0
 	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  A	
  Presenta*on	
  at	
  Hong	
  Kong	
  Business	
  Associa*on	
  of	
  Hawaii...
Evolution of Intangible Assets – U.S. Companies
Knowledge-based Economic Trend
2June 5, 2014 OEM to ISP Transformation
Mkt...
The Value Hierarchy (Business Models)
Values/ProfitMargins
Applications (Mkt. & Standards)
System Integration (Archit., …)...
 Value	
  Chain	
  (=>	
  Demand!Supply	
  in	
  Alignment)	
  
IC H/W Platform
IC S/W Platform (API, drivers, etc.)
Syste...
Raising Values of a Product (IP is the Core)
"  Price = Value to Customers =>
Price = Mftg. Costs + Services +
Embedded IP...
Profitability vs. IP Creation (Competitiveness)
OEM to ISP Transformation 6June 5, 2014
Manufacturing Cost
(⽣生产成本)
Pre- & ...
ServicerequirementsdriveH/Wplatformimprovements
Existing OEM/ODM business model breaks the IT Business Food Chain
without ...
Mature (must have)
Under-developed
Ecosystem
Well-developed
Cut-throat
Competition
(me too!)
Application
Futuristic (nice ...
June 5, 2014 OEM to ISP Transformation 9
Case Study: MxXxxx Ltd (2007)
(Hong Kong - Shenzhen)
Business/Market Strategies
#  Business focuses/existing revenue sources
#  AMR system (#1 priority) - Towngas as the lead ...
OEM to ISP Transformation 11June 5, 2014
AMR System - Architecture (for Towngas)
Gas meter -
Low Speed
DTS
GPRS
Modem
Cont...
OEM to ISP Transformation 12June 5, 2014
AMR System - Milestones
GBS
Jan
2005
CBS
CMS
Control
Center
Sep.
2008
Jan
2006
RM...
AMR System - Realized Benefits to Towngas
Direct Cost Reduction Benefits
#  Monthly data transmission charge (GPRS vs. pho...
Service = Highest-level Value/IP Integration
MyCard Confidential 9August 1, 2008
GPS/GPRS Logistics Service Platform - Sys...
OEM to ISP Transformation 15June 5, 2014
GPS/GPRS Log. Service Plat. – Network
Customers monitor vehicle activities on MxX...
OEM to ISP Transformation 16June 5, 2014
GPS/GPRS Log. Service Plat. - Milestones
Launch in HK
- Single-SIM
2nd-gen. Devic...
GPS/GPRS LSP - Realized Benefits to Users
Direct Cost Reduction Benefits
#  Saving on fuel consumption: $4,000 estimated v...
Differentiating Advantages & Strategies
#  “Full System Integration” solutions
#  End-to-end proprietary solution from “H/...
Diff. Advantages & Strategies – Cont.
#  Close collaborations with lead customers/users
#  For wireless real-time flow-bas...
Business/Technology Developmt. Roadmap
#  Comprehensive Business Intelligence (BI) enabling
capabilities as core strategy
...
June 5, 2014 OEM to ISP Transformation 21
Looking Ahead
Methodology	
  for	
  “CRE	
  +	
  Con*nuing	
  Innova*on”	
  	
  
Lead Customers’ Requirements => 2nd G => 3rd G =>…
Diff...
Strategies in the “Cloud” & IP Protection
Barriers in Cloud Computing era against copycats
#  Business Model – Service-fra...
Key Advantages of HK for Business
As stated by international business executives why they pick HK for
doing business
#  In...
Thank You!
