Q: With consumers continuing to rank voice as the number-one application for mobile phones, voice communications is clearly an attractive market to chip companies. To maintain its competiveness and create value for its customers, how does Audience’s processor bring voice quality to mobile devices? Do you see consumer preferences changing in the near future?
A: Audience’s processor brings voice quality to consumers’ mobile devices through removing environmental noise from conversations or mitigating its effects. Our technology, which is based on the human hearing system, allows cell phones to ignore background noise and entirely focus on the speaker’s voice. Audience’s cell phone chips guarantee high-quality voice communications regardless of a speaker or receiver’s noisy environment. Audience accomplishes and performs these voice quality miracles by using hardware acceleration. There are competing methods of solving voice quality problems, but they tend to be simpler, looking at only the difference between two microphones. The human system relies on many different criteria to differentiate between signal and noise. It’s a very powerful system that is computationally intensive by its unique representation of sound. Semiconductor technology is a key part of our solution and wouldn’t be possible without a custom chip, which is why Audience is a fabless chip company and not an algorithm software company.
We feel Audience’s technology will play a big role in shifting consumer expectations. Today, consumers tend to not place calls in noisy environments because they know their phones aren’t immune to noise, and therefore must drop calls voluntarily. We predict their expectations will change as they experience high-quality voice communication in noisy environments through the use of Audience’s technology. They will begin to expect noise immunity when using their cell phone.
Q: Rapid technological change has increased consumer expectations, which means companies must continually innovate. However, companies can no longer spend large sums of money to remain competitive. How has this barrier impacted Audience’s goal to revolutionize the mobile phone market? What is Audience’s plan for research and development (R&D) in the next year?
A: Audience will continue to expand its investment in R&D since that is what it has been funded to do. The company’s operating plans are built around on-going investment and innovation, and the firms that have funded Audience share our belief that there is a high return to be gained from investment in Audience. Furthermore, since Audience is a small, highly focused company, we are more productive in our R&D investments than larger companies. We have the advantage of providing a very tight coupling of R&D resources to customers in a way that’s difficult for larger organizations.
Regarding future R&D plans, as previously mentioned, we will continue to invest and increase our investment in R&D to not only enhance our basic signal improvement capability, but to also identify new applications that could take advantage of this capability, such as making speech recognition robust to noise.
Q: In December 2008, Audience was nominated for GSA’s Start-Up to Watch Award. Since receiving the nomination, how has Audience continued to demonstrate the potential to positively change its market through the innovative use of semiconductor technology or a new application for semiconductor technology?
A: Audience has continued to demonstrate its potential and build on early success by gaining additional market traction with customers over the past few months, proving that our technology and the way we bring it to market is scalable. We are transitioning from initial successful engagements with early customers to customers incorporating our technology throughout their portfolios, validating that this powerful technology can be brought to the masses.
Q: The handset market is maturing and becoming saturated, triggering a drop in original equipment manufacturer (OEM) prices and margins, and therefore putting increased pressure on chip providers to lower prices. How has the game of price negotiation changed over the past year and a half? In today’s environment, is it dangerous to focus on one market?
A: In general, we have not seen more pressure than is expected in this industry, as this industry constantly experiences price pressure. However, we have experienced relatively little pressure, with the exception of currency fluctuation, which will hurt some of our customers. Audience has been able to defend itself against this pressure because we provide a capability that differentiates a product (e.g., mobile phones) from its competitors, and the value of the capability is clearly apparent to end users.
Before we tackle multiple markets, we need to first achieve success in the mobile phone market. Once Audience establishes leadership in this market, we would like to implement our technology in markets where voice communications is a required application, such as data processing, automotive and gaming.
Q: Audience’s solutions have set a high bar in the industry, achieving levels of noise suppression that even industry standards are unable to measure. Therefore, it has been reported that the company is working with industry standard organizations, such as the Cellular Telecommunications Industry Association (CTIA) Working Group, to make necessary modifications to noise suppression measuring methods. To date, what progress has been made? With few industry standards, what internal standards does Audience use to assess the quality of their products?
A: When a new capability is brought to market, for it to be deployed broadly, consumers must know how to evaluate its performance in their systems across a wide portfolio. Strategically, our goal is to always release the best solution to the market, so we need to ensure that consumers know how to identify high voice quality from low voice quality.
The most efficient way to get a new test method adopted is to change an existing standard that everyone has already agreed to and look at both subjective and objective test measurements. Subjective testing is how it sounds to a person, while objective testing is instrument-based testing that gives you a number. In the case of subjective testing, Audience worked with the International Telecommunications Union – Telecommunications (ITU-T) to modify an existing test standard called P.835, which uses a well-known quality scale called mean opinion score (MOS). The new test standard was accepted in October 2007. Regarding objective testing, we are currently working with ITU-T and CTIA to modify another existing standard called G.160.
Audience has taken the initiative to create standards to increase the value of our chips and our profitability. The company prototypes these methods internally before we propose them to industry standard organizations.
Q: During a period when venture capital financing is rare, Audience successfully secured a substantial amount of funding in February. What factors contributed to Audience receiving its latest round of funding? What business plans will Audience undertake with the new financing?
A: Audience was able to secure funding through opportunity, execution and balance. Audience has established itself as a leader in the emerging application of advanced voice quality enhancement by successfully executing each opportunity. For example, our first chip was taped out in June 2007 and was in mass production nine months later. We have since secured tens of design wins with major mobile OEMs. Our business plan has also enabled us to achieve a balance between pursuing opportunity and achieving profitability. We have not retrenched in the face of the credit crunch, but at the same time, we have not spent large amounts of money going after multiple end markets.
Our new financing will be used to expand our business presence in our current locations and new global markets.
Q: In early 2008, Japan and Korea were the first markets to experience Audience’s breakthrough solution. Why did Audience choose to first release its chip in these markets? Now that Audience has established themselves in these two markets, which regions will Audience tackle next?
A: We chose to initially focus on Japan and Korea because the handset vendors, OEMs, subscribers and carriers within these markets are all early adopters of technology. These groups have led the introduction of new technologies such as video conferencing capabilities.
While most of our customer base and shipments are in Asia, we have secured design wins from North American vendors. Furthermore, we are seeing penetration among our Asian customers, which ship parts of their portfolios to European and North American export markets.
Q: To achieve success in today’s competitive mobile handset market, companies must deliver products with long battery life. What is Audience doing in the area of power management to aid OEMs in fulfilling this low-power requirement?
A: Mobile phone applications consume power when transmitting unwanted sound. The problem is that if a person is in a loud bar and is not talking on a phone, the phone still thinks they are talking due to the external noise. The mechanism used to turn down the power cannot activate, resulting in that person receiving only three and a half hours of talk time when the vendor promised five hours. With Audience’s chip, more power is saved than consumed if a person is in a noisy environment 30 percent or more of the time. Our technology allows the mechanism to identify whether a person is actually talking or not.
The value of Audience’s technology is directed at those consumers that are constantly burning minutes. If someone’s burning a lot of minutes, they’re not likely in their living room or in their office, but in a noisy environment such as in the car, train station, airport, street, etc.
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