The Embedded Hardware Market
a Year Into the Recession:
How Has the Market Shifted and What is the New Course?


Embedded ...
Recording Available

These slides are from a webcast presented on 11/11/09
                                             11...
VDC Research




 Other complimentary insights & marketing data on the
         embedded hardware market available at:

  ...
Today’s Speakers


• Chris Rezendes, Executive Vice President
     18 years experience as an analyst, consultant, advisor...
Agenda


VDC Introduction
Market Definition & Segmentation
Market Estimates & Forecasts
Customer Requirements
           q...
VDC Research, Embedded Practice


• VDC Research was founded in 1971.
     Continuous, profitable operation since.
     ...
Market Definition & Segmentation
    The
    Th multi-level value chain i getting more complicated – and more crowded
    ...
The Effect of the Global Recession on Industry Growth
2009 was a flat year; it i f
           fl t          is forecast t ...
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 ...
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 ...
Emerging Verticals Becoming Even More Important
New and emerging vertical segments will d i growth at a ti
N     d      i ...
User Product Selection Criteria
Why
Wh are OEM continuing to convert to merchant products?
       OEMs   ti i t           ...
How Will Some Firms Take Market Share in the
Current Environment?

• By aggressively defending their core, and conservativ...
Global migration to the ‘cloud’ will be drive demand
for, and be enabled by, new scalable edge nodes
   ,                 ...
How VDC coverage will help clients stay on top of
these markets in 2010

The 2010 Embedded Hardware Market Intelligence Se...
Primary Research and Market Model Highlights


                                   2010 Embedded Hardware Service
         ...
Q&A Session


                      Thank You for Attending this VDC Webinar

  For more information about VDC Research co...
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The Embedded Hardware Boards & Systems Market a Year Into the Recession: How Has the Market Shifted and What is the New Course?

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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.

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The Embedded Hardware Boards & Systems Market a Year Into the Recession: How Has the Market Shifted and What is the New Course?

  1. 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. 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. 3. VDC Research Other complimentary insights & marketing data on the embedded hardware market available at: www.vdcresearch.com www vdcresearch com
  4. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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