The latest salvo from the Genivi Alliance – a SWOT analysis of competing automotive operating systems – appears to cloud rather than clarify the existing automotive OS market environment. The future prospects for current and emerging players are described with little supporting evidence or insight. The report also concludes – from OEM and supplier interviews – that the Alliance’s assumptions regarding cost savings are valid without providing a detailed financial analysis of where cost savings may be achieved – ie. head count, lines of code, etc. Not surprisingly, the self-serving report concludes that Genivi will rule the market in the long term with deployments beginning in the 2013-2015 timeframe (http://tinyurl.com/29aly2t). The report initially sets out to provide a thumbnail view of current OS market leaders Microsoft, QNX, MicroItron, Linux and Android. Going without mention are Mentor Graphics, Ubuntu, OpenSynergy, Meego or even VxWorks (currently used by Peugeot-Citroen, Nissan and Volkswagen). Also missing entirely are Genivi members MontaVista and Wind River. Ostensibly, the goal of the report is to benchmark and/or handicap these various infotainment software architectures and their influence on in-vehicle infotainment systems; and to validate the cost savings claimed for Genivi’s code-sharing/recycling model. Missing is a detailed description of the actual software architectures themselves – ie. what makes one “better” than another. What is available in the report summary seems misleading such as a reference to Microsoft Auto booting slowly, which is also a shortcoming of Android, but which is also easily overcome. Also missing is a discussion of current market forces, strategic supplier relationships, recent mergers and acquisitions or potential mergers or acquisitions. The absence of these latter aspects means that Intel’s acquisition of Wind River goes without mention as does the merger of Intel’s Moblin platform with Nokia’s Maemo OS to create Meego – rumored to have been selected by Genivi as its infotainment platform of choice. (Press and Nokia reports have quoted senior Genivi representatives stating that Meego has been chosen for this purpose - http://tinyurl.com/2d46xls. No affirmation of this selection has come from any Genivi member other than BMW.) MontaVista’s acquisition by Cavium Networks and QNX’s purchase by RIM gets no attention in the report. Neither does TomTom’s decision to adopt the Webkit OS, a platform found in other segments of the mobile market such as Palm’s Web OS. (The report fails to note Bosch’s adoption of Linux or Visteon’s embrace of Genivi, Microsoft, QNX AND Ubuntu – hedging its bets.) These oversights are more significant than they seem as they suggest a lack of awareness of the symbiosis between mobile device operating systems and automotive hardware and software architectures. Additionally, the report repeatedly refers to “risk-averse” Japanese OEMs and tier one’s being hesitant to adopt open, Linux-based platforms – including anything from Genivi to Android.  This assertion is patently absurd given Clarion’s longstanding support of Linux. The report also paints a grim picture of QNX’s market outlook, suggesting the company’s app support is “difficult to configure” and that the company can be expected to withdraw from the IVI market entirely within a short period of time. This will no doubt be news to executives at QNX’s Ottawa headquarters where headcount committed to automotive projects is on the rise as are design wins. And the acquisition of QNX by RIM opens doors to automotive-related IP (ie. traffic apps) while adding access to a massive and growing installed base (ie. probes). Unlike all of the alternatives currently in the market, QNX currently offers a range of flexible, scalable solutions future proofed to support Adobe Flash, HTML5, Flash Air and Flash 10.1 and all mobile OS's. QNX is customer friendly with support unmatched by Linux-based competitors or Microsoft. By way of contrast, OEMs implementing Microsoft are finding they must enlist the aid of third-party developers (bSquare, Elektrobit, etc.) to customize Microsoft Auto to their requirements. Microsoft has left application development entirely to its customers and their partners. It is worth noting as well that QNX’s flexibility is an advantage vis-à-vis Microsoft. Where QNX supports nearly every potential application or implementation known to automotive engineers without favor, Microsoft is likely to push its Bing search engine, Silverlight graphics and other in-house offerings. The report notes that the next generation Microsoft IVI platform, Motegi (Windows Automotive Embedded 7), will launch with Japanese OEMs, though it provides no time frame. Microsoft indeed has at least two