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Escaping COM-Moditization

COLIN MCCRACKEN

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As consumers we enjoy the wide selection and fair prices of mass-market electronics. Competition among manufacturers spurs innovation and integration, and features rise while prices fall over time. Far into the lifecycle of product categories, OEMs find themselves unable to cling onto desired price points and margins once each market saturates and supply outstrips demand. Desktop and laptop computers passed through these stages, and smartphones and tablets are on the road to becoming commoditized. Consumers are the big winners, while suppliers do get to enjoy some profits, especially the early adopters and operational wizards.

In the industrial computer space, ATX and Mini-ITX motherboards crossed the chasm long ago, as Geoffrey Moore might say. Suppliers who aren’t building these form factors in Asia must find a special niche, which can take the form of additional I/O circuits or expansion connectors. Run fast or perish. The other Moore’s Law, in a manner of speaking.

Large form factors such as VPX, ATCA and PICMG 1.3 play in modest-size theaters that don’t draw massive supplier crowds. These are protected intrinsically due to focus and scope. Small form factors such as EBX (5.25”), EPIC and ECX (3.5”) have achieved some measure of commoditization, and Nano-ITX might get there eventually due to the popularity of ultra-low-power silicon from Intel, AMD and VIA for modest-performance embedded apps.

Which brings us next to Computer-on-Modules (COMs). Certainly well deserving of its own product category, multi-sourced form factors have passed a dozen years and amassed a half billion dollars of revenue collectively, or more depending on who’s doing the estimate. As processor building blocks with defined interfaces to custom carrier boards, COMs certainly have the potential to become commodities. Limited true interoperability and limitations of OEM’s resources to truly qualify multiple sources has deferred the kinds of all-out price wars that fill our Sunday newspapers.

But as the COM market cautiously approaches the fastest moving part of the stream, some late-entry module manufacturers are starting to suffer the sting of price-driven deals. While the early adopters have crossed the chasm, the relative newcomers are faced with either jumping the shark Hollywood-style, or flat-out folding from the frenzy forever. Their legacy businesses are rich with healthy margins based upon firm foundations of hundreds of small-volume SBC customers. Their cost structures restrict COM profit margins to only half or one-third of their SBC cash cows. Their managers and investors have higher expectations.

OEM customers benefit from COM price wars, which will keep progressing as long as many COM suppliers remain in the market. So what’s a module manufacturer to do to escape commoditization? Circuitry is certainly fixed by the small size and defined interfaces of the various COM standards.

In technology, innovation always represents a way out. Good old fashioned embedded features that are nearly extinct on Mini-ITX and ECX / 3.5” SBCs can add quite a bit of value with that extra “oomph” needed for highly customized designs. The commodity SBCs are often just hooked up to a power supply, a disk drive and a display with very little additional hardware. Just like Happy Meals in an embedded box.

But COMs have moved beyond the limited SBC-replacement engagements into very viable alternatives for full-custom designs, and the typical carrier boards are anything but trivial. These designs go into specialized devices and instruments that may have a real-time function implemented in an FPGA or DSP, for example. These designs are done by expert engineers in their respective market segments who are eking out every last efficiency and performance. These are the folks who thrive off multi-stage hardware watchdog timers, dedicated I2C controllers that don’t compete with on-module SMBus traffic, thermal monitoring, OEM BIOS code and board controller firmware to carefully tune power sequencing for extreme booting reliability. Things that digital signage and kiosk integrators could care less about.

In competitive environments, there are opportunities for innovation. Firmware features add value to modules, allowing differentiation that substantiates price premiums. As an OEM customer, your mission, should you choose to accept it, is to clearly communicate your requirements to suppliers and let them compete for your business. Module vendors who are backed into a corner just might be able to escape COM-moditization after all, as time will tell.