al@iipcc.org
OEM to ISP TransformationJune 5, 2014 25
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OEM to ISP Transformation

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Transcript of "OEM to ISP Transformation"

  1. 1.                      A  Presenta*on  at  Hong  Kong  Business  Associa*on  of  Hawaii  -­‐  Hong  Kong/China   Forum  @  Hilton  Hawaiian  Village,  Honolulu,  HI  (June  4-­‐7,  2014)     Prepared  by:    Al  Kwok                      Member,  HKSAR  “IP  Trading”  Working  Group                      Founder,  Interna*onal  IP  Commercializa*on  Council                        Governor  &  Co-­‐founder,  Savantas  Policy  Ins*tute                      President,  CASPA  PRD  Chapter                      Founder,  China  Interna*onal  Intellectual  Property  Services                      Former  VP  &  CIPO,  NetLogic  Microsystems  (“NETL”)   OEM to ISP Transformation 1 OEM to ISP (Integrated Service Provider) Transformation: "Turning a Product Company into a Service One" June 5, 2014
  2. 2. Evolution of Intangible Assets – U.S. Companies Knowledge-based Economic Trend 2June 5, 2014 OEM to ISP Transformation Mkt. Cap. / Intangible Asset: 1)  Apple: ~US$656B / >99% 2)  Foxconn: ~US$5B / <20%
  3. 3. The Value Hierarchy (Business Models) Values/ProfitMargins Applications (Mkt. & Standards) System Integration (Archit., …) Engineering (Design, ODM,..) Manufacturing (Process, OEM) Intellectual Property (IP) Outsourcing Trend Consumer recognition Core competency Brand Innovation 50% 40% 30% Presented  at  Intellectual  Property  Symposium  2002  in  Guangzhou  on  December  10,  2002   OEM to ISP Transformation 3June 5, 2014
  4. 4.  Value  Chain  (=>  Demand!Supply  in  Alignment)   IC H/W Platform IC S/W Platform (API, drivers, etc.) System Application Platform(s) Generic Reference Design (w/ other chips) Differentiated Application Designs Various Applications/Services Consumer Markets (End Users) IC Design houses System Integrators Service Providers For Consumer Electronics Market (Ecosystem) System Manuf. Great  end-­‐to-­‐end  push-­‐pull  effect  for  market  scaling  thru  lifecycles   OEM to ISP Transformation 4June 5, 2014
  5. 5. Raising Values of a Product (IP is the Core) "  Price = Value to Customers => Price = Mftg. Costs + Services + Embedded IP License + Brand "  Pre-sale services mean design- win efforts providing solutions to address customers’ problems "  This is the best sources of innovation and ideas for the next- generation products "  Post-sale services mean reducing customers’ costs of ownership, extending the useful lifetime of the product, generating recurring sales "  Embedded IP licensing means the customers can use the product IP for their own product uplifting & differentiations - e.g., “Intel Inside” "  Brand recognition means the customers recognize the product and its maker for superb quality, performance, reliability & services IIPCC Confidential & Copyright Protected 5Jan. 19, 2014 Manufacturing Cost (⽣生产成本) Pre- & Post-Sale Services (售前及售后的服务) Brand Recognition (品牌认可) Embedded IP Licensing (隐含IP授权) IncreasingValues(提⾼高增值) Price = Values to Customers (价格 = 给客户的价值) >70%PM ~10%PM >60%PM >40%PM Mkt. Cap. / Intangible Asset: 1) Apple: ~US$393B / >99% 2) Foxconn: ~US$3B / <20% Demand Side Demand Side Demand Side Supply Side
  6. 6. Profitability vs. IP Creation (Competitiveness) OEM to ISP Transformation 6June 5, 2014 Manufacturing Cost (⽣生产成本) Pre- & Post-Sale Services (售前及售后的服务) Brand Recognition (品牌认可) Embedded IP Licensing (隐含IP授权) IncreasingValues(提⾼高增值) Price = Values to Customers (价格 = 给客户的价值) >70%PM ~10%PM >60%PM >40%PM Demand Side Demand Side Demand Side Supply Side OPEN OPEN PRIVATE Trademarks Utility Patents, Design Patents, Copyrights… Trade Secrets (Know-how) Only <20% Know-how for Patents, the rest kept as Trade Secret