partners in Japan – Alpine and Mitsubishi – which suggests that either Honda or Mercedes may be implementing Motegi. The report neglects to mention QNX’s recent gains in Japan, including Panasonic and Denso, showing a deeper penetration of QNX into Toyota. In fact, QNX has benefitted handsomely and rapidly from its separation from Harman – immediately attracting attention from potential Japanese and Chinese customers. Where QNX is weakest is in developer support. This is precisely where Android shines. The report summary correctly identifies existing developers working on automotive Linux implementations – ie. Parrot, Continental and Roewe – and identifies the inclination of many designers in the industry to connect with Android but to keep it out of the central stack. The report also notes Google’s disinclination to support or endorse Android for automotive implementations, but leaves the door open to an embedded future for Android. (GM is thought to be considering an open platform such as Meego or Android for a future OnStar or infotainment launch.) But this points up a fundamental gap in the report, which is the wider context of the OS debate. Android and Genivi do not line up directly with QNX, Microsoft or Linux (pick your distribution). Genivi has always been positioned as a code sharing platform for infotainment systems - as such it has never been presented as a replacement for Microsoft or QNX. Android, similarly, is being pursued as an alternative for ultra-low-cost (entry level) platforms - typically those emanating from India and China - as well as a means for implementing revenue sharing models based on mobile applications in the car. The new Genivi report marks the first time the Alliance's platform is proposed as a replacement for QNX or Microsoft or any other OS, indicating a change in strategy for the group. This is where the group may be overreaching. Presenting Genivi as a one-for-one substitute for existing real-time operating system solutions is a different proposition from offering a code-sharing/recycling platform intended to reduce development costs. Obtaining industry buy-in to this vision will take 5-10 years, by which time the market may well have moved on to the next big thing. And as an industry coalition-driven solution, Genivi arrives untested in the marketplace. The report further attempts to validate Genivi’s vision for cost-reduced platform development, saying interviewees estimated IVI deployment cost savings of up to 50%. At the same time, though, the report acknowledges that initial implementations may cost even more than incumbent solutions. Justifying or validating proposed Genivi cost savings will continue to be a tall order for the Alliance. Conclusions: The Genivi Alliance’s IVI software architecture report provides valuable insights but is rife with glaring omissions, unsupported conclusions and errant assumptions. The report oversimplifies the automotive OS ecosystem and competitive environment and underestimates the influence of some incumbent players, such as QNX, and the emerging role of content and service aggregators including TeleNav, Inrix, Airbiquity, WirelessCar, TCS, ITIS Holdings, Navteq and Hughes Telematics. A few of these content and service providers were interviewed for the report. But not a single telecommunications carrier or handset maker – outside of Nokia - was interviewed. Even more obvious than these omissions, however, was the exclusion of both Audi and the e.solutions joint venture with Elektrobit - the single most prominent, influential and competing IVI platform in the industry. The oversight is obvious and unfortunate. The forces that are determining the future of the automotive IVI experience are almost entirely developing outside of the car, so a wider base of interviewees should have been considered. The single greatest weakness of the Genivi Alliance is its inward focus on the automotive industry as opposed to an outreach to the wider world of mobile devices and consumer electronics. It is possible for Genivi to “win” in the long run and “challenge” (in the report’s own words) Microsoft, but the Microsoft embedded solution will always have the advantage of developer support from across a broader range of industries and the design priorities that those other user communities will contribute. Genivi’s narrower focus is at once its greatest strength but, in the end, its Achilles heel. <!--[if !supportLineBreakNewLine]--> <!--[endif]--> Further insight: Smartphone Market Evolution and the Automotive Opportunity Implications – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/34hldb5 Automotive Connectivity: Beyond Bluetooth Solutions – Mark Fitzgerald – Automotive Multimedia and Communications Service - http://tinyurl.com/2gx88eo

