THE HANSEN REPORT ON AUTOMOTIVE ELECTRONICS. A Business and Technology Newsletter

VOL. 18, NO. 10◆◆ PORTSMOUTH, NH USA DEC. 2005/JAN. 2006

Car Audio/Video Bosch-Denso JV Delivers Update from CES T-Engine Infotainment Platform T-Kernel Operating System vendors and other providers. Programmers with experience in ITRON will easily be Every January a flurry of new product Based on ITRON able to adapt to T-Kernel. According to announcements surrounds the Interna- Is Royalty-Free the T-Engine Forum Web site, “ITRON is tional Consumer Electronics show in Las the world’s number-one adopted standard Vegas, held this year from January 5-8. The infotainment market is about to in the field of embedded systems.” Based The world’s mobile electronics suppliers get a whole lot more competitive. The on proven technology, T-Kernel is robust channel creativity and technical expertise Hansen Report recently learned that the and, like micro-ITRON, it has a small into a variety of multimedia entertain- Bosch Blaupunkt-Denso joint venture footprint, which minimizes memory and ment, infotainment, communications, chartered in July 2003 to develop a new computer overhead. telematics—you name it—devices that multimedia computing platform for its According to the T-Engine Forum, might make one believe again that spend- parents is delivering a platform based on while ITRON standardized the API (ap- ing countless hours in a car could be, if T-Engine, an all-encompassing develop- plication programming interface) for basic not actually fun, then at least not mo- ment environment created by the Japa- functions of the operating system, it notonous. nese electronics industry. Blaupunkt and lacked standards or guidelines for hard- The idea that the car should be an ex- Denso will almost certainly make the spe- ware, device drivers and a development tension of the office and “wasted” com- cially developed T-Engine platform the environment. T-Engine widened the muting hours could be productive work basis for almost every new navigation scope of standardization so that T-Kernel time might be giving way to the notion of and multimedia product planned for the enables the distribution of middleware on the car as an extension of the family future. top of the existing basic ITRON RTOS room. For someone willing to hang up and With a standard platform in place and (real-time operating system) functions. drive, a wide selection of entertainment much of the engineering work already on The biggest goal of T-Engine was to en- options can make a long commute or a the shelf, Bosch and Denso will be able to able distribution of software resources in- family road trip more enjoyable. quickly respond to OEM market opportu- dependent of CPU architecture. nities with full-featured, highly competi- Some legal questions surrounding the Satellite Radio tive product offerings. The first new Linux general public license influenced Since its launch of service in Septem- Blaupunkt and Denso products based on ADIT’s choice of an OS. T-Kernel licens- ber 2001, XM Satellite Radio had en- T-Engine could ship as soon as the end of ees are under no obligation to make al- rolled more than 6 million subscribers as 2006 or early in 2007. tered T-Kernel code open to the public, of year-end 2005 and continues to forecast Before selecting T-Engine, the 50-50 which means they can safeguard their a subscriber base of 20 million by 2010. joint venture by Denso and Bosch known product know-how. Versions of the T-Ker- Sirius Satellite Radio, which began as ADIT (Advanced Driver Information nel standard are maintained by the T-En- broadcasting nine months after XM, re- Technology) had considered a number of gine Forum. ported 3.3 million subscribers at the end operating systems. Denso engineers fa- The ADIT platform’s two main of the year, 2.2 million of them added in vored Linux, WinCE and T-Engine, while microcontrollers were developed jointly 2005. Satellite radio service at $12.95 per Bosch engineers supported VxWorks, by ADIT and NEC; NEC will be the sole month ranked thirteenth in consumer QNX and T-Engine. supplier of the two ASICs (application interest in J.D. Power and Associates’ Unlike other candidate operating sys- specific integrated circuits) designed spe- 2005 U.S. Automotive Emerging Tech- tems WinCE from Microsoft, VxWorks cifically and exclusively for Bosch and nologies study. from Wind River and QNX from Harman Denso’s use. In order to provide scalability Beginning in 2006 Hyundai will start International, the T-Engine operating from mid- to the very high-end price/per- implementing its plan to make satellite system—called T-Kernel—is royalty-free. formance, the platform’s architecture can radio standard in all models. Delphi Corp. And no less important, since T-Kernel is a accommodate a one- or two-microcon- will supply receivers for the Santa Fe, follow-on to the vastly popular micro- troller chip solution; one chip delivers Azera and Elantra models. ITRON operating system, the platform 800 million instructions per second and Turn to CES, page 3 will have wide industry support from tool Turn to T-Engine, page 2 T-Engine... Continued from page 1 on theT-Kernel RTOS. T-Engine was the other 1.3 billion