  7. 7. ServicerequirementsdriveH/Wplatformimprovements Existing OEM/ODM business model breaks the IT Business Food Chain without positive feedback from Service to drive next product dev. cycle Mkt. Cap./Intangible Asset: 1)  Apple: ~US$393B / >99% 2)  Foxconn: ~US$3B / <20% Integration vs. Standardization vs. Scalability #  Hierarchy of IT Business (from “service to consumers” as the top of the food-chain with highest Gross Margin then down): Much Higher Value Creation from Demand-side Service (to consumers) <=> Domestic market (localization) (China market is huge enough) Application (for service) <=> Domestic market (localization) (China centric standards & IPs) Network platform <=> Domestic stds. for local services/appl. International stds. (for global interface) System Integration <=> Domestic market (localization) vs. Int’l. mkt. (for applications) (China centric standards & IPs vs. Int’l. ones) S/W & F/W platform <=> Int’l and domestic stds. (global & local) H/W platform <=> International stds. (global IC supplies) OEM to ISP Transformation 7June 5, 2014
  8. 8. Mature (must have) Under-developed Ecosystem Well-developed Cut-throat Competition (me too!) Application Futuristic (nice to have) Too Far-out: Not ready, hype, bubble Future Growth: Longest-term Future Growth: Long-term Future Growth: Short-term Well-developed infrastructure: consumer market by nature with lower (30->50%) profit margins Buildinginfrastructure& ecosystem:Industrial marketbynaturewithhigher (50->70%)profitmargins Market Positioning – Product/Service Focus OEM to ISP Transformation 8June 5, 2014
  9. 9. June 5, 2014 OEM to ISP Transformation 9 Case Study: MxXxxx Ltd (2007) (Hong Kong - Shenzhen)
  10. 10. Business/Market Strategies #  Business focuses/existing revenue sources #  AMR system (#1 priority) - Towngas as the lead customer #  GPS/GPRS logistics service platform (#2 priority) - Nippon Express (for cargo) & Eternal East (for passenger) as the lead user/customer #  Wireless data acquisition system (#3 priority) - existing business #  Business model #  Fully-integrated solutions to build long-term service platforms #  Scalable service platforms for recurring revenue streams from top-tier customers. #  Add high-value service items to grow revenue/account. #  Customer channel development - mostly by referrals (endorsements) #  Top-tier users/customers introduce their partners as new customers #  Follow and support top-tier customers’ expansions for growth #  Market expansion -- as led by top-tier customers #  Hong Kong (as the market test site) -> PRD -> Mainland -> Global #  Setting up service/data centers in Beijing, Shanghai, Chengdu and Xian June 5, 2014 OEM to ISP Transformation 10
  11. 11. OEM to ISP Transformation 11June 5, 2014 AMR System - Architecture (for Towngas) Gas meter - Low Speed DTS GPRS Modem Control Centre A/D Converter Commercial & Industrial (C&I) Users Domestic Household Gas meter - High Speed MS/RMS CMS GBS Mid-way collector 1X 20 X 240 X 2Y Y Y240 X : Items currently supplied by MxXxxx DTS : Item to be supplied by MxXxxx : Items to be integrated Billing Customer service Resource Planning Marketing IVRS Towngas existing internal system GPR S IVRS = Interactive Voice Response system CBS CBS RF
  12. 12. OEM to ISP Transformation 12June 5, 2014 AMR System - Milestones GBS Jan 2005 CBS CMS Control Center Sep. 2008 Jan 2006 RMS Dec. 2008 Nov. 2008 Adoption into 60+ JVs in China Sept. 2005 Dec. 2006 MxXxxx Product/Technology Roadmap DTS * Jan. 2009 R/T Data Analyses Billing Customer services, IVRS, Gas supply planning Values to Towngas * = under development Full system integration capability for any AMR system in all flow-based applications incl. gas
  13. 13. AMR System - Realized Benefits to Towngas Direct Cost Reduction Benefits #  Monthly data transmission charge (GPRS vs. phone line) #  HK$20 vs. HK$148 #  Installation cost reduction (w/o digging, drilling & cabling) #  HK$200 vs. over HK$5,000 #  Monthly staff cost reduction for collecting meter reading manually #  HK$2.4M (over 200 persons @ $12K/mon) CRM, Productivity & Efficiency Benefits #  Enable real-time gas usage monitoring, down to 1 minute interval, for CRM, ERP and gas supply/distribution/delivery planning #  Enable proactive CRM to retain high-value customers #  Enable accurate billing based on real data instead of estimates #  Connectivity in all situations regardless physical accessibility June 5, 2014 OEM to ISP Transformation 13
