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| Survive with a broken arm! From General Motors to Delphi to Aptiv
Never seen an auto parts company on the road of transformation, taking such a radical and decisive approach, except for Aptiv.
In the 1970s, the industry's vertical integration strategy made GM brilliant, from screws to engines, and a huge parts business group was born. In the late 1980s, GM, which was hit by Japanese automobiles, decided to abandon vertical integration and establish a separate parts division.
Source: DELPHI, APTIV, Core Myna Collation
In 1999, Delphi spun off from GM to operate independently and listed on the New York Stock Exchange.
2004 was the highlight of Delphi, when Delphi's annual sales reached 28.7 billion US dollars, overpowering Bosch, Continental and other manufacturers, becoming the world's largest auto parts company.
However, as the North American auto market shrank sharply, the largest customer GM passed on the loss of the vehicle price reduction to the parts company, coupled with Delphi's own high labor costs, by the second quarter of 2005, Delphi huge loss of $338 million, a great contrast with the net profit of $143 million in the same period last year.
Also in 2005, Delphi filed for bankruptcy protection, and then began a drastic streak of surviving with a severed arm. In just a few years, Delphi cut 76 production lines and sold more than 40 factories. At the same time, Delphi also set the future strategic focus as "security, green, connected", and launched an early layout in terms of active security.
In the years since, Delphi has continued to sell off its traditional businesses while frantically acquiring companies related to new business developments such as autonomous driving and intelligent interconnection, including Ottomatika, Movimento, Control-Tec, nuTonomy and other self-driving related companies, as well as companies investing in lidar fields such as Quanergy, Innoviz, and LeddarTech.
After nearly 10 years of divestitures and acquisitions, delphi began to focus more clearly on autonomous driving by 2017, resulting in one of the biggest changes in history - "splitting the company in two".
Source: APTIV official website, sorted out by Core Myna
Among them, the powertrain business is independent of the new listed company "Delphi Technology", which inherits the powertrain and new energy business of Delphi Automobile, while the other two major segments belong to the parent company and are renamed Aptiv ( Aptiv ) , focusing on active safety, automatic driving and other businesses.
There are traces of this historic spin-off. Delphi's 2015-2016 financial data shows that the gross margin of the powertrain business has declined, and the revenue growth rate has lagged significantly behind the other two businesses. At that time, the global fuel vehicle market was gradually saturated, and the development of autonomous driving was in full swing.
Data source: DELPHI financial report, core myna collation
After the spin-off, the PE center of Aptiv is significantly higher than that of the original Delphi, and the lightly armed Aptiv is more favored by the capital market, and the company's scientific and technological attributes have been greatly enhanced.
Source: Bloomberg, Changjiang Securities
In early 2020, Delphi Technology confirmed the sale to BorgWarner, and the acquisition was completed at the end of the same year.
So far, the Tier 1 giant, which once dominated the auto parts industry, has achieved a stunning and gorgeous transformation, from a bloated traditional auto parts company to a lightly equipped technology company.
| Intelligent Vehicle Architecture (SVA): Leading the E/E architecture upgrade
When it comes to Aptiv, it has to be mentioned that it has launched the Intelligent Vehicle Architecture (SVA). But before we do that, let's take a look at electrical and electronic architecture (EEA).
As early as 2007, Delphi had already proposed the concept of electrical and electronic architecture (EEA).
At present, most of the electronic and electrical architectures of mass-produced cars are distributed function architectures, and each new function added to the car is achieved by adding a corresponding electronic control unit (ECU), which communicates between these ECUs through the vehicle's CAN/LIN bus.
However, with the rapid development of automotive intelligence and networking, the increasing number of automotive functions, the exponential increase in software code volume and complexity, and the traditional distributed electrical and electronic architecture has been overwhelmed. After ensuring the space requirements such as vehicle styling, driving safety and occupant comfort, cars no longer have enough space to install more ECUs and increasingly complex vehicle wiring harnesses.
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Therefore, including Tier1 giants such as Aptiv and Bosch, as well as volkswagen, BMW and other car companies began to explore new electronic and electrical architectures, and the automotive E/E architecture upgrade war began.
Aptiv's Intelligent Vehicle Architecture (SVA) debuted at CES in Las Vegas in 2020, with the OTA update to the software being a highlight. SVA is highly flexible, changing the solution of traditional automotive embedded software and hardware, hardware and software are relatively separate so that relatively independent and flexible upgrades can be made for two systems, and owners do not need to upgrade expensive hardware, and can update car functions from time to time through software upgrades.
Image source: APTIV
Intelligent Vehicle Architecture (SVA) is a sustainable and optimized topology consisting of five independent computing platforms, namely the Intelligent Cockpit Domain (OSP), the Autonomous Driving Domain (OSP), the Propulsion and Chassis Controller (PCC), the Central Vehicle Controller (CVC), and the Internet of Vehicles Server, which greatly simplifies the electronic system of the intelligent car.
Among them, the intelligent cockpit domain and the automatic driving domain are two OSPs that can be redundant with each other (Open Server Platform, open server platform), when the vehicle has an emergency, such as the OSP used to perform automatic driving domain operations after the collision is damaged and cannot work, the intelligent cockpit domain OSP at this time can be used for automatic driving functions.
The propulsion and chassis controller (PCC) is used to adapt to different powertrains, such as pure electric, hybrid or internal combustion engines; the central vehicle controller (CVC) is used for vehicle safety Internet shutdown and body master control functions; and the vehicle networking server is used for edge computing and in-vehicle data services, such as data collection, desensitization, automatic driving black box and other functions.
