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The Dynamics of ODMs and OEMs

I've seen a lot of different thoughts about "original equipment manufacturers" and "original design manufacturers" recently, so I figured I'd offer my observations from my time working in Shenzhen for my IoT company.

Backstory: we’re partnered with Qualcomm to cloud enable bluetooth mesh technology across myriad US, Asian, and European based companies, primarily for lighting and smart home products in consumer/commercial markets. I spent about 6 months in Shenzhen and Hong Kong during 2017 putting together the supply chain partnerships.

From what I’ve experienced, “brand,” i.e. the companies we’re familiar with as consumers, and Original Equipment Manufacturer “OEM” are used interchangeably, while Original Design Manufacturer “ODM” refers to the “factory.”

In most of my interactions, there is a tight albeit painful relationship between the OEM and ODM in consumer electronics because cooperation between multiple vendors is often required to get a product to market, especially in IoT. Typically, the most differentiated intellectual property (IP) is in the hands of the OEM (brand)— industrial design, software, firmware, and it’s in their best interests to obfuscate as much as possible throughout the supply chain to make it harder to replicate the technology, which everyone assumes will happen. And it does. This is especially true during the rise of the IoT, where connectivity challenges plague both sides of the pond, and clever solutions are the 11th hour superpower everyone is fighting to find first to use as leverage in the supply chain. 

There is another class of manufacturers— not sure the technical name, but we call them “module makers” — companies that specialize in the design and production of drop-in PCB modules for various connectivity chipsets to make them easier to productize. An example would be ITON, who provides chips for several of GE’s products to the prime ODM (such as Leedarson or Eastfield) who is responsible for final assembly (note: many ODMs are also module makers— they keep chips in house to maximize control and profits).

Both ODMs and module makers participate in a process of product innovation that presupposes the market. Chipmakers (and other tech vendors) like Qualcomm send their reps out to the factories to demo new silicon technology in the form of a “reference design” in a bid to get the ODM to create a module or product based on that chipset that answers to a trend they’ve noticed from their OEM/brand customers. In this way, the ODM bears the R&D cost as a bet for business, but doing so gives them a chance to retain the right to get a royalty on every module sold. Ask an ODM to hand over any firmware they've made and they’ll tell you with their sweet puppy dog eyes “eat my shorts” because it’s how they keep you from just taking everything to another vendor.

For brands like Home Depot (or more generally companies less interested in designing hardware) these ODMs are essential because they are flexible enough to develop a catalog of partially developed products on speculation— whatever successfully sells up the food chain at Home Depot, they make real (note: the “make real” part is where a lot hits the fan because this stuff is hard to scale).

The OEM-ODM-module maker ecosystem creates a sort of “it takes a village to make a product” atmosphere, but with grumpy uncles, annoying neighbors, and meddling kids abounding. There's a constant sense of quiet espionage on both sides, although that tends to get better if you develop a direct relationship with your mfg partners. Western business has evolved to sustain trust with purely transactional relationships-- this is way less true in places like China. Go to lunch with them and take them to dinner a few times, invite them to Macau, get them drunk and having fun with you. These relationships are insurance policies on getting screwed. Further, having boots on the ground near your manufacturing is practically a requirement nowadays if you want to have any hope of your supply chain operating smoothly. 

In the case of a brand like Apple, who meticulously defines and controls every little detail of their product and supply chain works with an Electronic Manufacturing Services company “EMS” like Foxconn who primarily invest only in building other designs precisely to specification.

So OEM v. EMS: OEM: “build this for me, exactly like this, and don’t ask too many questions, or I’ll eat your children.” 

EMS: ;)

The ODM/OEM relationship is a bit shakier: 

OEM: “build this for me, and pretty please do your best not to use lead paint or explode my users.” 

ODM: ¯\_(ツ)_/¯

All that said, many companies I’ve encountered are chimeric— companies that usually do business as an EMS could also be caught as an ODM if the opportunity is right. I’ve wracked my brain over how to approach meetings with ODMs that also have an OEM/brand side to the company. The ODM side is a potential partner while the OEM side is a potential customer— in the already confusing world of IoT this can be quite the rollercoaster.

I could be off, but the cash value of the above has navigated me through hella lots of conversations from ivory tower to where the dog food gets made. It is a truly global and complex web of associations, across cultural, language, political, and social boundaries. Read “Poorly Made in China” and “Barbarians at the Gate” to see the differences in East vs. West strategies for business success, which I see as orthogonal values of Replication and Dominance.

