The document discusses the value chains in microTCA and ATCA standards. It outlines that value chains capture the added value at each stage from components to complete solutions. It then draws lessons from the PC industry value chain shift from proprietary to open systems. This led to a shift in value from system vendors to component vendors and declining system vendor margins. The document suggests microTCA and ATCA may see similar trends, which could displace some ATCA applications with more cost effective microTCA solutions.

1. The Value Chain in microTCA and
ATCA Standards: Components vs
Systems
B.W.Stuck
Executive Chairman
CorEdge Group
Santa Clara, CA USA
October 2008 1

2. Outline
What Is a Value Chain?
Lessons learned from the Personal Computer
(PC) i d t value chain
industry l h i
What is different in Embedded Computer
systems value chain
• ATCA value chain
• microATCA value chain
Summary
Santa Clara, CA USA
October 2008 2

3. What Is a Value Chain?
Value chain captures what value is added at
each stage in information systems, starting
with components, and moving up to complete
solutions
Each t
E h stage of the value chain can h
f th l h i have
• Different capabilities
• Different b siness models
business
• Different cost structures
Santa Clara, CA USA
October 2008 3

4. Value Chain Graphic
Components Boards Systems Solutions
Santa Clara, CA USA
October 2008 4

5. Underlying Economic Driver
Product
Features
Pricing
Rising
Demands f
D d for Manufacturing
More Product, COGS
New Products
Applications
Use Products
Increae
Demand
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October 2008 5

6. Computer Industry
Service
Provider
Applications
System Software
Hardware
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October 2008 6

7. Computer Industry Evolution
1965-1980
1965 1980 1980-2008
1980 2008
Vendor proprietary PICMG industry standard
hardware interfaces for hardware
Vendor proprietary including integrated
system software circuitry
Vendor d third
V d and thi d party t Microsoft,
Microsoft UNIX software
applications Third party applications
Time sharing services Software As a Service
Santa Clara, CA USA
October 2008 7

8. Computer Industry Lessons
Learned
Shift from proprietary to open systems
• Value shifted from system vendors to component vendors
• Software enjoyed increasing gross margins
• System vendors gross margins dropped to support this
change in value chain economics
• Total system prices dropped but volumes increased
Economies of scale and scope
• Standard bus led to manufacturing economics of scale
• Growing volume/scale led to contract manufacturers rather
than internal manufacturing groups
Santa Clara, CA USA
October 2008 8

9. Embedded Computer Industry
Potential Trends
Shift from proprietary to open systems
• Value shifted from system vendors to component vendors
• System vendors gross margins dropped to support this
change in value chain economics
• Total system prices drop while volumes increase
Economies of scale and scope
• Standard backplane led to manufacturing economics of
scale
• Growing volume led to contract manufacturers rather than
internal manufacturers
Santa Clara, CA USA
October 2008 9

10. Lessons to Be Learned
The Press Confuses Rhetoric with Product
There is an S-Curve down the road for xTCA
Potential over the next 3-5 years to see
billions of dollars of xTCA standards
compliant equipment sales
Major players such as Ericsson and/or
Huawei can accelerate market development
Santa Clara, CA USA
October 2008 10

11. Potential Lessons for ATCA
ATCA encompasses
• Carrier cards
• Advanced Mezzanine Cards
• System software
• Chassis
Proprietary blade vendors enjoy significant
economies of scale and scope based on PC
industry standards
ATCA will be niche market, may disappear
market
Santa Clara, CA USA
October 2008 11

12. Potential Lessons for microTCA
microTCA encompasses
• Advanced Mezzanine cards
• System software
• Backplane with chassis
Potential for high volume Advanced
Mezzanine Cards in new applications
(telecom, defense,
(telecom defense industrial)
Potential for displacing ATCA applications
with far more cost effective microTCA
Santa Clara, CA USA
October 2008 12

13. Biography of B.W.Stuck
Chairman, CorEdge Group, 2004-
Managing Director, Signal Lake, 1998-
g g g
Independent investor, 1993-1998
Independent consultant, 1984-1998
p ,
Bell Laboratories, 1972-1984
MIT,
MIT SBEE and SMEE (1969), ScD (1972)
(1969)
http://signallake.com/
Santa Clara, CA USA
October 2008 13

14. Additional Reading
B.W.Stuck, M.Weingarten, Chipping Away at Value
, g , pp g y
Add, Business Communications Review, December
2001
B.W.Stuck, M.Weingarten,
B W Stuck M Weingarten The Impact of ATCA on
Telecom Economics, Business Communications
Review, December 2005
B.W.Stuck, M.Weingarten,
B W Stuck M Weingarten Micro (and Pico)TCA:
Setting the Standard for Less Expensive Carrier
Network Gear, Business Communication Review,
October 2006
B.W.Stuck, M.Weingarten, There’s an S-Curve
Down the Road for xTCA Market, Business
Communication R i
C i ti Review, NNovember 2007
b
Santa Clara, CA USA
October 2008 14