The Telegraph My details My newsletters Logout Upgrade to Premium My details My newsletters Logout The Telegraph Amazon's Echo steals a march in the race for artificial intelligence 20 September 2016 • 10:24am this year Credit: Amazon It came and went so quickly that one could easily forget it ever existed, but it was only two years ago that Amazon released its own smartphone.
 Developed in the web retailer’s secretive “Lab 126”, a Silicon Valley subsidiary 800 miles south of Amazon’s Seattle headquarters, the “Fire Phone” was applauded for its ideas, which included a 3D screen effect made possible by an elaborate four-camera system.
 However, it proved to be a commercial flop.
 Tied to Amazon’s own operating system – a flawed stepbrother of Google’s dominant Android software – and with a premium price tag that disappointed those familiar with the company’s reputation for aggressively-thin margins, it failed to mount anything approaching a challenge to Apple or Google in the smartphone wars.
 And regardless of the Fire Phone’s merits, or lack thereof, Jeff Bezos and his team had entered the market half a decade late.
 In a year that smartphone sales surpassed one billion, the Fire Phone sold a few tens of thousands, and it was swiftly and silently discontinued.
 The Amazon Fire phone The Amazon Fire phone Credit: Amazon For a company founded on prescience – Bezos’s belief in online retail led him to quit his Wall Street hedge fund before many had heard of the web – it was a spectacular misjudgement, and led to a $170m (£130m) writedown just a year after the phone was launched.
 Amazon’s failure in such an important battleground would perhaps have been more closely scrutinised in a tougher year, but at present it seems the company can do no wrong.
 It has posted five straight quarters of profits, unheard of for a company previously allergic to the word, and shares have risen by 150pc since the start of 2014.
 But at the same time, its dismal showing in smartphones has been eclipsed by delirious enthusiasm about what comes next.
 A few months after the Fire Phone, Amazon unveiled a mysterious black cylinder it called the Echo.
 A two-way wireless speaker and microphone combination with a virtual artificial intelligence assistant – “Alexa” – that responds to voice commands like “Read me the news” or “Turn off the lights”, it is designed to blend into the background in a kitchen or living room, responding to every wish.
 At a glance | Amazon Echo When it was first announced to a sceptical tech press months after a flop phone, the Echo was dismissed separately as a joke and a privacy nightmare.
 Now the latter may still prove to be the case - the Echo is always listening, and after it is awakened by saying "Alexa", it logs every sentence spoken to it (although Amazon says privacy is at the heart of the device and that users can delete queries that are stored) - but a joke it is clearly not.
 In fact many analysts now believe that Amazon has one hand on the future that comes after the smartphone.
 Alexa is not the only, or even the first, voice-activated virtual assistant – Apple, Google and Microsoft have had their own for years – but it is the first that consumers have truly embraced.
 While taking out a smartphone in public and speaking to it – as one must with Apple’s Siri or Google’s Assistant – is awkward, and often slower than simply using a touchscreen, talking to a device in the comfort of one’s own home is decidedly less uncomfortable.
 Amazon’s software also seems more reliable.
 The company’s prowess in cloud computing – which has spawned the colossal Amazon Web Services unit – means that the Echo has access to the near-infinite computing resources of the company’s servers: it can hear a question, send it to be processed, receive an answer and relay it in milliseconds.
 And Amazon’s underrated artificial intelligence chops, honed using years of it to sneak under the radar.
 It is important not to get carried away about the Echo, despite its growing buzz.
 Sales to date are estimated to be around 7m – less, for example, than the Apple Watch, whose sales have been below expectations – although the Echo is believed to have picked up momentum in recent months and has only been available in the US to date, with the UK and Germany following later this month.
 The impact on Amazon’s own business is also unclear.
 The company says it is not making a profit on the £150 device.
 Many shoppers, meanwhile, are likely to feel uncomfortable, at least at first, about speaking to a robot to do their shopping.
 Analysts at RBC Capital Markets say 47pc of owners have never used the Echo to order an item from Amazon, against 10pc who buy things “very often” and 16pc who do so “somewhat often”.
 But Amazon has clearly stolen a march on its rivals, which they are now scrambling to recover from.
 Google announced a rival to the Echo earlier this year, although evidence of its development has been scarce, and privately, Amazon does not appear to be too worried.
 Apple is also rumoured to be exploring such a device.
 But in the same way that Amazon’s tardiness in the smartphone game punished it, the company getting ahead of its competitors may prove crucial.
 Incidentally, the arms race that will follow is only likely to heighten interest in British expertise in artificial intelligence.
 Much of the Echo’s technology stems from Evi, a startup it acquired in 2012.
 Google’s AI breakthroughs are increasingly being made at the King’s Cross headquarters of its subsidiary DeepMind.
 And last year Apple bought VocalIQ, a University of Cambridge spin-off that specialises in talking computers.
 British tech investors wondering where to put their cash would do well to take notice.
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