TomTom interrupted the epitaph writers last week with a spunky earnings call and a stunning customer presentation ushering in a new portable navigation device architecture and strategy modeled on the mobile phone market. The earnings report was significant both for the company’s ability to parry analyst skepticism and its self bestowal of the title: “fastest growing European telematics company.”

 

Skepticism surrounding TomTom’s ability to continue to grow and do so in a profitable manner was laid to rest by the Q1 2010 report which showed a 26% increase in revenue and a profit. The revenue gain came in spite of declining PND sales overall with TomTom claiming market share gains in Europe and North America.

 

The skepticism was expressed by multiple analysts on the earnings call repeatedly questioning the short- and long-term impact on TomTom of smartphone navigation. TomTom executives were quick to point out that 10M navigation application downloads, as reported by Nokia, did not directly translate into regular, daily use of smartphones for navigation.

 

TomTom’s broader survival strategy became clearer from a quick review of the earnings report which showed its non-consumer lines of business – a newly created categy – capturing 31% of revenue in Q1 ’10, up from 24% in ’09. The non-consumer segments consist of TomTom Work, licensing and the automotive business. (TomTom reports a 40% attach rate for its solution at Renault and claims 10% automotive market share as its solution is extended to additional Fiat and Renault models.)

 

TomTom Work showed 41% subscriber growth year-on-year to 104,000, well short of the 300,000 subscribers targeted for 2011, but enough to justify TomTom’s claim of being the “Fastest Growing Telematics Company in Europe.” The figure is even more important when one considers this is one of the highest gross margin businesses in TomTom’s portfolio, according to the company.

 

To round out the rosy picture TomTom pointed to the 700,000 Live Service enabled devices currently in use by consumers enabling a range of service and content transactions (including sharing of traffic and speed cam data), all of which are also exceptionally profitable to TomTom, again according to the company. With its newly announced webkit architecture strategy and adoption of the smartphone app store model (http://bit.ly/9q1jIV), TomTom hopes to build this user base.

 

An interesting note to this effort to build the TomTom user base is the fact that TomTom says it will no longer provide quarterly reports of device unit sales or average selling prices. The reason for this reticence is the company’s stated intention to alter its business model to build the base of users. Clearly TomTom is alluding to the potential for subsidizing sales of PNDs along the mobile phone model – a strategy long toyed with by the industry but never fully adopted.

 

TomTom did not specifically confirm its intention to subsidize PND sales. But this interpretation is supported by the somewhat ambiguous comments expressed in the earnings call and in the context of its plans to build its subscriber base.

 

Once TomTom has brought its open platform and app store model completely into the marketplace, expect subsidized devices, particularly among the new, simplified TomTom Ease line. The objective is to build a larger user base producing a wider range of shared location information which will become increasingly accurate (traffic) and useful (user evaluations) as the subscriber community grows.

 

TomTom’s aim is to achieve daily relevance from daily usage by a wide subscriber base. To further hedge its bets TomTom is adding new automotive relationships – such as Ford’s announced intention to use TomTom maps and content – and continuing its expansion into emerging markets (Ukraine, Morocco, Mexico, and India) where further PND growth is expected. The pieces are falling into place for Europe’s fastest growing telematics company, which has chased away the skeptics once again.

 

Further Insight:

 

http://bit.ly/cMw4f1 - Solid Q4 for PNDs, but 'Free' Navigation is Shaking Up Monetisation - John Canali – Automotive Multimedia and Communication Service

 

http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 - Nitesh Patel – Navigation and Location Opportunities

 

http://bit.ly/8Yo4U6 - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel – Navigation and Location Opportunities

Harman announced a return to profitability for its fiscal second quarter in an earnings call earlier this week. In that call, the company detailed its marketing plan which could be taken as a blueprint for the entire industry – particularly the company’s inroads into larger volume mid-segment vehicle categories.