instructions per sec- T-Engine Development ond. First functional silicon samples of the conceived by Professor Ken Sakamura of chips have been completed. Tokyo University. In the 1980s, Dr. Environment Unlike the QNX operating system and Sakamura launched the TRON project, T-Kernel: An open source, real-time (sub- development environment from Harman, from which came ITRON, the hugely microsecond) operating system that’s which is used not only by Harman but is popular real-time operating system. royalty free. Modifications of T-Kernel will also actively promoted commercially to The T-Engine Forum is a huge and po- be strictly controlled to maintain compatibil- other infotainment suppliers, the ADIT tentially powerful organization. Forum ity with the middleware it is to run and the platform was developed for the exclusive board members active in the automotive microcontroller that will run it. T-Kernel is a use of Blaupunkt and Denso. industry include Denso, Hitachi, Mat- close relative of ITRON, the world’s most Aimed broadly at infotainment mar- sushita Electric Industrial, Microsoft, Sun, popular embedded operating system. kets served by both Denso and Blaupunkt, Mitsubishi Electric, NEC, Renesas and Middleware: A growing library of ADIT developed middleware to support Toshiba. The vast majority of forum mem- middleware includes device drivers, network RDS TMC data communications applica- bers are Japanese. protocol stacks, filing systems, Japanese tions in Europe and DARC VICS com- With headquarters in Kariya City, language processing, eTRON security munications applications in Japan. Aichi prefecture, Japan, and an office in software, graphical user interfaces, voice Resource management software was also Hildesheim, Germany, the home of processing and a Java runtime environ- developed by ADIT as well as certain ap- Blaupunkt, ADIT employs about 55 ment. plication software, for example a browser people. ADIT serves just two companies, 32-Bit standard hardware platform: and DVD player. Bosch and Denso, but those two compa- Includes target system processor boards Managed by the T-Engine Forum, T- nies are respectively the number-one and based on SH, MR, ARM and MIPS series Engine encompasses a 32-bit microcon- number-four global automotive OEM sup- processors. troller hardware reference platform, a pliers. Denso is among the world’s top T-Engine Forum: Established in June 2002, standard real-time operating system and a three manufacturers of navigation equip- the T-Engine Forum conducts R&D and wide selection of middleware that can run ment. ◆ promotes the popularization of the T-Engine architecture. The Forum lists 491 member companies and universities. Microsoft Targets Infotainment Main benefits of T-Engine architecture: Enables the speedy development of Since acquired shortened the name to simply Windows inexpensive embedded computing systems. operating system maker QNX, Harman’s Automotive. Version 5 of Windows Auto- Web site: www.t-engine.org competitors in automotive audio and motive followed in July 2005. According infotainment such as Visteon, Delphi and to Microsoft, Windows Automotive-based THE HANSEN REPORT ON Johnson Controls, who have developed navigation and entertainment systems are AUTOMOTIVE ELECTRONICS products based on QNX’s software, are re- shipping today in “61 preinstalled, dealer examining their OS options, according to option and aftermarket devices from 18 © 2006 Paul Hansen Associates, 150 Peter Wengert, global director for the world-class automakers and suppliers,” Pinehurst Rd., Portsmouth, NH 03801, Microsoft Automotive Business Unit. including Alpine, Panasonic, Mitsubishi USA. Telephone: 603-431-5859. Fax: 603- Windows Automotive is definitely an Electric, Pioneer, Kenwood and Clarion. 431-5791. Email: [email protected]. available option, and Mr. Wengert admit- The company estimates between 300,000 All rights reserved. Materials may not be ted, “Microsoft is getting a lot more phone and 500,000 navigation systems in the reproduced in any form without written per- calls,” from suppliers seeking an alterna- U.S. today are running on Windows Au- mission. The Hansen Report on Automotive tive platform. tomotive. Electronics is published 10 times a year, Microsoft’s Automotive Business Unit Alpine Electronics selected the Win- monthly; July/August and December/Janu- has been developing software for the auto- dows Automotive platform for all its mid- ary are combined issues. The annual sub- motive industry for more than a decade. term AVNC (audio, video, navigation, scription rate is $717 (North America), $747 Its first venture, the Windows CE-based communications) products under develop- (elsewhere). Back issues are available for AutoPC, developed with Clarion as an ment for both OEM and aftermarket ap- $50 each; see our online index at aftermarket product, never gained wide plications. At the 2006 Consumer www.hansenreport.com. Paul Hansen Asso- acceptance with consumers. In 1998, Electronics Show, Alpine demonstrated ciates is a strategy and market research Microsoft decided to market just the un- its new Blackbird portable navigation de- firm consulting to the electronics industry. derlying software from the