If you’re interested, here’s a great article by a Shenzhen based supply chain expert: https://www.linkedin.com/pulse/3-types-partners-product-managers-can-use-development-changtsong-lin/

 

Thanks for reading! Our company is expert at IoT integrations, and we thrive on building ecosystems of partners with positive feedback loops on new services and revenue streams. Kindred spririts, please reach out to me at [email protected] 

 

Best, 

 Preston

COO @ Droplit

https://droplit.io

[email protected]

 

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Connected Cars: From the Edge to the Cloud

Many of us have yet to see an autonomous vehicle driving down the road, but it will be here faster than we can image. The car of tomorrow is connected, data-rich and autonomous. As 5G networks come online, sensors improve and compute and memory become faster and cheaper, the amount of data a vehicle will generate is expected to be 40 terabytes of data every day. This will make the autonomous vehicle the ultimate edge computing device.

Last week at Mobile World Congress Americas in San Francisco, Micron Technology hosted a panel discussion with automotive industry experts where they discussed the future of the connected car and the role of both the cloud and the edge in delivering the full promise of autonomous driving (FYI – Cars are now big at wireless trade shows. See Connected Vehicle Summit at MWC).

Experts from Micron, NVIDIA, Microsoft and Qualcomm discussed what 5G, cloud, IoT and edge analytics will mean for next-generation compute models and the automobile.

Micron claims to be the #1 memory supplier to the automotive industry and notes that its technology will be required to access the massive streams of data from vehicles. This data must be processed and analyzed, both in the car and in the cloud. Think about going down the road at 70 MPH in an autonomous vehicle. You need to have safe, secure and highly-responsive solutions, relying on split second decisions powered by enormous amounts of data. To quickly analyze the data necessary for future autonomous vehicles, higher bandwidth memory and storage solutions are required.

Smart, connected vehicles are the poster child for edge computing and IoT.

Some intriguing quotes from the discussion:

  • “In last seven years 5839 patents have been granted for autonomous vehicle technology.” – Steve Brown, Moderator and Futurist
  • “There is a proactive side of autonomous driving that can’t be fulfilled at the edge.” Doug Seven, Head of Connected Vehicle Platform, Microsoft
  • “The thin client model won’t work for automobiles. You won’t have connectivity all the time.” Steve Pawlowski, Vice President Advanced Computing Solutions, Micron
  • “Once you have enough autonomous vehicles, the humans are the danger.” Tim Wong, Director of Technical Program Management for Autonomous Vehicles, NVIDIA

The entire panel discussion can be found in the video below.

Disclaimer: The author of this post has a paid consulting relationship with Micron Technology. 

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Notable IoT Announcements at CES 2016

CES_Logo.jpg

170,000 attendees from across the globe and 3,600 vendors gathered amongst 2.4 million net square feet of exhibit space debuting the latest products and services across the entire consumer tech ecosystem just concluded CES 2016.

It’s come a long way since spinning out of the Chicago Music show in 1967. Products that have debuted at CES include the videocassette recorder, the compact disc player, HDTV, Microsoft Xbox and smart appliances.

Each year there seems to be a new category in consumer electronics added to the mix. In 2015 the big buzzword was the Internet of Things and it’s weight carried over to 2016 with more than 1000 exhibitors unveiling IoT technologies. For a community like ours focused on the industrial side of the IoT, what does a consumer electronics show have to do with our world?

A lot actually.  

Here are the notable announcements from CES 2016:

 

WiFi HaLow

For industrial IoT heads this is probably the most notable announcement to come out of the show. The Wi-Fi Alliance® introduced a low power, long range standard dubbed Wi-Fi HaLow™ .

In the IoT space with billions of sensors to be placed everywhere, the industry is in need of a low power Wi-Fi solution. Wi-Fi HaLow will be a designation for products incorporating IEEE 802.11ah technology. Wi-Fi HaLow operates in frequency bands below one gigahertz, offering longer range, lower power connectivity to Wi-Fi certified products.

Edgar Figueroa, President and CEO of Wi-Fi Alliance said, “Wi-Fi HaLow is well suited to meet the unique needs of the Smart Home, Smart City, and industrial markets because of its ability to operate using very low power, penetrate through walls, and operate at significantly longer ranges than Wi-Fi today. Wi-Fi HaLow expands the unmatched versatility of Wi-Fi to enable applications from small, battery-operated wearable devices to large-scale industrial facility deployments – and everything in between.”

