These slides are from the webcast VDC Research's Eric Heikkila and Chris Rezendes presented on 11/11/09. A recording of this webcast is available on our website http://www.vdcresearch.com.
The Embedded Hardware Boards & Systems Market a Year Into the Recession: How Has the Market Shifted and What is the New Course?
1. The Embedded Hardware Market
a Year Into the Recession:
How Has the Market Shifted and What is the New Course?
Embedded Hardware & Systems Practice
Eric Heikkila, Director Embedded & Hardware Systems
Chris Rezendes, Executive Vice President
Ch i R d E ti Vi P id t
2. Recording Available
These slides are from a webcast presented on 11/11/09
11/11/09.
A full audio recording is available for download at:
http://www.vdcresearch.com/market_research/
embedded_hardware/freeresearch.aspx#Webcast
3. VDC Research
Other complimentary insights & marketing data on the
embedded hardware market available at:
www.vdcresearch.com
www vdcresearch com
4. Today’s Speakers
• Chris Rezendes, Executive Vice President
18 years experience as an analyst, consultant, advisor or operator in embedded, industrial, defense and a
number of niche IT technology markets
Operating experience in the embedded markets as VP/GM at Industrial Computer Source and Kontron GmbH
Prior experience: Deloitte & Touche, Harbor Research (‘Smart Services’ firm) DARPA CD&R (private equity)
Touche ( Smart Services firm), DARPA,
Harvard University
• Eric Heikkila, Director – Embedded Hardware & Systems Practice
y
5 years experience covering the embedded hardware and systems markets
Managing a team of 3 focused on every aspect of the embedded hardware and systems markets
Lead/ support analyst on every VDC Research EHW syndicated or proprietary engagement since 2005
Bucknell University BSEE
3 – 2008 VDC Research Group, Inc.
5. Agenda
VDC Introduction
Market Definition & Segmentation
Market Estimates & Forecasts
Customer Requirements
q
Market Share
A Look into the Future
4 – 2009 VDC Research Group, Inc.
6. VDC Research, Embedded Practice
• VDC Research was founded in 1971.
Continuous, profitable operation since.
Staff of 30 in Boston, Chicago, Los Angeles.
Focus on embedded platforms, power management, a number of niche IT markets
• Over 20 years covering the embedded systems markets
• Driven by extensive and constant primary research
Supply side – component, processor, board, and system suppliers (00s of telephone interviews annually)
Demand side – OEMs & integrators (000s of telephone interviews and web surveys annually)
• Syndicated & custom engagements with clients in the embedded systems market
5 – 2008 VDC Research Group, Inc.
7. Market Definition & Segmentation
The
Th multi-level value chain i getting more complicated – and more crowded
lti l l l h i is tti li t d d d d
The ‘traditional’ industry has been
1 fragmented, but linear
Distributors/VARs &
Other Channels
Component
Suppliers
Embedded Board &
SW Platform Integrated System
Suppliers OEMs End Users
Suppliers
CPU, DSP,
CPU DSP FPGA
Suppliers Growing
Value, Frequency, Intensity
Independent
Of Technical and Commercial System Integrators
Relationships Between
ECM/ ODM – IT Vendor And Others
ISVs
ODM/ ECM IT Infrastructure
Firms Vendors
Standards migration will create more
3 opportunities for these third-parties
pp p
Platform standards have allowed ODMs/ECMs to enter the
2 market; IT vendors have been in segments for a long time, but
some are expanded their footprints driven in by slow growth of
IT during the recession
6 – 2009 VDC Research Group, Inc.
8. The Effect of the Global Recession on Industry Growth
2009 was a flat year; it i f
fl t is forecast t get b tt i 2010
t to t better in
Current VDC Forecast
Total Merchant C
Computer Board Market, C
Current & Projected Market*, 2007-2012
*
(US$ in Millions)
2007-2012 CAGR: 5.48% 2007 2008 2009 2010 2011 2012
Market Size $4,694.8
$4 694 8 $5,087.3
$5 087 3 $5,111.2
$5 111 2 $5,305.9
$5 305 9 $5,629.6
$5 629 6 $6,103.1
$6 103 1
Growth % 8.36% 0.47% 3.81% 6.10% 8.41%
• Consistent 8-10% growth per year was average for the merchant boards & systems market
from 2002 to 2007.