AutoPC, vice based on Windows Automotive and Publisher/Editor Paul Hansen which it called Windows CE for Automo- Windows Automotive-based navigation Managing Editor/ Brianne Wolfe tive, to tier one and aftermarket naviga- systems on the new Honda Odyssey, Circulation Manager tion and telematics developers. By the Ridgeline and Civic models. fourth release of the software, Microsoft Turn to Microsoft, page 8 ISSN 1040-1105 Page 2, December 2005/January 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com CES... Continued from page 1 At CES, XM demonstrated in-car sat- from the iRadio catalog: for example five of $150 for the receiver at number 3 in ellite video using On2 Technologies’ radio stations and one playlist, or 6 the list of features they would like in their video compression technology. The demo playlists. Users have the option of listen- next vehicle. BMW offers factory-in- car was also equipped with Voice Com- ing via Bluetooth adapters through their stalled HD Radio receivers on the 2006 mand, co-developed with VoiceBox Tech- home or car audio speakers. With the ra- model year 6- and 7-series. nologies, which allows you to control XM dio content cached on the phone, there is Radio features by speaking the channel no interruption when the phone is moved Beyond Radio selection or music genre. XM’s NavTraffic from car to home or connected to ear- There are plenty of options for bring- feature, already standard on the Acura RL phones, and the music pauses when a call ing your personal music and entertain- since MY 2005 and an option on the comes in. With Internet radio program- ment selections wherever you go. While Cadillac CTS, could in the future be en- ming, iRadio is free of the bandwidth many carmakers provide MP-3 compatible hanced with ParkingLink, a feature de- limitations faced by XM and Sirius. The car stereos, aftermarket suppliers are way signed to locate available parking places satellite radio providers are each allocated ahead of OEMs with a flood of iPod (au- in designated facilities. 12.5 MHz of the S band by the Federal dio and video) docking devices, multime- Communications Commission (FCC). dia drives, TVs and video game players. Satellite Radio Competition iBiquity Digital, the sole technology Antenna-maker RaySat recently intro- Offering a viable challenge to satellite provider in digital AM and FM broadcast- duced TeleRay, which it says is the world’s radio and to iTunes is Motorola, with its ing, enthusiastically reported that the smallest satellite TV antenna for vehicles. announcement at CES that iRadio service number of on-air HD Radio stations had Measuring just one inch thick and 16 is now available to U.S. wireless carriers. reached 634 at the end of 2005. The inches in diameter, TeleRay is compatible Consumers should be able to subscribe to rollout was aided by a commitment from with all the mobile TV receivers currently the service later this year for a monthly the leading broadcast groups to eventually on the market in Japan. Sales will begin fee comparable to or less than the $12.95 convert 2,000 stations. More companies later in 2006. charged by XM and Sirius for their basic are supplying HD Radio receivers to the KVH, another antenna supplier, plans. Motorola plans to launch the ser- aftermarket including Alpine, Fujitsu Ten partnered with Microsoft to create a mo- vice internationally later in 2006. and Panasonic. According to iBiquity, bile Internet receiver with MSN TV ser- According to Motorola, iRadio will more than 10 new products were an- vice for mobile Internet access in cars. launch with 435 commercial-free Internet nounced in 2005. At CES iBiquity also Visteon’s market research revealed radio channels covering all types of music, announced a new reference design for a that video gaming ranks among the most talk radio and news. Subscribers need a “tuner box” that allows any satellite-ready desirable in-car entertainment options. special iRadio wireless phone—due later head unit to receive digital radio signals— Visteon’s Aftermarket division added this year—with a memory storage card AM, FM and FM Multicast. Nintendo Game Boy capability to its and a high-speed Internet connection on After purchasing an HD Radio re- Dockable Family Entertainment system. a USB-equipped PC running Windows ceiver, there are no further costs to con- NHTSA (the National Highway Traf- XP. sumers. In the 2005 J.D. Power and fic Safety Administration) estimates Users can download from their PC to Associates Emerging Technology survey, driver distraction contributes to 25% of their phone up to six channels of content consumers ranked HD Radio with a price all police-reported traffic crashes. ◆ eMOST in the Works For now Mercedes has decided to stick Since the physical advantages of glass from Harman-Becker. with plastic optical fiber for its MOST are not much greater than plastic, According to Toyota’s top manager multimedia communications bus but will Mercedes has decided not to make the of electronics, Takashi Shigematsu, the eventually switch to copper. A year ago expensive engineering switch. “We will MOST E5 working group has not yet Mercedes was considering a move to glass stay with the improved plastic until