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junko.yoshida
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Re: Look at the factory
junko.yoshida   10/2/2013 5:36:06 PM
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No question about innovation on the factory floor, @DMcCunney. I totally agree. 

Look no further than Taiichi Ohno, a self-taught engineer who developed the just-in-time manufacturing system at Toyota -- and that was introduced in Toyota plants in mid 1950. 

Toyota, Honda and Nissan are also known for their own robotics technology.

So, yes, lots of innovation is going at the factory.

junko.yoshida
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Re: Define "innovation"
junko.yoshida   10/2/2013 5:27:52 PM
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@DMcCunney, thanks for your thoughtful reply. Certainly, I believe that there are lots of innovation going on at major automakers' labs -- things of the nature consumers aren't aware of.

In my defense, I wrote this piece from chip companies' point of views. As more and more electronics is going inside a car -- whether infotainment or ADAS, I am hearing more chip suppliers complaining about the auto industry.

Sure, the automotive industry represents a "steady" market for some of these chip suppliers.

But to be clear, chip vendors are under pressure to innovate a number of key electroincs systems for ADAS.  When semiconductor companies come up with a new image sensor, software and camera modules that see things differently, for example, they find carmakers not exactly as their "partners" to innovate new ADAS technologies together.  Rather, chip vendors remain "suppliers" -- essentially to jump hoops for them.

Of course, in this case, chip vendors ARE automotive parts suppliers. And parts suppliers to complain is probably out of line in the eyes of carmakers. Perhaps. But as a Freescale executive was quoted by saying in the last graph of this story, I suspect the advancement of electronics systems inside a car will need a much tighter collaboration between the two parties, on a much more equal footing in the future...

The uncomfortable truth is that the fundamentals suggest that the industry needs to rethink how it goes about sustaining innovation. This requires a completely different kind of collaboration -- and true partnership -- to manage through new emerging challenges.  

 

DMcCunney
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CEO
Look at the factory
DMcCunney   10/2/2013 5:17:24 PM
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Another thought on auto industry innovation: instead of looking at the car, look at the factory that builds it.

One thing I think you'll see if you tour an assembly plant operated by one of the big manufacturers is steadily increasing automation and use of robotics, with a declining number of people required. Machines are doing more and more of the work that used to be done manually.

In addition, there have been changes in other areas, such as organization.  Led by the Japanese but now common, we see increasing emphasis on supply chain management and "Just In Time" inventory control.

While not obvious to a car buyer, this is as much innovation as what's currertly on an engineer's CAD station at an automaker R&D facility.

DMcCunney
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CEO
Re: Upgrades don't need a whole new model
DMcCunney   10/2/2013 5:06:01 PM
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@Bert22306: The other thing is that all of these electronics, as well as power steering systems, transmissions, engines, batteries, climate control systems, windshield washers and wipers, brakes, shock absorbers, wheels and tires, and on and on and on, are certainly modular and are installed in many different models. That's why anyone who looks under the hood or underneath, can see the strong family ties between, say, a Chevy and a Cadillac.

Yep.  And an awful lot of that stuff is not actually made by the auto manufacturer whose label is on the car.  It's made by third-party suppliers selling to all of the automakers.  Consider the ubiquitous spark plug. People like NGK, Bosch, and Champion - Federal-Mogul are competing to get their plugs supplied in new cars from major manufacturers.


Increasingly, automaking resembles PCs - the automakers are assemblers, putting together parts made by others.


DMcCunney
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CEO
Re: Modular vs. vertically integrated
DMcCunney   10/2/2013 4:56:17 PM
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@AIPothoof: Later came Checker Motors (I grew up near Kalamazoo, MI, where they were located).  Their model was the same: buy axles, motors, suspension and so on from the Big 3 (and their suppliers), attach it to their chassis and cover it with their own body.

Yes, I was thinking about them.  IIRC, they bought chassis and running gear from Chevrolet.  They were essentially custom coach makers, putting their body on someone else's frame. I've ridden in classic Checker cabs, and you still occasionally see the odd Checker Marathon (taxi body but not in yellow, and packaged as a family sedan without the taxi jump seats in the back.)

When Detroit started downsizing their cars late 60's-early 70's, Checker could no longer buy their larger components for a competative price.  They went out of business.

