Embedded Devices vs Smartphones
Do you know that more than 25% of world population shall be using smartphones in next few years? According to eMarketer, the number of smartphone users worldwide will cross 2 billion by 2016. That’s really a colossal number! Going by existing statistics, I believe majority of the smartphones sales shall be driven by few dominant suppliers or Original Equipment Manufacturers (OEMs). In my view, the high sales volume is beneficial for the OEMs, as they can leverage economies of scale. Further, the high Non Recurring Engineering (NRE) cost can be distributed over high volumes, and may also help OEMs in achieving optimal cost structure.
Let us now shift focus to another equally important market: embedded devices (e.g ECG machine, Ticket vending machine, etc.). Although, embedded devices uses mostly the same hardware and software components, which includes System on Chip (SoC), memory, connectivity & multimedia interfaces, operating system, device drivers, etc., as those used by smartphones, both have contrasting characteristics. The typical characteristics of low sales volume and long product life of embedded devices create significant challenges for their OEMs.
|Product Life||7-10 years||12-18 months|
|Sales Volume||Thousands or less||Millions|
As you maybe knowing that unlike that of smartphones, sales volume of embedded devices is usually low, as these devices are application-specific. Obviously, this creates problems for embedded OEMs in term of supply-chain management of silicon components, cost pressures and barriers to adopt latest technology. Usually market leaders of silicon components prefer not to engage with low volume customers. So, OEMs may struggle to get access to latest technologies. Low sales also rules out the possibility of leveraging economy of scale in components procurement and product manufacturing. The impact is further compounded with high NRE cost leading to non-optimal cost structure. Thus, many OEMs may struggle to maintain a good profit margin.
With Moore’s Law in action, now we have already SoCs based on 14nm process node, and within few years, it is inevitable that we will see silicon components based on 10nm and even 7nm! This rapid technological advancement makes the embedded devices outdated or obsolete sooner than expected, as these devices have long lifecycle of around 7-10 years. For the OEMs, this leads to issues in terms of platform redesigns, supply-chain management of silicon components, inventory management and finally price wars, as the market embraces products with latest technologies. For smartphones, these rapid changes is not an issue as the expected product life is around 12-18 months.
I believe that OEMs in the embedded market should make ideal choices starting from the embedded product development. Product development from scratch may not alleviate the issues presented by the typical characteristics of embedded devices. Stay tuned for my next blog in this series for more details on this and know how Toradex can help in resolving these challenges!
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