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CNBC Transcript: Ian Rhodes, CEO, McLaren Applied Technologies

Following is the full transcript of CNBC's interview with Ian Rhodes, CEO of McLaren Applied Technologies at the 2017 Singapore Summit. This interview broadcasted in Asia on Monday, 18 September.

All references must be sourced to a "CNBC Interview".

Interviewed by Nancy Hungerford, Anchor/Correspondent, CNBC.

Nancy Hungerford (NH): Thank you for taking the time for speaking to CNBC. As we get ready for the big race here in Singapore the Grand Prix, tell me more about the technology you supply, how important it is to winning?

Ian Rhodes: Well the technology we supply is the same for all the teams we have to provide the electronic data capture analytics platform for the entire race series. So all the data coming off all the cars and the drivers will go through the ECU, standard engine control unit that we put on we can be supply to every single team. All the data coming out of the ECU has to get to track side as the cause of flying around the city center 200 miles an hour and then we have to get the data from the track side back to the pit lane and in real time have that same data appearing in the factories whether its back in Italy, UK, Switzerland the mission control teams back in the factories will be monitoring that data and advising the teams back here at the track in real time and during its sort of one and a half hour race on Sunday evening. We will be seeing about 10 terabytes of data flow through that system which makes it the biggest science project on the planet for that for that period of time eclipsing even the Human Genome Project.

NH: Absolutely incredible and what can they use that data to do. Can they use it in real time to then improve performance?

Ian Rhodes: Absolutely. They can they can figure out and to continuously update tire strategy, they can figure out what's going on with the traffic, they can figure out what's going on with other people's cars. They can figure out when they should stop and change tires when they should turn their engine power up on the track and go for a couple of fast laps or turn it down save some fuel, save some tires. So the entire race strategy is constantly being simulated and re-simulated. So each team will probably run three hundred thousand simulations live during the race to constantly advise their team on what to do next – If this happens, if that happens.

NH: This raises the question we talked about, the car versus the driver. How much do you think comes down to the car itself, the technology that is in the car when it comes to getting across the finishing line first?

Ian Rhodes: So technology is very important in Formula One at the moment. And I guess it has been for many years. What I have just spoken about there with the data was all about enhancing the ability for human beings to make better decisions faster. And that is separate some of the other technology on the car, the hybrid technology, the engine power the aerodynamic design which enables you to get more and more downforce and protect your tires in longer more laps out of a set of tires. All and one of the most fascinating things for me is the efficiency with which you can write your software will drive the way in which the electronics on your particular car will run which will drive the amount of cooling requirements you have because this huge amount of heat generated by all the electronics in the car these days and it's that cooling requirement that for many teams compromises aerodynamic design. So if you can write more efficient software you can free up your aero team to come up with a more aerodynamic car.

NH: Amazing. And when we talk about innovation side. How quickly is this technology changing? We do know that Singapore is now just signed a contract to hold the Grand Prix for another four years coming from here. In 2021 how different will these cars look?

Ian Rhodes: That's is probably a question I can't answer directly but what I can say is that the engine regulations which will change at the end of 2020, the 2021 season they are in detailed discussions right now. They will be concluded by the end of this year so everybody can start working on the design of the next engine. And I think that will be the big dominating feature is how much technology how much complexity and how much cost will go into the next generation of Formula One engines. I think you know what I hear on the great going no big secrets is that the kinetic energy recovery systems the cars will continue but the heat recovery, energy recovery from the turbocharger will probably be dropped to help.

NH: Will that make the cars faster?

Ian Rhodes: That in itself won't necessarily make the cars faster. But there are other changes that will that will most likely make the cars more noisy and faster which is again something I think the fans are looking for.

NH: And you mentioned cost. We understand that's one of the topics we talk about all the time. Some complaints that cost are getting out of control in Formula One. Are you under pressure when it comes to the technologies supply to keep cost down?

Ian Rhodes: So yes everybody's under pressure to contain and control costs. Cost is a big issue in the sport is it's and it's enabling a few teams at the front of the grid to spend more money and win arms race and it's putting huge pressure on the teams towards the back of the grid. And under the new owners Liberty Media looking to get even that out and they're exploring cost caps at the moment to level some of that.

NH: Essentially that the cost structure of the game. Do you think that would make for a better game if there was more level playing field?

Ian Rhodes: One of the things from our point of view one of the things that I think is great is that what will has happened in the sport in the past which is why we have the standard ECU contract and we see more of this happening is that there will be standardization of certain parts of the sport. So certain big blocks and areas of technology will get standardized and there'll be a single supplier as McLaren Applied Technologies is for a number of parts of the series. There's going to be more standardization and that will then drive the competition into other specific areas of technology where they do want the sport to compete and where they want to drive the technology forward. The sort of thing that for example Formula E are doing with battery technology.

NH: I was just about to ask you, you also work with Formula E. What do you think is going to be gain traction here and stand as a competitor in some ways to Formula One?