Aptiv will use the above five computing platforms to manage the power and signal of the vehicle sensors and peripherals according to the physical area through the area controller (PDC), and finally transmit a large number of original sensor data collected to the central computer, which will process and realize the automatic driving command.
Integrated EEA is a key part of the response to the increase in the functionality and complexity of the car, and one of the major changes that will come with it is the innovation of the way the car is upgraded, and the OTA update similar to the smartphone will become the mainstream update method of the future car. The separation of hardware and software is convenient to promote the efficiency of software development, realize the OTA upgrade of the car, and the software-defined car will become a new trend in the industry.
| Acquisition of Wind River Company ignites automotive "software war"
At the beginning of 2022, Aptiv announced a blockbuster acquisition of Wind River from private equity firm TPG Capital for $4.3 billion in cash, a move that instantly ignited this year's automotive "software war".
Wind River is a software company specializing in embedded OS, software development tools, solution platforms and services. VxWorks is a real-time multitasking operating system (RTOS) from Wind River. For the past 40 years, Wind River and VxWorks have been leading the way in embedded OS, with a wide range of applications in aerospace, communications, industrial control and other industries. In 2009, Intel acquired Wind River for $884 million, and in April 2018 Intel sold Wind River to investment company TPG.
According to Wind River's public information, as of now, the company's software involves more than 2 billion edge devices of more than 1,700 customers around the world, and Aptiv's acquisition is the Wind River Studio (cloud-native platform) launched by Wind River at the beginning of last year, which is used to develop, deploy and operate highly reliable and high-security mission-critical intelligent systems.
Image credit: Wind River
In its acquisition statement, Aptiv noted that the company plans to use Wind River Studio to develop software-defined intelligent systems for the automotive industry and continues to invest in and develop the platform to serve other industries such as telecommunications.
The platform involves seamless technology integration including remote cloud computing, data analytics, system-level security, 5G, and AI/ML, which means that it can provide a mission-critical intelligent systems development environment for the entire product lifecycle for industries such as automotive.
For example, Studio's cloud on-premises infrastructure software and analytics capabilities address the complex needs of telecom service providers around physically distributed ultra-low latency, cloud-native infrastructure deployment and management. Deployed in 5G networks, these technologies enable the world's first end-to-end fully virtualized 5G data session.
This will complement Aptiv's previous strategic layout in the vehicle electronic architecture, especially its intelligent vehicle architecture SVA, which divides the vehicle electronic and electrical architecture into domain control units such as intelligent cockpit, automatic driving and body control, and realizes functions such as software and hardware, I/O and computing separation, and software cloud upgrade.
However, the most direct automotive business additions to Aptiv at the moment are Wind River's real-time operating system VxWorks and the embedded Linux development platform. The most typical case is that TTTech's automotive security software platform MotionWise is the VxWorks real-time operating system.
For example, as early as 2015, Wind River launched the Automotive Profile for VxWorks, which supports the function of secure partitioning, and customers can centralize multiple applications of different security levels on a single hardware platform, up to the requirements of ISO 26262 ASIL D certification, so as to meet the new needs of the industry of the whole vehicle to the domain controller architecture.
This suite of software is AUTOSAR compatible and can support standardized interconnection and functional interfaces for simpler and faster interoperability and integration. At the same time, it provides security features for connected cars, reducing the risk of tampering or execution of unauthorized code and access, as well as malicious attacks.
Last year, Wind River also partnered with Vector to launch a service-oriented architecture (SOA) solution that supports the development of driver assistance systems (ADAS) and autonomous driving technologies based on the AUTOSAR Adaptive standard, powered by Wind River Studio and VxWorks Real-Time Operating System (RTOS).
This means that through the acquisition of Wind River, Aptiv has a complete end-to-end full-stack electronic architecture software development capability, from the underlying real-time operating system, embedded Linux operating system, middleware and upper-level application algorithm development capabilities. At the same time, with The help of Wind River Studio, the ability to develop a cloud-native automotive platform was realized.
"The automotive industry is undergoing its largest transformation in more than a century, with connected, software-defined vehicles increasingly becoming key elements of the broader intelligence ecosystem." Aptiv CEO Kevin Clark said that Tier1 needs to speed up software development and achieve full deployment of software and hardware full-stack solutions.
Previously, Bosch and Continental upgraded their respective software subsidiaries (ETAS, EB) to the level of corporate strategy. Among them, Bosch has begun to expand the team of ETAS and announced that it will invest 4.5 billion US dollars per year to improve the overall software competitiveness of the group. In addition, ZF has established a global software center to take on the responsibility of transforming this new business in the future.
| Write at the end
From Delphi to Aptiv, from the launch of the Intelligent Vehicle Architecture (SVA) to the acquisition of Wind River, this traditional Tier 1 vendor, which has continuously spun off redundant businesses and continuously focused on the wave of vehicle electrification and intelligence, has now transformed into a technology company leading the E/E architecture upgrade and software-defined automobile trend.
With the in-depth development of the wave of vehicle electrification and intelligence, more and more auto parts suppliers will face a similar choice of Delphi-Aptiv, will they continue to exist as a traditional Tier 1, or will they take advantage of the transformation of the automotive industry by lightly armored technology companies? This is a question that deserves constant consideration by practitioners in the automotive industry.
Aptiv provides a living car Tier 1 development case spanning 20 years, which is worthy of reference by many domestic auto parts manufacturers.
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