the decided between the two protocols, fiber. “We had two problems,” explained electrical solution is available,” said Mr. though he did say that the Harman ap- Stephan Wolfsried, Mercedes’ top electri- Wolfsried. proach has better noise performance. A cal engineer. “One was insufficient ro- Having pioneered in the development decision from the E5 working group is bustness against mechanical damages, and of the fiber-optic MOST physical layer, expected soon, after which Toyota will the other was insufficient temperature Mr. Wolfsried is now content to let consider the possibility of replacing its range.” The stability problem has been Toyota take the lead in developing a pro- proprietary AVC (audio video commu- fixed and the temperature range of the tocol that can be transmitted over copper nications) protocol with MOST. Ac- plastic has been improved to as high as 95 wires without excessive electromagnetic cording to one well-placed source, that degrees F, with expectations that getting noise. Two protocols are under consider- could happen as soon as the 2008 model beyond 100 degrees F is possible. ation, one from Panasonic and the other year. ◆

The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com December 2005/January 2006, Page 3 The Company Profile... Harman International

Thumbnail Sketch Harman International Sales Harman International Sales and Net Margins by Reporting Segment Harman International Industries Address: 1101 Pennsylvania Ave. NW, Suite 2000 to 2005 CAGR: 12.6% FY 2005 Total Sales: $3,031 million 1010, Washington D.C. 20004 in $ millions Tel.: 202-393-1101; www.harman.com Professional, 16% FY 2005 Sales: $3,031 million FY 2005 Operating Margin: 11.6% Consumer, FY 2005 Net Margin: 7.7% 14% R&D: 7.3% of sales Automotive, Net Cash Provided by Operations: $419.7 70% million 1,678 1,717 1,826 2,229 2,711 3,031 Shareholder’s Equity: $1,038 million as of Employees by Region September 30, 2005 FY 2000 2001 2002 2003 2004 2005 Market Capitalization: $6,600 million as of Total June 30, 2005: 10,845 October 31, 2005 Net Margin Ownership: FMR Corp., 15.2%; Barclays FY 2000 4.3% FY 2003 4.7% Outside North North Global Investors NA, 9.2%; Sidney Harman, FY 2001 1.9% FY 2004 5.8% America, America, 6.8%; Goldman Sachs Asset Management, FY 2002 3.1% FY 2005 7.7% 55.1% 44.9% 5.9% Employees: 10,845 as of June 30, 2005 FY 2005 Sales per Employee: $279,000 Distinctions Claimed by Harman ◆ 10 million vehicles equipped with Harman popular in the high-fidelity audio con- Automotive Segment systems, cumulatively sumer market. FY 2005 Group Sales: $2,126 million ◆ Harman produces 1 million infotainment Harman’s high stock market valuation, FY 2005 Operating Margin: 16.4% systems per year. with price to earnings ratio currently at R&D: 10.8% of sales, or about $230 million, ◆ Harman produces 1.5 million sound 26.7, is a direct result of respectable mar- 17% of which is spent on basic research systems per year. gins. For the most recent quarter, ending Products: Infotainment and audio systems September 30, 2005, Harman yielded an Top Customers: #1 DaimlerChrysler; #2 enabled its expansion into the automotive operating margin of 10.2%, and it has BMW sector. In the 1990s, Harman acquired won more infotainment systems bookings Note: Harman’s fiscal year ends on June 30. AKG (microphones), (digital outside of Asia than any of its competi- audio signal processing), Becker GmbH tors. Harman says it will be the exclusive Background (automotive head units), Madrigal Audio or nearly exclusive infotainment system Harman International’s roots go back Labs (Mark Levinson audio systems), Ox- supplier to Porsche, Audi, PSA and to 1953, when founder Sidney Harman ford (automotive speaker supplier to Chrysler and the principal supplier to partnered with Bernard Kardon to form Chrysler) and Audio Electronics Systems Mercedes and BMW. Harman expects its . Harman Kardon’s first (speaker supplier to European carmakers). infotainment sales to grow 18% per year product was an FM tuner, followed in Dr. Harman served as CEO until 1998 and from FY 2005 through FY 2008. 1954 by the world’s first hi-fi receiver, a as chairman of the board until 2000, when Harman’s well-respected high-fidelity monaural unit that incorporated a tuner, he became executive chairman. Harman audio brands including JBL, Infinity, control unit and power amplifier in the International stock has been traded on Harman/Kardon and Mark Levinson also same chassis. A stereo receiver debuted in the New York Stock Exchange since 1986 distinguish the company from its competi- 1958. The company expanded through under the symbol HAR. tors, as does Harman’s technology, says the next two decades, acquiring the In FY 2005 the automotive group ac- Erich Geiger, chief technical officer and speaker-maker JBL in 1969. Dr. Harman counted for 70% of Harman’s sales, while executive vice president of Harman: “We sold the company to the conglomerate the consumer and professional groups have the largest portfolio of [infotain- Beatrice Foods in 1976 while he served as roughly split the remaining 30%. Accord- ment] technologies under one umbrella.” U.S. Undersecretary of the Department of ing to Dr. Harman, that breakdown will Since 2002 Harman has acquired several Commerce under President Jimmy Carter. stay nearly the same for the foreseeable relatively small companies, each with im- Dr. Harman reassembled the company future. Each segment of Harman’s business portant pieces of infotainment technol- as Harman International Industries, a feeds the other segments. For example, ogy. These include: Xsys, CAA, Temic holding company, in 1980 and began ac- some of the Harman brands now popular Speech Engines, Margi Systems, quiring companies and technologies that in the automotive industry were first made Wavemaker, QNX and PhatNoise. Dr. Page 4, December 2005/January 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued

