Electronics vendors pursue autos as new horizon
By Charles J. Murray
EE Times
(01/11/02, 1:37 p.m. EST)
LAS VEGAS — In a concerted effort to loosen the economic logjam that has stifled industry growth during the past year, electronics makers and software vendors at the 2002 International Consumer Electronics Show (CES) this week set their sights on a new target: the largely untapped vehicle telematics and multimedia markets.
Makers of satellite radio systems, digital video disk players (DVDs), rear-seat videos, navigation systems and wireless transceivers stepped up their efforts in the automotive arena, in hopes of staking out their territory inside cars and trucks. They were joined by such longtime automotive vendors as Visteon Corp. (Dearborn, Mich.) and Delphi Automotive Systems (Troy, Mich.), which showcased more of their best technologies at CES, rather than at annual auto shows in Detroit and Los Angeles, also held this week.
The emphasis on automotive electronics could signal the beginning of a new era for both the electronics and automotive industries. Industry analysts said that electronics manufacturers and chip makers see automotive as an untapped frontier. Unlike users in the home and business markets, they said, most automotive customers have yet to incorporate electronic gadgetry.
"Companies such as Intel, Hewlett-Packard, Sun and Microsoft are betting on the market potential of the vehicle," noted Thilo Koslowski, lead automotive analyst and market director for Gartner Dataquest (San Jose, Calif.). "They see it as the one big market that has not yet been bombarded by PDAs, cell phones and video."
Automakers, too, see the telematics trend as a potential gold mine. Some believe it will blossom into a $10 billion to $20 billion market in the next four years, with virtually every car being equipped with a cell phone and many using in-car information and navigation services.
"The growth will be tremendous," said Geoffrey Smith, a product specialist for Mercedes-Benz's Telematics Client Assistance Center (Montvale, N.J.).
Mercedes-Benz backed that belief with a huge presence at CES, even cordoning off a parking lot near the Las Vegas Convention Center to allow show attendees to test-drive the company's newest luxury vehicles.
Industry analysts and vendors at this year's CES agreed that the growing automotive presence is providing a shot in the arm for a struggling electronics sector. "It used to be that the automotive world was known as a boom-or-bust market," noted Robert Schumacher, general director of mobile multimedia for Delphi Automotive Systems. "Now, we're the ones bringing the stability here."
Not just teenagers
Such efforts contrast sharply with those of a few years ago. At past Consumer Electronics Shows, automotive displays consisted largely of booming audio systems, many of which were designed exclusively for teenagers. With the advent of in-car multimedia and telematics, however, the 300 or so exhibitors in the show's automotive pavilion geared their products to a broader audience.
Companies such as Pioneer Electronics USA Inc., whose automotive bread and butter was once almost exclusively car audio, displayed an automotive DVD-navigation system. The company also unveiled an AM/FM/CD system with a built-in 10-Gbyte hard drive.
Similarly, Robert Bosch Corp.'s Blaupunkt car audio group rolled out systems for multimedia, navigation and in-car video.
Even the entertainment systems have taken on a decidedly non-teen flavor. The two satellite radio giants, Sirius Satellite Radio and XM Satellite Radio, vied for attention with mammoth show booths that included live entertainment and radio broadcasts.
The Consumer Electronics Association, which runs CES, said that the move toward navigation and video systems is currently the strongest new area in automotive electronics. Association representatives noted that five years ago in-car video and navigation was a market that was too small to track. Now it's hitting $900 million per year.
"In-car electronics is not just for teenagers anymore," said Lisa Fasold, director of communications for the Consumer Electronics Association. "Now it's marketed at moms and dads, grandmas and business customers."
Indeed, many in the industry hope that business customers will become mainstay, basing their hopes on the recent growth of the telematics market, which is expected to jump from $1.3 billion in 2001 to $2 billion in 2002, an increase of more than 50 percent.
Some automakers believe the market could reach $20 billion annually. A study by Forrester Research (Cambridge, Mass.), however, puts the figure closer to $6 billion. Either way, many electronics and software makers believe that the automotive telematics field holds more potential for growth than any other electronics sector.
