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Electronic Design

Placing Automotive OEMs Inside The Quality, Cost, And Technology/Innovation Triangle

As an automotive semiconductor supplier, I frequently travel to automotive design centers around the world, including Tier 1 and Tier 2 automotive system suppliers in America, Europe, and Asia. Besides witnessing the technology advances on these three continents, I’ve learned a lot about the automotive OEMs worldwide—about their perceptions and values in design approaches and activities, as well as the factors influencing their decisions.

I tend to assess the automotive world through a triangle, with corners representing quality, cost, and technology/innovation (see the figure). These three values are common to all OEMs, whether they’re advanced or emerging, in the new automotive world. Yet the OEMs emphasize each of these values differently, influenced by their respective customers and market demands.

Growing up in Germany and probably being a little bit biased by my former work for a big German automotive Tier 1 company, I still believe that European automotive manufacturers and system suppliers are somewhat more open to new technologies and innovation. Therefore, I tend to place European automotive OEMs and suppliers closer to the innovation/technology corner of the value triangle, with quality being a very strong second value driver.

My experience with Japan is vice versa. Here, quality and reliability are the clear value drivers. The Japanese automotive manufacturers and suppliers tend to keep proven technologies much longer in their cars for the sake of reliability, and the adoption of new technologies seems to take somewhat longer.

Of course, Japan is the technology leader in hybrid electric vehicles (HEVs). But most Japanese cars still use standard internal combustion engines, with a strong emphasis on quality and reliability without much leading-edge technology or innovation under the hood. Many Japanese see their cars as an important transportation mechanism that must be fully reliable, like their world class train system.

For quite some time, North American automotive OEMs were mainly driven by cost reduction programs. Yet this constant pressure to cut prices and offer big rebates has come at the cost of quality and innovation. With today’s automotive crisis hitting the U.S. car makers the hardest, this cost-slashing strategy has not worked.

On the contrary, U.S. consumers would have preferred more progress in quality and innovation, which the success of Japanese and German car brands in the U.S. seems to confirm. Depriving U.S. consumers of new and advanced technologies has backfired. Technology, innovation, and reliable safety systems are big factors in purchasing decisions made by new car buyers in Europe.

The design approach for OEMs and suppliers in emerging markets like China and India is completely different from the Japanese or Western automotive world. While low cost is the biggest driving factor in emerging automotive countries, as it ensures affordable cars for local markets, the design approach is worlds apart.

In the established advanced automotive world, our customers typically give us a very detailed specification for a required product. But local automotive system manufacturers in China or India will probably ask if we can help them, say, move a door window up or down. Correspondingly, these manufacturers expect fully functional plug-and-play solutions from us, not just a product. It’s a very different world, and entering that market requires a very different approach.

Nevertheless, in cooperation with major component and system suppliers, key automotive manufacturers in these emerging countries, especially China, are setting up advanced design centers for next-generation domestic vehicles. As a result, the automotive OEMs in the developing world will see quite a number of advances and enhanced technology development capabilities in the coming years.

Remember the South Korean automotive OEMs? Only a few years ago, they were known for producing inexpensive cars. But lately, the South Koreans have improved in quality. Likewise, Chinese automotive OEMs are expected to move toward quality in the next couple of years.

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TAGS: Automotive
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