Ian Rhodes: I don't think it'll be a competitor to Formula One but I think it will get traction. It's a big race in Hong Kong each year and it would be nice to see one in Singapore sometime soon. But I think the two series' will run. They are offering different things and I think that actually playing out to quite different generations and different types of fan bases.

NH: And speaking of the fan bases. You already mentioned that Liberty Media trying to expand really the games' appeal, is that ultimately good business for you?

Ian Rhodes: Yes it is. It's great to have an owner with so much experience of how to take a sport and to make it more accessible and more exciting and more engaging for bigger and bigger fan base. And I think in my personal view is that Formula One needs to appeal more to the younger generations than it than it has done in the recent past. And if you knew what was going on behind the scenes in Formula One with all of the data that is being created and the way that it's being analyzed and the way that's being used. If we could expose some of that to some of the younger generation I think that would be absolutely fascinated by the sport and people that aren't watching it today would be would be totally engaged.

NH: Looking outside of Formula One you have used the technology from Formula One to apply to other areas as well. I know you had a partnership with GSK trying to help some of their production processes if you will. Have you applied this to other businesses and will you do so in the future?

Ian Rhodes: Yes that's part of our reason for existence it's the technology part of McLaren. Our DNA, roots our origins are in motorsport and that will always be our sandpit for growing and developing different technologies like the IOT stack that we've effectively got running in motorsport today. But then we pivot that into other industries to benefit other parts of society and at the moment we're focusing on the automotive industry the health care industry and the public transport industry.

NH: And of those which is the highest growth area?

Ian Rhodes: Healthcare is the, I think that's the fastest growing opportunity for us right now and it's one of the biggest markets. It was one of the reasons I was attracted to joining McLaren in the first place just three years ago. I could see that McLaren had mastered the technologies that are fundamental to stopping health care bankrupting our children in the future.

NH: When we look at the big companies in the healthcare field many would say they have huge R&D budgets why not just do it in-house, why do they come to you?

Ian Rhodes: Those budgets are being spent on different completely different technologies. Those pharmaceutical bio pharma medical device diagnostics companies have a different technology base a different skill set and they've got a very important and complex things that they need to keep doing R&D on. What we're looking to do is to help them to engage that technology with patients, clinicians, friends, family and consumers more quickly more widely more effectively to get more value out of those products.

NH: Do you think innovation ultimately is better fostered outside of the larger companies?

Ian Rhodes: I think it has to be done in partnership. We need different people coming from a different world, a different industry, different backgrounds and technical insights combining with people in the healthcare industry whether that be a pharma company or an actual health care delivery organization in a hospital group.

NH: What's the biggest 'wow' product that you are working on in health tech that you would love to tell us about?

Ian Rhodes: We were working on some in vague terms I have to keep it a little bit vague. Digital therapeutics in the orthopedic industry. So digital wrappers that will go around existing orthopedic products that will completely transform the way in which we look after ourselves particularly as we all get older and we have issues with musculoskeletal systems that there are there are some big changes coming which are data driven.

NH: And when we talk about some of the applications here in health tech is there one regional market that presents the best growth for you?

Ian Rhodes: So the health industry is global. Very much. Well the health technology industry it is a global industry so if you're a pharma medical device diagnostic company it's very much a global business. The actual provision and delivery of that is a localized very localized it's almost it was still actually a cottage industry wherever you go in the world. And that's one of the things that we're looking to help break through as to how to take a pill and go beyond the pill or around the pill with the digital technology which means that health care provider with a particular payment system with a particular disease problem in Cambodia can use that pill as effectively as somebody can in Europe or in the U.S. or in Singapore or Australia regardless of the environment and the payment system and the individual that you all use. You all need to get the same amount of benefit from that same pharmaceutical chemical or biochemical breakthrough that has been discovered in the lab.

NH: All of this innovation technology development that you are talking about requires a lot of talent. As you are faced in the UK do you worry that the implications of Brexit are going to make it even more difficult to hire this talent?

Ian Rhodes: So the biggest the biggest challenge to the growth of my business is talent. It's accessing enough of the bright young technically educated digitally enabled people. We are effectively holding back on some customers and some customer projects that we would like to be doing because we just can't hire enough talent people fast enough. It's one of the reasons that we are here and we have a significant and growing operation here in Singapore and an operation in the U.S. and we will be opening up other offices not the geographies in due course. So we have to locate near the talent pools. So we don't need to locate near any our customers. We are global, our customers are global. We commute but we have to locate our operations as McLaren Applied Technologies where we can dip into the key educational talent pools around the world. Clearly if it becomes more difficult to move people you know talent in and out of the UK that's going to that's going to hinder our business.

NH: Since you do work across all the F1 team are you pooling for anyone in the race?

Ian Rhodes: No.

NH: Thank you very much for your time. Thank you. Appreciate it. Thank you.