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Software is Eating the World - Electric Motors

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By: Meson Capital Partners LLC
Harvest Exchange
April 21, 2018

Software is Eating the World - Electric Motors

The Big Picture Trend: Software is Eating the World

Big picture – the most powerful and predictable trend in economics is not inflation, growth, or poverty reduction, it is the exponential price/performance trend of information technology. This trend has continued globally through recessions and wars for deeply fundamental reasons. It takes a linear amount of energy or cost to move physical material goods in trade. By contrast, we are nowhere close to the physical limits of being able to rearrange bits or atoms into a more precise value-added structure so the cost to do so falls exponentially. This was first popularized by “Moore’s Law” in 1965, specifically referring to the packing density of transistors on an integrated circuit and more recently by Marc Andreessen in 2011 with his “Why Software is Eating the World” essay in the WSJ.

The broad implication of this linear vs. exponential trend is that once an exponential trend overtakes a linear improvement trend there is no looking back to the old ways. One of my favorite examples of this is that prior to the year 2000, cars used to have a $45 mechanical accelerometer to deploy airbags and the company specializing in these devices had over $1 billion of revenue. A sharp deceleration (i.e. crash) would break free a ball bearing from a holster to complete an electric circuit and explode the airbag open – a very elegant design. Thanks to advances in microelectronics from Kionix, a company spun out of Cornell University’s nanotech lab, this deceleration could now be detected more reliably and intelligently with a $1.00 tiny MEMS chip and the rest is history. It was not a fair fight. Information processing improvements pave over the traditional trade-offs of reliability/speed/cost inherent in mechanical systems. Amazon is an extreme example of this in retail with the largest selection, best prices, and fastest delivery – possible only because of computing power and software.

Today, nearly all of the $100 billion per year global electric motor market is based on the AC induction design that Nikola Tesla invented over a century ago. The installed base of motors consumes roughly $2 trillion of electricity per year (45% of total electricity) – predominantly in buildings (HVAC, refrigeration, pumps), in manufacturing lines and increasingly in transportation. The AC induction motor has an elegant mechanical design – it takes a simple sine wave of alternating current like the 60Hz from your wall socket and converts it into mechanical torque. It was the electromagnetic era’s equivalent of the invention of the wheel.

Notable advances for motor technology came with the advent of power semiconductors in the 1970’s where that 60Hz sine wave could be converted to a different frequency and thus change the speed. Additional advances were made with the introduction of mechanical improvements such as permanent magnets in higher performance applications where motor cost is less of an issue (magnets are expensive and China controls >95% of the global supply).

AC electric motors work well for the specific jobs they were originally designed for, however suffer from two main drawbacks: 1) inability to easily adapt to changing workloads, and 2) efficiency decreases significantly when they are outside of that narrowly designed load (the “nameplate rating”). In a word – AC induction motors are unintelligent. This is precisely why a large market exists of complex, mechanical “Band-Aids” such as gearboxes, soft-starts, pulleys, sensors, and VFDs to assist motors to do what we want them to do. It doesn’t have to be this way. SMC completely turns it its head by using a programmable motor architecture.

Part 1 of 3 in a series related to our largest investment in Software Motor Company, click below for more access to learn more.

Originally Published at: Software is Eating the World - Electric Motors