An analysis of the impact of modularization and standardization of vehicles electronics architecture on the automotive industry

Abstract

The growing use of electronics in automobiles designs and their dependency on it, has increased the level of complexity of the car-system and created new challenges. But at the same time, it has created new opportunities and the potential to reduce complexity through modularization. This represents a new architectural paradigm for OEMs and suppliers. This thesis suggests an approach to this new era of automobiles designs. It looks at the effect of modularization and the advent of electronics on the supply chain in other industries. It evaluates the risks of value migration in the automotive industry and studies the mechanisms of such migrations through several interviews, financial data research, systems functional decomposition and system dynamics analysis. Electronics, along with software and control algorithms, enable an encapsulation of functionalities by creating higher levels of abstraction. While early vehicles had an all-mechanical interface between operator and actuation, electronics has allowed the separation of the processing of signals coming from the operator, the control/functionality infusion, the transfer of information and the transfer of energy. Thus, what was once integral has now the potential to be modular.

(cont.) Such a separation increases the modularizability of the automobile's architecture and gives it an opportunity to get closer to a lower bound "essential complexity" floor. While integrality helps prevent knowledge from fleeing away, it limits the ability to profit from various design options. When outsourcing for a modular architecture, those exclusive functionalities that actually bring value ought to be retained in-house. In particular, outsourcing software is usually not a desirable option. Software modules are likely to remain intrinsically integral for a long time to come. OEMs should thus look at expanding their software expertise in order to eliminate any dependency to an outside source for software, because it is likely a dependency on knowledge. Suppliers, who have already taken on a greater system integration responsibility, should look outside the traditional mechanical systems box. Automotive systems today involve electric, electronics and software engineering. To gain the necessary expertise in those domains, suppliers may have to perform strategic mergers & acquisitions. The role of system engineering is what OEMs ought to focus on if they want to avoid seeing value migrate to their suppliers. The emergence of value is the fruit of architecting.

(cont.) New open standards should be regarded as opportunities to become more aggressive systems architects. Open standards also allow to reduce cost, in particular by creating economies of scale and scope. However, reducing cost without creating value is the beginning of a downward spiral. Modularization and standardization have created a dynamic reaction in the industry whereby the nature of the boundaries between firms is changing and value is created and redistributed. In order to capture that value, a player has to focus on the design process, the architecting of products, rather than on the products themselves. The role of system architect in the automotive industry has evolved and now requires expertise in the field of software development, testing and integration.