Standardization Will Pave the Way to Software-Defined Vehicles (and Commoditization)

The transition to software-defined vehicles will happen, and with that the way vehicles are developed will completely change. Instead of relying, as is common today, on additional hardware components to enable new functions, resulting in 100 electronic control units per vehicle, cars ultimately will evolve into software devices.

Industry players are claiming that over 80% of vehicle features will be driven or implemented by software. That means vehicles will have somewhat generic hardware components, and new capabilities, such as semi-automated parking, will be added by downloading a new piece of software.

Nevertheless, the challenge of building these vehicles is far too complex for a single company to solve. And even if each OEM were to design its own solution, the software portability and scalability necessary for such an approach would be hard to achieve.

Nearly all players agree collaboration and standardization are required for the successful transition to SDVs. That entails finding consensus around the architecture and interfaces, as well as defining software parameters and hardware components to foster development of an ecosystem of technology providers that can support the model.

Furthermore, reference platforms for testing and implementation will be needed to give partners a common basis for developing the standards and collaborating openly. That is typically best done on open source. However, some argue that while the products designed specifically for mission-critical systems can be based on an open-source architecture, the final product will remain, in almost all cases, based on proprietary products.

Scalable Open Architecture for Embedded Edge

Industry groups have an important role to play in the standardization process. The Scalable Open Architecture for Embedded Edge (SOAFEE) alliance is a great example of an ongoing collaboration between some of the leading automakers, software vendors, chipmakers and cloud technology companies. Arm, Volkswagen’s Cariad, Continental, Red Hat and AWS are some of the members.  

SOAFEE essentially provides a standardized cloud and edge architecture for mixed-criticality vehicle applications as well as corresponding open-source reference implementations, creating an ecosystem of hardware and different layers of software. The goal is to standardize non-differentiating middle layers, namely operating systems, hypervisors, container runtime and hardware abstraction layers.

SOAFEE’s cloud-native approach brings continuous integration, delivery and deployment of applications to the automotive industry by automating steps of app development. Moreover, the cloud-based infrastructure can be used for training and validation and the parity between the edge and the cloud enables software to be deployed in different hardware without re-architecture efforts, shortening development time and decreasing costs.

Lastly, the cloud provides a virtuous cycle for software developers because they receive data and insights from vehicles that enable them to identify areas for improvement or new opportunities and, hence, continuously enhance their solutions.

Apex.AI

Apex.AI is one of the latest SOAFEE members. The company’s flagship product Apex.OS provides the base software (software development kit) for automakers and automotive suppliers developing safety-critical functions for all vehicle domains and communication to the backend.

Apex.AI abstracts different chips, hardware manufacturers, underlying software and device drivers into predefined functional cores to significantly simplify the development of automotive applications (e.g., automated emergency braking, cabin sensing), while enabling it to work on several different types of hardware. The same is done for communication protocols, including bus systems (e.g., Ethernet, CAN) and wireless connection to the cloud.

In summary, the company offers a simple but robust and reliable way for software developers to write safe and certified vehicle applications, and its contribution to SOAFEE will be in helping standardize software architecture for mission-critical features.

Vertical Integration

Why does it matter? The inclusion of Apex.AI in SOAFEE is significant because, today, the main competitors of such companies are OEMs attempting to develop software solutions in-house. The problem is that building and maintaining the base software underlying vehicle applications is an arduous and costly process that does not add unique selling points to the final product.

Despite recent investments and restructuring, incumbent OEMs are not software companies, and even software companies know they cannot develop all software layers and excel in all of them. Reinventing the wheel in software that is invisible to the end user is resource-consuming and, in most cases, unnecessary, as in-house solutions will hardly match, let alone exceed, solutions offered by specialized companies.

OEMs doing the heavy lifting in-house eventually will concentrate efforts on the visible part of the software experience, and SOAFEE’s goal to standardize non-differentiating middle layers will help them with that.

The same happened in the smartphone industry. In the past, all manufacturers, including Nokia, Microsoft and BlackBerry, had their own operating systems. Today, most of them have been discontinued, and the market is dominated by iOS and Android. In fact, this is already happening with infotainment operating systems aboard vehicles, with several automakers migrating to Android.  

Commoditization

Standardization sometimes results in commoditization in the long run. The question that arises is: How likely is what happened to personal computers and smartphones to happen to automobiles?

Wards Intelligence asked this question in a recent survey, and as shown in the chart below, nearly half of all respondents (49.7%) agree commoditization is inevitable. Tier 1 and 2 suppliers have the highest expectation that differentiation between vehicles will decrease, with 61% of respondents saying commoditization is highly likely. Surprisingly enough, automakers also share the same opinion – although to a lesser extent – with 39% of respondents answering that it is very likely. 

Source: Wards Intelligence

Nevertheless, not all is lost. While vehicle margins will decrease in the low-end segments because vehicle price will become the main distinguishable attribute, post-sale software revenue opportunities during the vehicle lifecycle will be significant. General Motors, Stellantis and Ford are estimating at least $20 billion in software and services revenue by 2030, with GM recently claiming the software business will be bigger than vehicle sales in the future.

On the other side of the spectrum, premium vehicles will still have better sensors, better computing and more advanced artificial-intelligence and machine-learning capabilities and be first to market with a better software experience. They will be the first to feature, for example, a hands-off autonomous-driving system usable over a large geofenced area or the capability of autonomously parking or retrieving a vehicle in the most challenging scenarios and from the greatest distance from the driver. Moreover, premium OEMs will keep a larger portion of software development in-house to guarantee some differentiation.

The commoditization process is already happening in China, where virtually all infotainment systems run on Android and feature similar apps. Differentiation is based on the chipset running in the car, being the first to market with new functionalities, such as in-car gaming, and providing a highly customizable and personalized in-cabin experience.

Although differentiation will be based on being first to market, competition will catch up fast due to the support of an ecosystem of specialized middle-layer software suppliers. Therefore, intensive R&D, investment in the latest hardware and software tech and constant enhancement of vehicle functions will be keys to gaining a competitive edge.

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