Apple's reported $200 million acquisition of Xnor.ai is part of the bigger red-hot trend of edge computing

• The edge computing industry is expected to be worth more than $3 billion dollars in the next five years.
• In January Apple acquired one firm, Xnor.ai, for a reported $200 million, while competitor Kneron raised $73 million in funding from backers like Alibaba and Qualcomm.
• Edge computing allows data to be processed 'on-device', removing the dependency on cloud networks - and limiting the risk of user data being hacked.
• Early Xnor.ai backer Autotech Ventures told Business Insider he is so 'optimistic' about the industry's future, his firm has already invested in another edge startup.
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By 2025, the edge computing industry is expected to be worth $3.24 billion.

In January Apple acquired Xnor.ai, an edge AI startup, for a rumored $200 million. A few weeks later, another edge AI firm called Kneron raised $73 million in a fundraising round backed by commerce giant Alibaba and top-tier Silicon Valley investor Sequoia Capital.

So what's all the hype about?

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Edge computing allows data to be stored and processed closer to home, as opposed to going via the cloud. The increasing number of "Internet of Things" devices - everything from smartphones to smart diapers - means bandwidth requirements are being pushed to their limits.

By transferring these processes to the "edge", these devices can perform their primary computing functions without being dependent on a WiFi or cloud network. This could be applied to complex filters on your favorite photo-editing app or facial recognition capabilities in a smart camera. For example, smart camera company Wyze partnered with Xnor.ai so that its cameras could detect people, without relying on the cloud.

In an age rife with fears over privacy and how big businesses make use of consumer data, limiting the use of cloud networks also means' personal data doesn't travel so far, and is therefore less vulnerable to hacking.

Albert Liu, founder and CEO of Kneron, told Business Insider the company hopes to "democratize" computing power. Among his firm's biggest clients are Gree Electric, the largest manufacturer of air-conditioners in the world, and Sogou, one of the best-known online search engines in China.

"Cloud-based AI definitely has its purpose," said Liu. "But we want to disperse the power of inferencing among each individual device. You as a customer may not want your devices to be forced to access a cloud network every time you use it."

Xnor.ai, Apple's most recent buy, was spun out of A12, a research institute set up by the late Microsoft cofounder Paul Allen in 2014.

Asked what Apple's acquisition meant for the industry, the firm told Business Insider edge tech has "unique advantages" in the realm of privacy, "especially in a time when user data concerns are more in the spotlight".

"[It's] a clear signal that edge technology is a high-potential area of new investment for companies working on consumer electronics and other interactive technologies," a spokesman said.

"A smartphone, tablet, or home assistant device equipped with the tech Xnor.ai is building will provide a big leap forward for the markets in which Apple is the most competitive."

It added: "We expect to see a big impact from edge AI applications in the rapidly-expanding world of IoT devices. We'll see it in areas where privacy and the protection of user data are paramount, such as in medicine or law enforcement."

Autotech Ventures is a venture capital firm specializing in tech for vehicles - and an early backer of firms like Tesla and Lyft - which invested in Xnor.ai long before it was bought up by Apple.

Managing director Alexei Andreev told Business Insider he feels "very optimistic" about the future of edge computing. So optimistic, in fact, that he has just signed off an investment in another edge startup.

He laughs: "I'm afraid I can't tell you who it is yet."