Harman is pursuing emerging market opportunities in China, Brazil and India with local development and manufacturing presence – including a $1B revenue target for China by 2015. The emerging market initiative is reflected also in a targeted shift of engineering/R&D balance from 99% high capital and cost (HCC) markets to 60% HCC, and manufacturing/assembly from 81% HCC to 50% HCC by 2012.

The company expects to maintain its luxury segment leadership while leveraging its previously announced “scalable system” strategy, which has already contributed to a Toyota European design win for MY2011. The scalable system is part of an initiative targeting what Harman sees as a $5B high-growth, mid-segment market opportunity reflecting the company’s desire to capture a broader portfolio of business.

In that regard, Harman wants to pioneer energy-saving GreenEdge technologies for hybrid and electric cars in partnership with Intel and Texas Instruments developing solutions to reduce power consumption by 75% including high efficiency speakers, one of the few objectives the company has yet to realize in the marketplace. Similarly, the company is working with Lotus Engineering on Active Noise Management solutions for hybrid, electric and conventional vehicles to address impending legislation regarding pedestrian safety. Noise management will also apply to in-cabin noise cancellation and reduced weight and CO2 emissions. And Harman is also targeting advanced driver assist systems, an entirely new segment for the company.

In its earnings call the company mentioned winning $2B of additional business, expanding its contract portfolio to $10B, a figure the company claims is the largest in the industry. Included in its current and recently executed order book are:

->     Infinity branded audio systems for next-generation Chrysler SRT series high-performance vehicles;

->     Launch of Mark Levinson premium surround sound for MY10 Lexus GX 460;

->     Launch of JBL premium sound for MY11 Toyota Sienna in U.S.;

->     Launch of Harman Kardon Logic 7 HD system with Range Rover for MY10 mid-model year introduction;

->     Launch of Ferrari 458 Italia equipped with Harman audio and infotainment;

->     Exclusive Haman Kardon sound lounges at BMW brand centers in Munich and Berlin;

->     Press launch of Harman/Lotus Engineering HALOsonic sound synthesis technologies;

->     Selected by BMW for next gen, high-end “Professional infotainment system for all new platforms including BMW, Mini and Rolls Royce;

->     Selected by Daimler for next gen Comand infotainment system for new Mercedes S-Class and C-Class models;

->     Selected by Toyota to provide Harman next gen scalable infotainment for vehicles sold in Europe beginning MY11;

->     Selected by Toyota to provide premium JBL branded audio for 4Runner and Land Cruiser in the U.S., Europe and Middle East and the MY11 Siena in U.S.

All of this contributes to what Harman estimates as 45% global branded automotive audio market share, with Bose at a distant 25%. Harman’s branded audio solutions are used in more than 200 car platforms from 12 OEMs shipping more than 2M audio systems annually. Sources indicate that this 500,000 units/quarter pace is actually approaching 1M units/quarter – a pace that will no doubt be stimulated by the recent Toyota wins and future higher volume segment wins.

The pace of launches has eased somewhat for Harman, which may help explain the return to profitability as profits cusually come later in the program cycle. The company hit a peak of six program launches in FY08, followed by five in FY09. The programs for those years included Mercedes, PSA, Porsche, Audi, BMW, SSangYong, Chrysler and Hyundai. Going forward, Harman says it will have four launches in FY10 (including Audi, Mercedes and BMW (2)), three in FY11 (Toyota, Mercedes and Chrysler) and one in FY12 (BMW), before ramping up again in FY13 with four: Harley-Davidson, Mercedes and BMW (2).

The company further notes the evolution of its infotainment architecture:

1997: SH1/16MB – Tuner/CD/Navi – Turn-by-Turn

2002: SH3/32MB – MMI2000 – VxWorks – Tuner/CD/DVD – Phone/SDS – MOST25 – 2D/2.5D Map

2008: SH4/512MB/1024 – MoCCA Framework – QNX CAR Platform – Tuner/CD/DVD – Phone/SDS – MOST50 – 3D Map – Internet Connectivity

2012: Intel Atomm/1GB – MoCCA & DSI 2.0 – QNX CAR – Tuner/CD/DVD/Blu-Ray – Phone/SMS/Email – MOST150 – NDS Navi – Enhanced 3D Map – Internet.