Harman Automotive Segment Harman Automotive Segment Harman Infotainment Sales and Operating Margins Sales by Product Type Sales by System Type* FY 2003 to 2005 CAGR: 24% FY 2005 Automotive Sales: $2.1 billion FY 2005 Infotainment Sales: $1.1 billion Aftermarket and other, $0.2 billion Modules, 18.2% High priced, Entry priced, 54.5% Audio Infotainment, 9.1% 1,383 1,873 2,126 systems, $1.1 billion Mid priced, $0.8 billion 18.2% FY 2003 2004 2005 *Entry: $300–$500; Mid: $500–$800; High: $800+ Operating Margin FY 2003 15.4% FY 2004 16.5% Total Automotive Group Estimated Sales by Product Type in $ Billions* FY 2005 16.4% FY 2005 2006 2007 2008 CAGR Infotainment 1.1 1.2 1.4 1.8 18% Harman’s Top Automotive Customers Audio systems 0.8 0.8 0.9 1.0 8% by FY 2005 Sales Aftermarket and other 0.2 0.3 0.3 0.3 8% Total 2.1 2.3 2.6 3.1 13% #1 MercedesHarman International $773 million Sales *Based on 1 € = $1.25 by Reporting Segment #2 BMW $330 million toughest industries: automotive parts Integration Through Software #3 Lexus/Toyota $300 million and consumer electronics. “I am in su- According to Dr. Harman, the #3 Audi* $300 million perb physical condition,” said Dr. company’s margins are higher than what All others $397 million Harman. “I have exercised every single you would expect from automotive elec- *In the next few years Audi will move day for 60-odd years. And I’m not very tronics companies due to its ability to re- up to #2. interested in food. I drink almost no al- duce the amount of hardware in cohol. I have a vivid appetite for lots of infotainment systems through integration, Geiger was with Becker Automotive Sys- stuff including, but not limited to busi- while leaning heavily on software to tems before it was acquired by Harman. ness. I have young kids ... a very active implement infotainment features: “We are In 1996 he was named managing director life.” in the forefront of morphing hardware of Harman/Becker GmbH. into software.” Harman’s liquidity is good. In Septem- Automotive Segment Harman’s integration expertise is best ber 2005, Standard & Poor’s gave Harman In November Harman told investors exemplified by Mercedes’ new S-Class, a BBB/watch positive credit rating. Com- that automotive sales will grow 14% an- which was introduced in the fall of 2005. panies rated BBB have adequate capacity nually from $2.1 billion in FY 2005 to “The S-Class represents the most inte- to meet financial obligations but are more $3.1 billion in FY 2008, based on orders grated and homogeneous way to combine subject to adverse economic conditions that have already been booked. Auto- all the functions, whatever you need, from than A-rated companies. Watch positive motive group sales grew 13.5% in fiscal video to audio processing to navigation, companies have near term potential for a 2005. all under one [human-machine] inter- positive change in their credit rating, Harman’s objective for the automo- face,” explained Dr. Geiger. “We inte- though change “will likely be limited to tive segment is to maintain its leader- grated all of the electronics, the DVD one notch, to BBB+,” says S&P. On Sep- ship position in the infotainment player, the encoding, the data flow and tember 30, 2005, Harman’s ratio of cur- business. Infotainment products com- the display, all of which is under our rent assets to current liabilities was 1.7 bine information systems with audio infotainment HMI (human-machine in- with $505 million of working capital. and/or video entertainment systems. In terface). When you set the seat position Sidney Harman not only built one of its simplest form, a radio-navigation or seat heating, or if you go to your car the world’s leading audio companies, but head unit with a video display would menus, it is the same machine doing this, he was also a pioneer in progressive busi- qualify has an infotainment product. there is no extra computer.” The HMI ness management strategies that recognize Other producers of infotainment devices also provides access for diagnoses of vari- the value of employees. He is an educator, who compete very aggressively for a ous body electronics functions. a prolific writer, a public servant and a larger share of the market include Al- Harman reports that through integra- patron of the arts. I asked Sidney Harman pine, Aisin AW, Bosch/Blaupunkt, tion it reduced from 18 to three the num- how at age 87 he still manages to run Denso, Hitachi Automotive, Mitsubishi ber of devices and modules in its head Harman, a multibillion American