Embedded Computing Design met with around 15 vendors who consider themselves to be part of the industrial PC (IPC) space at COMPUTEX Taipei earlier this month, which begged the question, “what makes you different?” In this Q&A with Howard Lin, CEO, AAEON, and Fabrizio Del Maffeo, Managing Director of AAEON Europe, the two explain how technology trends and shrinking margins in the APAC region are driving embedded board and system manufacturers to redefine approaches to industrial computing.
What are some of the trends going on in the industrial PC (IPC) space here in Taiwan?
LIN: This year we’ve focused more and more on vertical markets. It’s not as much on general product implementations, and the reason is that everyone is talking about the Internet of Things (IoT), but the IoT is not a general platform. The IoT is comprised of several different vertical markets that require different solutions. That’s the reason that we’ve moved in the direction from general-purpose products to vertical solutions.
DEL MAFFEO: Digital signage and retail is one of the verticals in the U.S. where we’re very strong, especially our OEM solutions, tablet solutions, and boards. Since we’re part of the ASUS group we can leverage ASUS R&D and production for specific, price-sensitive markets like retail and signage. Intelligent transportation is a market that we are targeting now, and another market is metering and building management systems.
Of course, the typical market we’ve been in for many years is industrial automation, but now there is what is called industry 4.0, which basically means giving intelligence to machines but also connecting machines to the cloud. We are heading in this direction through partnerships with companies like HMS Industrial Networks that is doing protocol communication to bridge machines with a module that supports CAN bus, PROFIBUS, and PROFINET so that we can bridge machines to our gateway. From our gateway we can send information to the cloud leveraging the ASUS cloud, for example, because ASUS already has a strong focus on the IoT typically in wearable solutions and consumer automation, and we are completing this with our industrial knowledge. We have some differences for our customers, for example we can give them the software development kit (SDK) to develop and integrate their solution so they can transfer information directly to the ASUS cloud.
How do you differentiate yourself from competitors given that you’re in such a crowded space?
LIN: We divide ourselves into two parts. When we’re talking about industrial PCs, we are actually talking about two things. One is the motherboard itself and the other one is the system. From a motherboard point of view, currently we’re working with ASUS, who is very famous for consumer motherboards. We’re leveraging trends from ASUS from early design to the component purchasing and these kinds of things to try to make our motherboard more cost competitive. So from a board point of view, we’re looking to achieve cost leadership to differentiate ourselves from other competitors.
For most IPC vendors, because the volumes aren’t so big it’s always about the price. So we do have a strength that comes from working with ASUS that allows us to provide a cost-effective solution.
From a system point of view, the business is very specific. So we only focus on specific systems. One is tethering for mobile payment systems, as tablets become more and more important for retail and some industrial applications. In this case, we want to design products that are very reliable and have long lifecycle support. Currently there is still no IPC company in the industrial tablet space that is the global number one, so everyone is at the same level and everyone has a chance to compete in this market.
Another point is that we are able to do customization. With most consumer motherboards you’re not able to do any customization. Wee keep flexibility there for industrial customers, because they always want to add to their boards, or change interfaces from PCI Express to USB, for example. For this kind of application, we always maintain the flexibility to help meet these goals.
Consumer tablets are quite popular, but with industrial tablets you can’t ask Apple or Samsung to add something custom to your design. The trend for industrial PC companies is to try to penetrate this market.
A second vertical is transportation, because there are specs that are very difficult to meet. If you’re building a system for a train, you need to pass certification for vibration and these kinds of things. So we focus on these kinds of vertical markets with system solutions to reduce the competition from the general panel PC and general box PC market because so many companies are doing this, so it’s always a price war.
DEL MAFFEO: More and more, consumer companies are switching into industrial, you see ASRock and GIGABYTE, for example, but there’s a big difference between us and them. We can be as competitive as they are, but we provide local support through our global presence. ASRock and GIGABYTE are approaching the market with a standard model, pushing from Taiwan. In each country we have sales and technical support so we can do price adjustments and then leverage the industrial knowledge of AAEON with consumer technology, as well as production strength.
From a technology standpoint is there anything you are working on to reduce cost and customization as the primary differentiators?
DEL MAFFEO: We are using Intel, and we’re partnering more and more with them because ASUS is one of Intel’s biggest customers, which helps us a lot.
The other point is that we have a pretty horizontal organizational structure at AAEON, without many levels between sales and the CEO. This allows us to be more reactive and feedback to be much faster throughout various divisions. Also, it helps Intel deploy its technology in a faster way. For example, when Intel goes to market to promote Skylake, they have to show products. Big customers want to see products that are tested, they want to make modifications, and we are a company that can support them in a very flexible, very fast way compared to most of our competitors.
We are also one of the few companies that strongly believes in the Quark technology from Intel. We design a lot of products around Quark for IoT for building management systems, home automation, etc. We’ve been supporting the original generation and are in direct contact with Intel’s Quark division for new developments, especially considering that the new generation of Quark will be suitable for wearables and could be leveraged by ASUS. ASUS and AAEON are complementary in that we cover all the markets.
Are you working with ARM at all?
DEL MAFFEO: We do some things with ARM but it’s not really our focus. Honestly, ARM is a very competitive market and it’s much more fragmented than x86. In the U.S. it’s okay, but in Europe and Asia it’s very fragmented. It’s also a different business model because it’s more software driven, so everyone today can design an ARM or a RISC solution. The problem is good software support for digital signal processing, and so on. We are using ARM because for key accounts we must be there, but we’re not really focused on that. No one in Taiwan, honestly, is really focused on ARM for industrial solutions.
ARM is a really disruptive technology, but as with all disruptive technologies it should be approached in a different way. A good point for us though is that Intel is covering the gap. Finally with Cherry Trail, for example, which has already been adopted by ASUS for the ZenFone, which uses a 2.1 GHz quad-core Cherry Trail SoC at 2 W. Technologies like this and Quark are bridging the gap between Intel and ARM, and we strongly believe in continuing our partnership with them going forward.
What are your thoughts on the IPC space moving forward?
DEL MAFFEO: Something that will happen soon in this market, although it’s still a rich market and still a very profitable market, profits are shrinking and companies are not really lean. I expect an optimization of the operations within companies, and AAEON is already going in that direction compared to some of our competitors.
What we’ve talked about is that things are mixing up. In retail and digital signage we will have low profits but high volumes, so market by market we have to approach things in different ways. In transportation we want to be a leader thanks to customization, which means not huge volume but larger profits. In IoT the partnership with Intel is making a difference.
Five years ago there was no real differentiation because each company approached each market in the same way. There were no vertical solutions, so you had a product for signage and you proposed the same product for industrial. Nowadays, because the margins are shrinking you have to optimize the design and the production, so you have to think about each way that you produce the product and where to produce it, which technology to leverage. We are all at the beginning of this.