• The worldwide recession flattened the market from 2008 to 2009.
Certain verticals were hit worse than others – industrial & communications contracted; mil/aero grew.
• VDC currently projects that the embedded merchant markets should start to grow again
from 2009 to 2010, however, the return to pre-recession rates will be slow, and that pace of
growth is not projected to return until 2011 to 2012.
• The damage to some of the traditional markets caused by the macroeconomic recession is
accelerating some of the already existing market shifts/realignments.
7 – 2009 VDC Research Group, Inc.
9. Levels of Integration Are Growing Even Faster
OEMs
OEM are t i t suppliers t t k cost out f th
turning to li to take t t for them th
through hi h i t
h higher integration l
ti levels
l
• Integrated systems and solutions together
already account for nearly half of all merchant
l d tf l h lf f ll h t
embedded products.
• Under heavy pressure – operating expense
management, capacity constraints, differentiation
migration -- OEMs are turning to their embedded
suppliers to reduce their costs by taking on
increasing levels of integration for them.
• Suppliers are pushing to do greater levels of
integration themselves, in search of higher
margins.
• The appropriate definition of ‘standard support’ –
scope, timing, etc. -- remains one of the key
issues as OEMS refine their value propositions in
standards-focused market place.
• The result for suppliers of merchant embedded
computing platforms – including systems and
solutions – is grow in the number and
complexity, opportunity and risk.
8 – 2009 VDC Research Group, Inc.
10. Levels of Integration Are Growing Even Faster
OEMs
OEM are t i t suppliers t t k cost out f th
turning to li to take t t for them th
through hi h i t
h higher integration l
ti levels
l
• As with many other industrial, embedded and
related hardware markets, China share is growing
l t dh d k t Chi h i i
rapidly
The community of indigenous suppliers in China is
growing
Their development skills are accelerating
Customers and partners in many regional markets are
searching them out
• However, when one regards the migration of
revenue, a number of questions should be posed:
What types of products and projects are most likely to
migrate? Is it the standard boards?
What types are most likely not to? Is it the custom
solutions?
• Perhaps the key to continued, robust demand, if
smaller share, in developed markets is the rise of
Tier 2 and Tier 3 OEMs, and ISVs developing the
next generation of standards-based solutions,
who need also, some level of service that they
might not be able to source so well in other
markets
9 – 2009 VDC Research Group, Inc.
11. Emerging Verticals Becoming Even More Important
New and emerging vertical segments will d i growth at a ti
N d i ti l t ill drive th t time when some t diti
h traditional segments stall
l t t ll
• Industrial automation and control has been
perhaps the hardest hit embedded segment and
is unlikely to return to healthy growth in the next
two or three years.
• Newer applications such as digital signage,
infotainment, digital surveillance/security, and
energy/power will become the high growth areas
across a number of verticals
• Military & Aerospace has been the most solid
vertical segment through the recession and will
continue to be as many of the programs that
have been identified as hi h priority for DoD
h b id ifi d high i i f D D
spending in the latest budget announcements,
will require lots of embedded computers – think
UAVs, ISR, and other troop support platforms.
• Embedding connectivity in the field, at the outer
g y
edge of current networks, is a driving force for
much of the growth in many of these verticals.
• Higher performance processing still drive
growth in medical imaging, 4G communications,
digital security analytics, and robust military
applications.
10 – 2009 VDC Research Group, Inc.
12. User Product Selection Criteria
Why
Wh are OEM continuing to convert to merchant products?
OEMs ti i t tt h t d t ?
• Time to market acceleration will
continue to be the primary reason that
OEMs will choose to outsource their
compute platforms.
It is consistently rated by end users that we
poll as the most important value proposition.
ll th ti t t l iti
• Saving development time is the real
cost saver – more so than a low price
tag.
• Requirements such as extended
lifecycle, reliability, quality, etc. have
become table stakes.