"People have huge, huge hopes for telematics," said Dan Garretson, a senior analyst for Forrester Research. "A lot of companies are trying very hard to ride this wave."
Backseat video
Many believe that telematics is so strong that it ultimately could become the tail that wags the automotive dog, with customers trading in their old vehicles in order to buy a new, telematics-equipped model.
That's why such companies as Delphi Automotive Systems and Visteon saved their greatest thunder for CES, even while the worldwide auto market descended on Detroit for the International Auto Show. At CES, they could preach to electronics-savvy attendees, in addition to dealing with customers such as Ford, GM, Honda and Toyota, as well as such chip suppliers as Intel and Texas Instruments.
"Three years ago, Visteon and Delphi were selling directly to Detroit," said Fasold of the Consumer Electronics Association. "Now they're showcasing their technology here."
Indeed, Delphi rolled out 12 new automotive products and nine new technologies in 11 vehicles on the show floor. Those included a first-ever demonstration of a system that would enable home users to upload and download movies and audio files from home to car using 802.11a wireless technology. Shown on a General Motors Montana minivan, the system uploaded video files at speeds approaching 54 Mbits/second.
For the design of the system, Delphi teamed with Intel Corp., which provided the 802.11 wireless hardware, including an Intel PRO/Wireless 5000 LAN Card Bus Adapter in the vehicle, and PRO/Wireless 5000 LAN access points outside the vehicle. The Intel products operate in the 5-GHz frequency band and are based on the 802.11a standard. Delphi engineers said that, using the system, an MPEG-4-compressed file could typically be downloaded to the vehicle in four to five minutes.
Automakers and vendors hope that such technology will set the stage for gas stations and convenience stores to install kiosks where customers could download music and movie files for play on their rear-seat audio and video systems. The speed of the 802.11a systems makes the idea feasible, they say, because they are approximately 1,000 times faster than cell phone data rates.
For business users, Delphi engineers also teamed with counterparts from MobileAria (Mountain View, Calif.) to demonstrate hands-free Internet capabilities inside a new Saturn VUE sport utility vehicle. Using a MobileAria True Hands Free server, a Delphi Communiport Mobile Productivity Center, a GPS receiver and a Bluetooth-enabled laptop computer, engineers showed how the system could retrieve e-mail and Internet content while the driver watches the road, then read it back to the driver using a text-to-speech engine. As a result, the system enables drivers not only to download Web-based news, but also to some day retrieve up-to-the-second, accurate, Internet-based traffic reports.
Similarly, Visteon displayed a receiver that broadcast content from Sirius Satellite Radio.
The conveniences of home
Automakers see the implementation of such technology as a critical step in building customer affinity. At the show, Mercedes-Benz allowed attendees to test-drive electronics-equipped vehicles ranging from the company's $26,000 C-class sports coupe to the $130,000 CL-600 sedan. They used data capture units to capture names of attendees and built a bond with those who see electronic technology as a critical part of the driving experience.
"These people see their cars as extensions of their homes," noted Michael Smith, national manager for Presence Marketing for Mercedes-Benz. "And they want to put a lot of the conveniences of their homes into their vehicles."
Mercedes-Benz, which has taken the lead in marketing to attendees of shows such as Comdex and CES, believes it has found a critical new marketing approach. During the past two and a half years, the company has boosted sales of its Tele Aid telematics units from zero to 300,000, and has moved from U.S. sales of 60,000 vehicles per year to 206,000 last year.
Analysts believe that the current telematics fever is a double-edged sword of sorts, breathing new life into the electronics industry while simultaneously taking down scores of startup companies in the process.
"This is good for the consumer electronics industry," said Koslowski of Gartner Dataquest. "The consumer home market is approaching some level of saturation, and the business market is still suffering from a poor economy. The vehicle is the only outpost left that's not approaching saturation."
Still, Koslowski said, it may be too much, too soon. "The auto industry will have to come up with some very innovative applications to reach the potential they're describing," he said. "Right now, the price points are too high and many consumers aren't willing to pay for the kinds of conveniences they're talking about."
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