Bosch's choice of new CEO shows importance of connected auto
Denner headed supplier's electronics division before promotion
Bosch CEO Volkmar Denner foresees fast-rising demand for computing power in future cars.
Photo credit: Reuters
With Volkmar Denner as its new chief executive, German supplier giant Robert Bosch appears determined to be a key player in the unpredictable realm of automotive infotainment.
It won't be easy. With annual automotive revenues of 30.4 billion euros, Bosch is accustomed to planning its product strategies a decade in advance.
But infotainment — with its so-called "head" units that integrate audio systems, navigation, Internet links and smart phone hookups — takes its lead from consumer electronics, where a product becomes obsolete within months.
Perhaps that's why Bosch chose Denner, who started his new job July 1.
As the board member overseeing Bosch's electronics division, he was responsible for the company's multimedia division and subsequently oversaw what Bosch calls the "user experience" at the company's three business sectors.
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Bosch wants to establish itself as the dominant provider of Web-enabled head units. But the company must fend off aggressive providers of high-priced systems – such as Harman Becker Automotive Systems – plus a variety of inexpensive aftermarket products.
Praveen Chandrasekar, an infotainment analyst for the California-based consulting firm Frost & Sullivan, says Harman has lined up contracts worth $14.5 billion (11.6 billion euros) over the next seven years.
Harman started out with a line of premium audio systems, then added functions such as navigation and smartphone apps. Harman's customers include luxury brands such as BMW and Mercedes-Benz, plus mass-market brands like Fiat.
"That's an amazing book of business," Chandrasekar told Automotive News Europe. "If I were Continental AG or Bosch, I would definitely be worried about the inroads that Harman was making. I think Bosch has been a little slow with their smartphone applications."
Bosch appears ready to do something about that. Next month, a global automaker will introduce a Bosch infotainment unit equipped with a Linux-based operating system that will allow the automaker to consider apps from thousands of software designers.
"Linux comes from the consumer world, so it [provides] easier access" for app providers, said Joachim Creutzburg, marketing director of Bosch's car multimedia division. "We see that as the trend."
The Bosch unit also will allow motorists to make voice commands using natural speech. "You won't have to use commands with exact phrases," Creutzburg noted.
Voice technology that incorporates natural speech is catching on quickly. Last August, Apple Inc. wowed consumers when it introduced Siri voice technology on the iPhone.
Ford Motor Co., General Motors and other automakers are hustling to roll out infotainment systems that can be operated with natural speech.
It will be up to Bosch and other suppliers to integrate that voice technology into their infotainment units. Denner's previous work with the user experience at Bosch will come in handy.
Yet another technical hurdle awaits Bosch and other infotainment suppliers.
The iPhone, Android and other smartphones can exploit the computing power of distant servers — dubbed "the cloud" — a key resource for voice technology and other apps that require lots of computing power.
But that's problematic for automotive infotainment, since vehicles sometimes travel in remote areas where the cloud isn't available.
Bosch is developing an infotainment unit with enough computing power in the head unit to handle key functions, but which can draw on the cloud when it's available. That system will be ready after 2015, Creutzburg said.
Keep your eye on the cloud. In a speech last March, Denner emphasized the importance of the cloud's role in infotainment and other products.
"It is safe to assume that roughly every two years there will be a doubling of computing power … in the cloud," Denner said. "And that is the fundamental driver for the technological path to the future."
Bosch developed its Touch & Connect system for the new Corsa together with Opel/Vauxhall. The infotainment system combines audio, navigation and communications functions in one head unit.
Growing mass market
Other infotainment suppliers are rushing to develop similar systems, and the prize will be some very large contracts. According to Bosch, the global market for infotainment head units totaled 9.5 billion euros last year, and Creutzburg expects global sales to grow 6 percent to 7 percent this year.
Europe's market for head units, which generated sales of 3.3 billion euros in 2011, is growing more slowly than North America or Asia. Creutzburg estimates industry sales in Europe will rise 3 percent to 4 percent this year, slightly stronger than overall vehicle sales.
Much of this growth will be fueled by inexpensive infotainment systems designed for mass-market vehicles. In Europe, consumer demand rose as prices of in-dash navigation head units fell below 1,000 euros.
For example, Renault introduced an in-dash navigation system designed by TomTom, selling 500,000 units in 2010, according to IMS Research, a unit of IHS Inc.
The mass-market segment is primed for further growth. According to the IMS report, 60 percent of consumers in Germany, the UK and the United States want infotainment systems that feature 'connected services.
"It is clear that there is huge potential demand from motorists for a low-cost solution for in-vehicle navigation," wrote IMS analyst Jack Bergquist in his report.
Undoubtedly that's one reason why Denner was chosen to run Bosch. Certainly Bosch can count on substantial sales growth from other products such as turbochargers, start-stop systems and lithium ion batteries.
But infotainment is tricky. Unlike collision avoidance systems or fuel-efficient powertrains, automotive infotainment systems are influenced by a sometimes-chaotic aftermarket.
Smartphone manufacturers will dictate product innovations; Bosch and the rest of the auto industry will always lag behind.
For his part, Creutzburg, appears confident that Bosch will get its share of mass-market infotainment. "We are strong in all segments," Creutzberg said. "We have been in this market for a long time, and we are growing."
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