 to come with a stability control system to prevent rollovers when braking at high speeds. Basically, the United States is calling for a technology that applies the brakes to each wheel individually, and not without reason. Rollovers lead to more than 10,000 deaths in the U.S. every year, almost a third of total annual fatalities.

Europe and Japan are quicker to push for safety standards in cars, argues Robert Cavin, an analyst with market research firm Frost & Sullivan. In February, the European Commission launched the Intelligent Car Initiative, which aims to speed up the development of crash-avoidance technologies and make them available in all cars, not just luxury models. In 2005, road accidents killed over 40,000 people in the European Union and injured more than 1.2 million.

None of this is to say that automakers want to make the cars too smart. One fear is that drivers will start suing car makers when avoidance electronics fail in crashes. “We want to exploit all possible technologies to avoid a crash but always come back to the message that the drivers are still in control,” says BMW’s Mr. Baloga.

Even Canesta’s Mr. Spare can’t rely on his car’s back-up aid completely. Every time he backs into the garage, it says he will run into something, he says. But he never does.

Contact the Writer: Editorial@RedHerring.com