  14. 14. Service = Highest-level Value/IP Integration MyCard Confidential 9August 1, 2008 GPS/GPRS Logistics Service Platform - System Architecture GPRS Logistics & PassengerLogistics & Passenger Logistics Co. Forwarding Agents Security Monitoring & Alerts Customer- specified Call Services Functions of Control/Call/Data Centers & Service Platform Customs Insurance Co./ Bank - Asset Mgt. Real-time Location Tracking Coordination, Security Checks & Alerts Data analyses / Bus. Intel., Map Database & User Web Portal CallCall CenterCenter ControlControl CenterCenter Data Center /Data Center / Access PlatformAccess Platform Data Storage & Archives Map Database Mgmt. User Access Control & Portal Management GUI & Templates Emergency Alerts Senders & Receivers Transformation from Product to Service: OEM -> ODM(S/S) -> IDM(D/S) -> ISP(D/S) OEM to ISP Transformation 14June 5, 2014 Supply-side OEM = Original Equipment Manufacturers ODM = Original Design Manufacturers ---- A Big Gap In-between ---- Demand-side IDM = Integrated Design Manufacturers ISP = Integrated Service Providers
  15. 15. OEM to ISP Transformation 15June 5, 2014 GPS/GPRS Log. Service Plat. – Network Customers monitor vehicle activities on MxXxxx web-portal Hutchison PCCW (Sunday) China Telecom MxXxxx Sinotrans China Mobile Internet 4M+ lease line 10M lease line MxXxxx capabilities: • Web ASP services • Map database • Data center In Hong Kong In Mainland Wireless network Wireless network Wired & wireless network Wired network Wired network
  16. 16. OEM to ISP Transformation 16June 5, 2014 GPS/GPRS Log. Service Plat. - Milestones Launch in HK - Single-SIM 2nd-gen. Device w/ Additional Interfaces Dual-SIM Device Cross-border Logistics Co. Cross-border Passenger Vehicles Partnership with TC - the largest smartcard payment service provider for bus in China 90 cities in China with 98,000 bus Overseas markets Aug. 2004 Mar. 2006 Dec. 2007 Aug. 2008 Oct. 2008 Jan. 2010 Total Solution to Customers - Fully integrated System MxXxxx Service/Technology Roadmap Market Development Local Logistics Co. Full system integration capability to send other device data thru GPRS Eternal East as the lead customer
  17. 17. GPS/GPRS LSP - Realized Benefits to Users Direct Cost Reduction Benefits #  Saving on fuel consumption: $4,000 estimated vs. $220 for a monthly service fee to MxXxxx $  As reported on a newspaper, a saving of HK$120,000 in fuel expense for 30 trucks on monthly basis, with the assistance of MxXxxx’s fuel consumption report #  Saving on toll expenses: $3,360 estimated vs. $220 for a monthly service fee to MxXxxx $  Testimony by CEO of Eternal East: a potential saving of HK$3,360 in toll expenses for each coach on monthly basis, with the help of MxXxxx’s specified location report CRM, Productivity & Efficiency Benefits #  Has become a mandatory requirement (de-facto standard) for cross- border cargo logistics by the largest forward agents in HK - MxXxxx is the sole source! #  Intelligent fleet management through “Fixed Route Control” or “Fixed Area Control” with SMS/e-mail alerts on rule violations for proper supervision #  Effective security measure against robbery/theft with the on-line SOS button #  Ability to real-time coordinate vehicles for optimized job assignments June 5, 2014 OEM to ISP Transformation 17
  18. 18. Differentiating Advantages & Strategies #  “Full System Integration” solutions #  End-to-end proprietary solution from “H/W+F/W+Interface S/W” device platform to “Application S/W + User Interface (GUI & templates)” IT service platform #  Embedded through customization into customers’ operation systems as an integral part of its daily operation - hard to replace #  Becoming de-facto standards with on-going customer driven improvement cycles once every 3 months #  Comprehensive core competency for location-based total- solution service capability (“Entry Barrier”) #  “Full System Integration” know-how endorsed by lead customers #  Proprietary map database system customizable to cust. needs and capable of fast search (benchmarked as the best by PCCW) #  Proprietary wireless transmission evaluation platform to ensure proper optimization for high-reliability data transmission #  Data center and call center capabilities to support customers’ needs for “Total Solutions” June 5, 2014 OEM to ISP Transformation 18