Their alternative would have been new downsized models of their own, but the market for purpose-built taxis wasn't big enough to support that,  (And while taxis are increasingly down-sized now, too, a lot of them were things like Ford Crown Victorias or Chevy Caprices intended for the fleet market where customers buy many at a time.)  Pressure these days on taxis is fuel economy, because stop and go city driving is the worst from an economy perspective, and fuel costs will be a major portion of a taxi's operating cost, so taxis are downsizing to get fuel economy.

I came to the conclusion that a company had to have a certain amount of proprietary content in their product if they were to survive (but I don't know that the lower limit is).

"Proprietary content" had a lot more to do with styling than components.  Models were differentiated on what they looked like, more than by wat was under the hood.


I would also argue that PC's went through the same thing: in the early 90's, everybody and their brother was assembling desktop systems from components and putting their own label on them.  Now, we've got 2 or 3 major desktop PC manufacturers and perhaps 5 or so laptop manufacturers (the laptop side seems to have more proprietary design content).

Agreed.  PCs became fungible commodities.  Given the same specs, it largely didn't matter whose name was on the box, and competition came down to price, with lowest cost producer winning.  You had to make and sell huge volumes just to cover costs. let alone make money, and smaller vendors rapidly became unable to compete.

DMcCunney
User Rank
CEO
Re: Same dynamics in HDDs
DMcCunney   10/2/2013 4:32:26 PM
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@Sheetal.Pandey: I think we need to distinguish between two differnt kinds of electronics in automobiles.  One kind is what we already see a lot of: the sensors and microcontrollers used internally by the car, that do things like control brakes and provide ignition timing.  The other part arguably is consumer electronics and infotainment, as cars increasing have options for entertainment centers for the passengers and built-in GPSes for navigation.  The same underlying parts that might be in a smartphone or tablet are simply in a different form factor, but serving the same sorts of purposes.

krisi
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CEO
electrification
krisi   10/2/2013 4:31:27 PM
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yes, increase in electrfication will happen...but the pace of it will be snail slow

DMcCunney
User Rank
CEO
Re: Same dynamics in HDDs
DMcCunney   10/2/2013 4:24:17 PM
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@Rick: A few customers pound their profits down to pennies, yet they somehow stay in.

Think of it like the supermarket industry.  Supermarkets sell mostly fungible commodities, where competition is on price.  (Milk is milk, regardless of whose name is on the label.)  They make pennies on a dollar, so it's all about market share, and getting as many dollars as possible to make pennies on.  Measurment there isn't profit margin, it's inventory turns and Return On Assets.

When there's a market for millions of something, chances are you can address it and make money, even if the amount you make per unit is less than you might make on a different product.

AlPothoof
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Rookie
Re: Modular vs. vertically integrated
AlPothoof   10/2/2013 3:58:09 PM
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What goes around comes around...

Back at the turn of the millenium, I toured the Auburn/Cord/Duesenburg Museum in Auburn, IN.  One of the displays they had was a poster listing all the US car manufacturers that had existed between 1900 and 1950 (with a notation of the few that were still around).  There were something like 300 companies listed.

The vast majority of these "manufacturers" were really little more than assemblers; they'd buy axles from A, engine from B, transmission (or chaincase) from C and so on, then wrap it up with their own body (which was often contracted out to a coach builder).

Later came Checker Motors (I grew up near Kalamazoo, MI, where they were located).  Their model was the same: buy axles, motors, suspension and so on from the Big 3 (and their suppliers), attach it to their chassis and cover it with their own body.

When Detroit started downsizing their cars late 60's-early 70's, Checker could no longer buy their larger components for a competative price.  They went out of business.

I came to the conclusion that a company had to have a certain amount of proprietary content in their product if they were to survive (but I don't know that the lower limit is).

I would also argue that PC's went through the same thing: in the early 90's, everybody and their brother was assembling desktop systems from components and putting their own label on them.  Now, we've got 2 or 3 major desktop PC manufacturers and perhaps 5 or so laptop manufacturers (the laptop side seems to have more proprietary design content).

Sheetal.Pandey
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Manager
Re: Same dynamics in HDDs
Sheetal.Pandey   10/2/2013 2:16:38 PM
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Electronics in automotive has a long way to go before electronics industry considers maximum revenue coming from automotive. Cell phones and infotainment industry would remain quite a strong competition.

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