• Embedded suppliers absolutely must
pp y
be able to accelerate time-to-market
and/or take cost out for their
customers.
11 – 2009 VDC Research Group, Inc.
13. How Will Some Firms Take Market Share in the
Current Environment?
• By aggressively defending their core, and conservatively seek out new ways to support
customers:
Moving new platforms to merchant boards/systems is one way to do this
Differentiating services could be another – logistics, platform integration, value-adding stack elements
• B successfully t
By f ll targeting ti II/III OEM in this current environment – ti 1s are already
ti tier OEMs i thi t i t tier 1 l d
over served and are likely to take longer to fight their way out of the downturn
• By taking cost out for their customers
• By listening to customers technical requirements – and creating roadmaps that balance
customers’
now-term ROI and potential for longer-term sustained competitive differentiation:
Reducing SWaP – this is often the number 1 technical requirement we are hearing from customers across
vertical markets and one that can be a major differentiator.
Providing the best processor solutions for the application – from the latest multi-cores to Atom to Cavium to
FPGAs and beyond.
12 – 2009 VDC Research Group, Inc.
14. Global migration to the ‘cloud’ will be drive demand
for, and be enabled by, new scalable edge nodes
, y, g
Aggregation of Embedded Compute Functionality,
2009-2013
• Embedded compute functionality is re-aggregating out of the enterprise infrastructure first
to edge nodes and then to MSPs in all verticals
g
13 – 2008 VDC Research Group, Inc.
15. How VDC coverage will help clients stay on top of
these markets in 2010
The 2010 Embedded Hardware Market Intelligence Service
g
• Track 1: Embedded Boards Market Analysis -- 4 technology volumes
• Track 2: Embedded Integrated Systems Market Analysis – 6 vertical volumes
g y y
• Track 3: Embedded Boards & Integrated Systems Demand Analysis – 6 verticals
• Track 4: Embedded Boards & Integrated Systems Channel Analysis – 6 verticals
• The 2010 Scalable Edge Servers/Edge Node Computing & the Cloud for
Embedded Systems Market Demand and Requirements Analysis
A study focused on the important trend of scalable edge nodes -- computers and
servers,
servers general purpose and application optimized -- deployed at the edge/
intersection of enterprise/ infrastructure networks and embedded/ high
availability/ mission critical installations
14 – 2008 VDC Research Group, Inc.
16. Primary Research and Market Model Highlights
2010 Embedded Hardware Service
Target Communities Target Sample Sizes
Phone Interviews Suppliers of Merchant Computer Boards and Integrated Systems N~100
Web-based Interviews Industrial and commercial end users, OEMs, VARs, and systems integrators N~500
Phone Interviews Various channels for embedded computer boards and integrated systems N~50
Study Publication Date Supplier Share Actual Market Size Forecast Market Size
Service Year 2010 2009 2009 2010-2014
Scalable Edge Servers / Edge Node Computing and the Embedded Cloud
Target Communities Target Sample Sizes
Phone Interviews Suppliers of Edge Node Computers & Embedded Cloud Services/Software N~40
Web-based
Web based Interviews Embedded users/customers evaluating edge node computers and cloud services N~250
Phone Interviews Various channels for edge node computers and cloud services N~25
Study Publication Date Supplier Share Actual Market Size Forecast Market Size
2010 2009 2009 2010-2014
15 – 2008 VDC Research Group, Inc.
17. Q&A Session
Thank You for Attending this VDC Webinar
For more information about VDC Research coverage of the global markets
for embedded systems – including the 2010 Embedded Hardware Market
Intelligence Service & Scalable Edge Servers / Edge Node Computing &
the Embedded Cloud – please contact:
Eric Heikkila
Director, Embedded Hardware and Systems Practice
erich@vdcresearch.com | 310-393-9086
Cyril Bernard
Account Executive
cbernard@vdcresearch.com | 508-653-9000 ext.142
Chris Rezendes
Executive Vi P id
E i Vice President
cjr@vdcresearch.com | 508-653-9000 ext.120
16 – 2008 VDC Research Group, Inc.