  19. 19. Diff. Advantages & Strategies – Cont. #  Close collaborations with lead customers/users #  For wireless real-time flow-based intelligent-control total-solution #  Towngas - AMR “total system” solution development #  For location-based real-time intelligent logistics managmt. system #  Nippon Express and SinoTrans - cargo logistics GPS/GPRS tracking #  Eternal East - passenger logistics GPS/GPRS tracking #  Tianjin IC Card Public Network System - integrating GPS/GPRS tracking with smartcard (RFID) applications #  Business connections and leverage: #  Being the Shenzhen base of National Engineering R&D Center for Mobile Communications - a market-leader making platform! #  pre-approved authority to pilot-test in new frequency spectrum -- 1st mover advantage with >1 year’s lead #  Attractive platform to team up with the best device (H/W) providers #  Strategic partnership with leading network service providers in China: China Mobile, China Telecom and Sinotrans in Mainland; Hutchison and PCCW in HK June 5, 2014 OEM to ISP Transformation 19
  20. 20. Business/Technology Developmt. Roadmap #  Comprehensive Business Intelligence (BI) enabling capabilities as core strategy #  1st stage (present status): GPS/GPRS #  For “real-time” (updating) location-based service platform for time/ mission critical applications #  Generation of appropriate management reports #  2nd stage: GPS/GPRS + RFID #  RFID: add real-time item tracking capabilities #  For Location-based item-tracking service platform for Item-based logistics management and BI services #  3rd stage: GPS/GPRS + RFID + environmental sensor technologies #  Sensors: add real-time environmental (temp., humidity, pressure, etc.) monitoring capabilities #  For high-end high-profit comprehensive critical-item tracking and logistics management services June 5, 2014 OEM to ISP Transformation 20
  21. 21. June 5, 2014 OEM to ISP Transformation 21 Looking Ahead
  22. 22. Methodology  for  “CRE  +  Con*nuing  Innova*on”     Lead Customers’ Requirements => 2nd G => 3rd G =>… Differentiating Value Creations => 2nd G => 3rd G =>… Business Model => 2nd G => 3rd G =>… Service/Product Roadmap => 2nd G => 3rd G =>… Application/Technology Roadmap => 2nd G => 3rd G =>… IP Portfolio Development => 2nd G => 3rd G =>… The next innovation ideas come from customers (CRE) & “Stress Tests” identifying (1)  The weak-links in product design & performance and scalability (2)  System (architecture) integrity and scalability (elasticity) issues (3)  The bottlenecks for scalability (technology and manufacturability roadmap) Close collaboration between the customer (CRE) and the vendor Mission-&-Time Critical Requirements along Demand-chain OEM to ISP Transformation 22June 5, 2014
  23. 23. Strategies in the “Cloud” & IP Protection Barriers in Cloud Computing era against copycats #  Business Model – Service-franchising is the best #  Contractual framework in favor of the franchisor. #  Business/operation process – proper SCM #  Close-loop fully-traceable certified process is the best #  Network system integration #  Real-time monitor and surveillance is the best #  System integration - PaaS #  Proprietary firmware as trade secrets #  Software - SaaS #  No source code disclosure is the best #  Hardware - ASIC #  Anti reverse-engineering practice is the best OEM to ISP Transformation 23June 5, 2014
  24. 24. Key Advantages of HK for Business As stated by international business executives why they pick HK for doing business #  International heritages and appeal #  International Business Hub – no visa controls for businessmen #  Foreign employees – can bring in engineers from India and Mainland #  International Financial Centre – no currency exchange controls #  Pro-business & pro-free-market-economy environment #  A World’s Freest Economy #  Little government interferences – a “hands-off” & “behind-the-scene” policy #  A Free and Open Society – open book for rules of the game #  Anti-corruption is the norm – relatively equal plain field for all! #  Accountable Government – has a civic process to review and criticize #  Open and cost-effective legal system #  The Rule of Law #  Based on well-familiar British Common Law #  International Arbitration and Dispute Resolution Centre #  Update Arbitration Law – autonomy to establish new ones if needed #  Available domain expertise from international channels June 5, 2014 OEM to ISP Transformation 24
  25. 25. Thank You! al@iipcc.org OEM to ISP TransformationJune 5, 2014 25
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