Worth noting in the architectural evolution is the growing role of both QNX (CAR Platform) and Intel (Atomm) as well as the onset of Internet connectivity - pioneered by BMW - Blu-Ray, MOST and enhanced navigation features, many of which will revolve around 3D and augmented reality implementations.

Overall, Harman appears to have emerged victorious from its cost cutting regimen with fewer European facilities but with a profitable organization in place pursuing business building initiatives throughout Europe, Asia and the U.S. The most significant business transformation of all, though, will be the Toyota wins. Not even Toyota's recent marketing stumbles can tarnish this achievement and how its will transform Harman's operations and growth profile.

The unspoken theme to the 2010 Consumer Telematics Show held one day prior to CES in Las Vegas was HMI’s role in the safe interaction between the driver of the vehicle and the various portable and embedded electronics prevalent in today’s vehicles.  When polled, the vast majority of the 250+ attendees of the telematics conference indicated that driver distraction is a major concern. There is widespread legislation across international markets governing the safe operation of cellular phones while driving. Safety concerns and legislation over the next 2-3 years is also expected to cover music players/iPods, PND and smartphone use in the vehicle. There is also strong legislator interest and research into driver distraction issues surrounding driver use of multiple multimedia and automotive features within the vehicle.

• Ray LaHood, United States Secretary of Transportation has called distracted driving a “deadly epidemic” and NHTSA has stated that in 2008, 6,000 deaths and 500,000+ injuries were caused by distracted driving.

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/27/AR2009112702320.html Despite increasing demand for HMI innovation there are significant cost related challenges that will impact availability, pricing and competitive positioning between HMI products and between car makers. Achieving scale economies across vehicle segments and leveraging from markets and products outside the vehicle will impact automotive product development. Car makers have differing strategies towards `open' versus proprietary solutions for multimedia and communications solutions including HMI. For example, Ford and Fiat are working with Microsoft, whereas Toyota is considering taking a proprietary route to operating system (OS) platform development.

• The most notable progress towards `open' standards, platforms and APIs - and hence cost reduction - has been made by voice technology based automotive products.

As consumers multimedia usability experience improves rapidly on portable devices and in the home, there are increasing opportunities for automotive players to learn and leverage this progress for improvements in the multimedia and communications experience in the vehicle.

• There is a significant and growing gap between multimedia experience on devices and in the home versus automotive products.
• There is rapid growth in consumer adoption, functionality and user experience for: iPods; iPhones and smartphones; PNDs; and multifeatured devices.
• Display designs and location, voice technology, resistive touch, capacitive touch, other haptic technologies, other HMI technologies, improved intuitive menu structures, and user interface design all offer opportunities for automotive product improvement and competitive differentiation.  (Please refer to Strategy Analytics Blogs concerning the KIA UVO and Ford SYNC announcements at CES 2010)

Strategy Analytics forecasts strong growth for automotive voice technology and touch screen displays are set to reach $1.2 billion and $1.7 billion respectively in 2015. Strategy Analytics expects total revenues generated from voice recognition systems to increase from $284M in 2007 to $1,195M in 2015 representing a CAGR of 20% p.a. over the forecast period. Strategy Analytics expects total revenues from touch screen displays to increase from $660M in 2007 to $1,7102M in 2015 representing a CAGR of 13% p.a. over the forecast period (Exhibit 1.3).

• "Total" is the summation of demand from the major vehicle producing regions of NAFTA, Japan, Europe (West and East), Russia, South Korea, China and India.

For more information on vehicle HMI, please see the following Strategy Analytics report “Automotive HMI: Voice Technology and Touch Screens Have Significant Lead”:  http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=4730