Many devices that support Wi-Fi HaLow are expected to operate in 2.4 and 5 GHz as well as 900 MHz, allowing devices to connect with Wi-Fi’s ecosystem of more than 6.8 billion installed devices. Like all Wi-Fi devices, HaLow devices will support IP-based connectivity to natively connect to the cloud, which will become increasingly important in reaching the full potential of the Internet of Things. Dense device deployments will also benefit from Wi-Fi HaLow’s ability to connect thousands of devices to a single access point.

The bad news? The Wi-Fi Alliance isn't planning on rolling out HaLow certifications until sometime in 2018, and even if it gets here, it might not be the de-facto standard. There are others vying for the crown.

 

AT&T

AT&T held a developer summit at the Palms Resort which was all about emerging technologies, products and services. A year ago, AT&T launched the M2X Data Service, a cloud-based data storage service for enterprise IoT developers. At CES they announced the commercial launch of Flow Designer, a cloud-based tool developed at the AT&T Foundry that lets IoT developers quickly build new applications. They also said that they are on track to have 50% of their software built on open source. They are working with OpenDaylight, OPNFV, ON.Lab, the Linux Foundation, OpenStack and others. Rachel King of ZDNet has an interview with AT&T President and & CEO Ralph de la Vega here.

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Ericsson

Ericsson and Verizon announced joint activities to further the development and deployment of cellular low-power wide-area (LPWA) networking for a diverse range of IoT applications. Ericsson introduced three IoT solutions for smart homes and cities:

  • Smart Metering as a Service puts consumers in control and enables utility companies to offer "smart" services to consumers in the future.

  • User & IoT Data Analytics enables controlled access and exposure of data from cellular and non-cellular devices and creates value through cross-industry offerings.

  • Networks Software 17A Diversifies Cellular for Massive IoT, supporting millions of IoT devices in one cell site, 90 percent reduced module cost, 10+ years battery life and 7-time cell coverage improvement.

 

IBM Watson

Last year, IBM announced a USD 3 Billion investment in Internet of Things, and in October, they announced plans to acquire The Weather Company, accelerating IBM's efforts in the IoT market that is expected to reach USD 1.7 trillion by 2020.

They furthered their commitment with five related IoT announcements at CES: Softbank, Whirpool, Under Armour, Pathway Genomics and Ford. What IBM does with Watson in the consumer space will carry over to the industrial space and vice versa. With the tremendous volumes of data from IoT, Watson’s advanced power of cognitive computing will be one way to exploit this new resource. Fortune’s Stacey Higginbotham has more here.

 

Intel

Lady GaGa aside, Intel made one announcement at CES which I think got through a lot clearer than Qualcomm’s 14 announcements! Rather than focus on technical aspects, Intel announced innovative technologies and collaborations aimed at delivering amazing experiences throughout daily life - which we often forget to do as we get enamored by the 1’s and 0’s. From unmanned aerial vehicles and wearables to new PCs and tablets, Intel made sure their chip was in it. On the industrial front was the DAQRI Smart Helmet, an augmented reality helmet for the industrial worker, powered by an Intel® Core™ M processor.

intelcesHH_BK_Photo.jpg

 

Qualcomm

Qualcomm made a mind-boggling 14 announcements in the CES time frame. Probably the most interesting was the Qualcomm® Snapdragon™ X5 LTE modem (9x07). Qualcomm said the chip has multimode capability and supports LTE Category 4 download speeds up to 150 Mbps. It’s designed to be used in a range of mobile broadband applications and in IoT use cases that demand higher data rates.

 

Samsung

The President and CEO of Samsung Electronics, BK Yoon, delivered the opening keynote speech CES, calling for greater openness and collaboration across industries to unlock the infinite possibilities of the Internet of Things. Mr. Yoon announced a timetable for making Samsung technology IoT-enabled. By 2017, all Samsung televisions will be IoT devices, and in five years all Samsung hardware will be IoT-ready. He also emphasized the importance of developers in building IoT and announced that Samsung will invest more than USD 100 million in its developer community in 2015.

 

ZigBee Alliance

The ZigBee Alliance, a non-profit association of companies creating open, global standards that define the Internet of Things for use in consumer, commercial and industrial applications, announced that it is working with the Thread Group on an end-to-end solution for IP-based IoT networks. The solution will become part of the ZigBee Alliance’s comprehensive set of product development specifications, technologies, and branding and certification programs.

 

I’m sure there were many more industrial Internet of Things announcements. Let me know what I missed in the comments section below.




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