com- Electric Company, Panasonic and unit from the first generation to the sec- pany that is thriving in two of the world’s Siemens VDO. ond. For example, before integration of The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com December 2005/January 2006, Page 5 Harman International the S-Class infotainment system, Harman Harman International (HAR) Stock Price Jan. 2001–Jan. 2006 sold a voice control feature to carmakers $ for hands-free operation of the telephone 135 120 and navigation system as a separate add- Source: BigCharts.com on function for about $150. It included 105 an extra processor, memory, software and 90 connectors. In place of that, Harman now 75 provides Mercedes with a $20 voice con- 60 trol software module, which along with 45 the audio signals, runs entirely on the 30 infotainment system’s host computer 15 located in the head unit. Likewise, a navi- 0 gation software module or a noise-cancel- 01 A J O 02 A J O 03 A J O 04 A J O 05 A J O 06 lation software module can also run on the host processor. Harman Shareholders’ Equity Harman Stock With responsibility for the entire at Fiscal Year End Earnings Per Share infotainment system including audio and rear-seat entertainment, Harman’s S-Class $ Millions 1200 FY 2000 to 2005 CAGR: 16.9% FY 2001 $0.48 content amounts to more than $2,000 per 1,061 FY 2002 $0.85 vehicle. More than 60,000 S-Class ve- 1000 FY 2003 $1.55 hicles are sold each year. 875 FY 2004 $2.27

800 FY 2005 $3.31 Can Harman Further Penetrate the 656 FY 2006* $3.85 Infotainment Market While Maintaining 527 600 *Company guidance High Margins? 486 421 While Harman’s S-Class infotainment luxury vehicles down to entry level. 400 system is impressive, it’s not clear at this FY 2000 2001 2002 2003 2004 2005 In 2004, Harman was awarded point how quickly and how deeply Chrysler’s NTG 4 system business, infotainment systems will penetrate into ers for all its products are Mercedes, Chrysler’s first infotainment system, the lower-priced vehicle segments and BMW and Lexus (audio only) with Audi slated for model year 2007. In May 2005 whether Harman will be able to compete coming on strong. Harman picked up Chrysler’s new entry- with the world’s major infotainment play- Harman has little prospect of penetrat- level entertainment system beginning ers as it tries to expand its business beyond ing Ford or GM in North America or Eu- with model year 2008. That system will Europe, beyond German-owned rope, or of winning domestic Japanese integrate AM-FM, DVD, rear-seat DaimlerChrysler and beyond the luxury business with Toyota, Honda and Nissan, video, backup camera and hard disc car segment. Harman’s top three custom- while Japanese suppliers are slowly gain- drive with “jukebox music management ing market share in Europe at Harman’s functions.” “We have all of Chrysler’s Price-to-Earnings Ratios of expense. Executives close to Mercedes’ infotainment business,” declared Dr. Harman Compared with Other sourcing decisions tell us that Harman Harman. U.S. Auto Electronics Stocks will not win high-end navigation for the According to Dr. Harman, Siemens as of December 7, 2005 2007 C-Class or the 2009 E-Class. And VDO has been awarded infotainment P/E Alpine will continue to supply navigation system business at Volkswagen and NAVTEQ 26.85 for the M-Class in the U.S. Alpine also Renault. In 2004 Fiat and Microsoft an- Harman 26.70 supplies navigation for the E-, S- and C- nounced a long-term alliance to develop Gentex 26.17 Class in the . telematics systems that use Bluetooth to JCI 16.15 Still, Harman has landed most of the wirelessly connect to portable phone or Autoliv 13.01 infotainment business available in the music player devices. Magneti Marelli TRW 11.35 West. The company says it owns 80% of will supply that hardware. Lear N/A, loss quarter ending Mercedes’ infotainment system bookings 10/1/05 worldwide and 100% of audio bookings. Entry-Level Integrated Embedded Visteon N/A, net loss last four According to Harman, “Mercedes has Infotainment Will Be Limited quarters committed itself across the board to all Harman forecasts that 17% of its Delphi N/A, under Chapter 11 Harman/Kardon branded audio systems.” infotainment sales in fiscal 2008 will be protection Harman has also booked all of PSA’s and entry-level systems. Dr. Harman said he Source: MarketWatch.com Audi’s future infotainment business, from expects that “ultimately some expression

Page 6, December 2005/January 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued of integrated infotainment systems is go- ing to be found in just about all of the ve- Recent Acquisitions hicles built worldwide.” That just isn’t A significant part of Harman’s technological competence has come from relatively small going to happen, at least within the next acquisitions. decade or two. Infotainment systems usu- Company Acquired Technology ally combine navigation with radio and Xsys (Villingen, Germany) 1998 Video signal processing CD player, the most expensive piece of CAA (Filderstadt, Germany) June 2002 Automotive PC systems which is navigation. But increasingly, por- Temic Speech Engine (Ulm, Germany) April 2002 Speech recognition table navigation devices like those made Wavemaker (Vancouver, Canada) 2003 Noise cancellation by Garmin and TomTom, as well as smart Margi Systems (Fremont, California) September 2003 Multimedia software* mobile phones with navigation capability QNX (Ottawa, Ontario, Canada) October 2004 Embedded operating systems will greatly bite into demand for embed- PhatNoise (Los Angeles, California) August 2005 Multimedia hardware and ded navigation systems. Portable naviga- * For handheld devices software tion devices cost as little as $199 and can be used in any vehicle or while navigating Motors produces for the North American You could have a head unit in the front of on foot. market. OnStar currently serves nearly the car and an extension box somewhere Harman’s so-called entry-level product four million subscribers. in the trunk or in the body, with all of the includes a radio, display, CD player, some In November 2005, Harman’s con- [audio] power electronics, antennas and sound processing and an RF-only GPS sumer products sector began selling a things.” Each box’s MCU would have full receiver. For this carmakers will spend Becker portable navigation device called access to the resources at each box, for anywhere from $280 to $420, depending Traffic Assist. Offered in the aftermarket example, a telephone circuit or DVD on the size of the display and whether it is in Europe for about $550, the unit in- changer. The two MCUs would work as a color or monochrome. Not inexpensive, cludes a 3.5-inch touch-screen LCD with single processor with one operating sys- the basic device would retail for between 1-GB SD map, GPS receiver, MP3 player tem. First prototypes of this concept have $560 and $840, at least. Navigation can and digital picture viewer. been demonstrated. Actual production of be added to the system at the dealer by such a system wouldn’t begin for at least plugging in an SD-card or some other Parallel Processing five years, says Harman. QNX is a division Flash memory device that contains navi- Among the basic research projects un- of Harman. gation software and the map data. A simi- derway at Harman, Dr. Geiger is especially lar plug-in module provides Internet and keen on research to connect infotainment New Products phone connectivity; another module pro- computing platforms in real time and Harman says its automotive segment vides hands-free phone capability. thereby avoid bus systems like MOST or will stay focused on infotainment systems Telematics devices like those made by CAN, which are expensive. “Our goal is to the exclusion of vehicle control and Motorola ACES for OnStar also preclude to have two [infotainment] boxes in the body electronics for many years to come. demand for the sort of navigation-inte- car, one in the front and one in the rear,” However, the company will use its grated infotainment products made thus he explained. “In between we will have a infotainment expertise to pursue opportu- far by Harman. OnStar platforms are in- QNet link (from QNX) which is able to nities in driver assistance systems, diag- stalled in almost every vehicle General connect several core processors in parallel. nostics and connectivity to outside of the vehicle. Principal New Infotainment Awards* “We already have the display, we al- Mercedes FY 2007 FY 2008 ready have the [MOST] bus structures FY 2006 3 Series coupe, $25 million Entry, $200 million with bit rates of 150 Mbps to 500 Mbps. S-Class sedan, $175 million 3 Series convertible, $18 Hyundai We already handle digital video and au- M-Class Europe, $50 million million FY 2007: Dynasty, $70 million dio, we handle all of the gateway func- B-Class, $25 million Audi Peugeot Citroën tions to the body, it is very natural that we R-Class, $40 million FY 2006: Q7 Europe, $15 2008 get this extra functionality on our plat- FY 2007 million All Platforms, $250 million forms,” asserted Dr. Geiger. S-Class coupe, $20 million FY 2007: Q7 U.S., $15 million *Sales value when programs are Dr. Harman believes Harman C-Class sedan mid, $65 FY 2008: All, $350 fully launched. million Porsche International’s greatest and continuing challenge is “to continue to understand FY 2008 FY 2008: Harman’s OEM Price Categories the technology and interpret it creatively. C-Class wagon mid, $15 Carerra, $35 million for Infotainment Systems: million Cayenne, $45 million Entry $300–$500 Not to let engineers do whatever they can BMW Chrysler Mid $500–$800 with it, but to exercise the kind of disci- FY 2006 FY 2007 High $800+ pline that makes the product of their ef- 3 Series wagon, $17 million Mid/High, $350 million forts altogether useful.” ◆

The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com December 2005/January 2006, Page 7 QNX Advances in Automotive

Thumbnail Sketch the auto industry is its QNX Neutrino QNX Sales by Product real-time operating system, which is used Headquarters: 175 Terence Matthews in a variety of infotainment applications Estimated 2005 Sales: $50 million Crescent, Ottawa, Ontario K2M 1W8 around the world, most notably those Canada; Tel: 1-613-591-0931; www..com produced by Harman International. Pres- Customer Runtime royalties, 2005 Sales: $50 million, roughly ently however, QNX receives its greatest support and 33% engineering, Ownership: Wholly-owned subsidiary of automotive revenues from Visteon, 33% Harman International which makes Bluetooth hands-free kits Tools, 33% Key Markets: Automotive, Control & installed in some 2006 Nissan vehicles. Automation, Medical, Networking & The QNX operating system also pow- and the two companies worked together Telecom, Security & Defense. ers Bluetooth hands-free car kits installed to define a technology roadmap for future Key Products: Real-time embedded on Acura TL, Audi A8L and Chrysler products. Mr. Poliak noted, “They are operating system software, tools and Pacifica models. NAVIS chose QNX for making a strategic investment in us as an engineering a navigation system it makes for Daewoo. architecture, to work with us for the Japa- Employees: 280 QNX can also be found in a navigation nese market.” system produced by Hyundai Mobis and In OEM applications in particular, Founded in 1980 by partners Dan in an infotainment system used in the QNX’s main competition in Japan comes Dodge and Gordon Bell, QNX, originally Saab 9-3 in Europe and the United from the ITRON operating system but named Quantum Software Systems, re- States. LG Electronics opted for a QNX according to Mr. Poliak, ITRON may be leased the first commercial PC operating operating system to run a small-footprint reaching its limit. “You can make voice system to use architecture, in telematics platform it supplies for a lim- recognition, TCPIP, Bluetooth, things like 1981. ited number of OnStar applications. that run on ITRON but as more function- After a decade of building a business In Japan, the QNX operating system ality is added, complexity gets to the point around real-time operating systems for has found its way into ten 2006 Toyota where it is difficult to debug. The auto- PC/x86 platforms, QNX saw opportunity models, where it runs an infotainment makers are now saying, ‘What is the next in adapting its OS architecture to run on feature supplied by Denso. The company operating system.’” other platforms. The list of supported is picking up additional automotive busi- Over the next several years QNX will platforms now also includes PowerPC, ness in Japan. Indeed, QNX recently be in a shootout with other operating sys- MIPS, SH-4, ARM and StrongARM. signed a memorandum of understanding tems for infotainment applications world- Since its acquisition by Harman Inter- with Hitachi subsidiary, Akita Electronics wide. At least five operating systems will national, QNX no longer reports sales Systems, a systems integrator active in be contenders: QNX, WinCE, VxWorks, numbers. However, Linux operating sys- automotive electronics. Akita already has ITRON (T-Kernel) and Linux. tem supplier has five engineers working on QNX projects. One of the best things about QNX is reported that QNX sales were about $24 QNX is confident its longstanding re- that it is based on standards. “We are million in 2004. We estimate QNX’s 2005 lationship with Renesas will benefit its POSIX compliant,” said Mr. Poliak, which sales at $50 million, roughly. Harman In- growing business in Japan. Renesas is the is similar to Linux. So if you are familiar ternational purchased QNX in October world’s number-one supplier of MCUs for with Linux you can quickly program for 2004 for $138 million. car navigation and ranks Honda, Nissan QNX. QNX’s tool suite conforms to QNX first targeted the automotive in- and Toyota its top three end-use custom- Eclipse, an industry standard tool integra- dustry about four years ago and since then ers. According to QNX, tier one suppliers tion platform. Another benefit particu- has grown automotive sales from zero to in Japan consider Renesas the leader in larly important to automotive customers is 30% of total revenue, according to An- Japan for infotainment, navigation and the operating system’s reliability. “We are drew Poliak, automotive business man- telematics products. QNX is well-posi- pretty much the definition of hard real ager. The basis for QNX’s penetration in tioned as Renesas’ lead RTOS vendor, time,” declared Mr. Poliak. ◆

Microsoft... Continued from page 2 Microsoft offers Windows Mobile for sumer electronic gateway box in the car— Windows Mobile for Automotive is the Automotive as a solution for connecting more of a turnkey solution.” With such a product of Microsoft’s collaboration with consumer electronics devices such as gateway box, any Bluetooth phone can the Fiat Group to develop a low-cost Bluetooth mobile phones, digital music connect with the car audio system and telematics software platform and hardware players and portable navigation in the car. steering wheel controls. With an added reference design. Fiat will introduce the Mr. Wengert refers to Windows Mobile USB port, any digital music player can be first implementation at the Geneva Auto for Automotive as “a category in which connected to the audio system, including Show in March 2006, eventually rolling we include the software and hardware ref- an iPod if the carmaker has licensed the out to all 23 Fiat, Lancia and Alfa Romeo erence designs to actually make a con- proprietary Apple protocols. models. ◆

Page 8, December 2005/January 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com