An interview with Norbert Hauser, Vice President Marketing, Kontron

HS: Kontron is a major player in the embedded market. How large is this market?

NH: Very large. Some market analysts estimate the total embedded market at about US-$30 billion with about $5.7 billion being "open" for competition.

HS: How much of this is taken by Kontron?

NH: A significant part. After last year’s mergers and acquisitions we see Kontron in second place of the top five vendors after Emerson and before GE Fanuc, Advantech, and RadiSys.

HS: How is Kontron’s market share distributed?

NH: Very much balanced. Infotainment (POS/POI/gaming), telecom, and auto-mation each represent about 25 percent of sales and medical following with about half of that, i.e. 12 percent.

HS: Where do you design your products?

NH: Worldwide. We have one of the strongest engineering staff in the embedded industry with about 900 engineers. There are large design centers in Eastern Europe including Russia as well as in Central Europe, mostly in Germany, in North America, and in Asia Pacific (APAC). The East European design engineers are very cost efficient, provide a good protection for our know-how, and have almost no fluctuation in the work force as opposed to a 30 percent fluctuation rate in Asia.

HS: Where do you produce?

NH: Also worldwide. We have production sites in Europe and North America as well as in Malaysia in a former Intel motherboard factory. We also have some production in China and Taiwan.

HS: Where do you sell?

NH: Worldwide. Because of our European base, we sell about half of our products in Europe, and the rest of the revenue is split between the Americas and the emerging markets - Asia Pacific and Russia, which are rapidly developing.

HS: How do you see the mix of major product categories?

NH: Similar to the market forecaster VDC. AdvancedTCA sales have been about $480 million in 2007 [and are anticipated to grow at more than 50 percent in the upcoming years]. As the buy-in from Tier 1 Network Equipment Providers (NEPs) has increased, Service Providers have become more interested in open standards in the face of declining margins, and volume rollout of systems from early adopters has begun. CompactPCI and the next generation VME architectures VXS and VXP in 2007 are estimated at $1.6 billion and will make significant contributions to the overall market growth at about 15 percent annually. MicroTCA is just starting with about $8.5 million in sales in 2007 but now is also moving into defense and aerospace, industrial, and medical markets. VDC expects this to grow rapidly at about 150 percent CAGR up to $350 millionin 2011.

HS: Kontron has been growing without any acquisitions for quite a while. Are you now starting a new series of acquisitions?

NH: No, not really. We have stated that we want to expand by internal growth and development in our established market segments. However, we will acquire good quality companies if they bring different business endeavors to us that fit into our mainstream activities.

HS: How does this acquisition philosophy apply to the purchase of Thales Computers?

NH: Very well. Thales Computers strengthens our position in three segments of the embedded market.

First: we get additional sales and market penetration along with the in-depth know-how in the Power Architecture segment, where Thales Computers has a very strong position. Thales Computers is a founding member of the Power Architecture organization (www.power.org) and a strong force in this market. Kontron has the know-how and is one of the major forces in the market for Intel-based embedded computers.

Second: Thales Computers is very strong in the COTS military, aerospace, and transportation markets with expertise in extremely reliable and rugged systems in hard real-time and deterministic mission-critical applications.

Third: [We gain] increased regional presence. As a French company, Thales Computers has good knowledge of and a good position with French authorities regarding government funded projects and business. This is still very important, because the European Union is not a "United States of Europe" but rather a loose association of independent nations. Thales Computers will give Kontron and Thales customers more comprehensive local support through native speakers. Also in North America we will extend our market position with additional local staff and the new products/services.

HS: What is the significance of your joint-venture with the Taiwanese company Quanta Computer Inc., Taipei, the world’s largest manufacturer of laptops?

NH: Cost-effective production. As announced on March 6, 2008 by the Executive Board of Kontron, the Taiwanese listed company Quanta and affiliates are acquiring a 21 percent stake in Kontron Asia Inc., Taipei, the production organization of the Kontron Group, which includes its Penang, Malaysia production plant. Both parties have signed a relevant purchase agreement. Kontron and Quanta expect to benefit equally from the partnership’s advantages. Kontron’s main objective is to optimize its manufacturing costs for embedded computers using Quanta’s purchasing and production conditions to achieve the cost leadership in purchasing and production in the embedded marketplace. Quanta produces around 30 percent of worldwide laptops per year and will benefit from diversifying into the industrial market. Kontron can offer volumes of 100,000 embedded computer systems per year on a competitive basis after the joint-venture with Quanta.

HS: Large production quantities is what everybody expects from the emerging MicroTCA systems market. How does Kontron plan to stay ahead in business volume and margins?

NH: With ingenuity. An example of Kontron’s strategy is the Kontron OM6062 (Figure 1), which is a cost optimized AdvancedMC system platform. In comparison to conventional MicroTCA platforms, the Kontron OM6062 achieves significant cost improvements by a simplified design. This streamlined design includes: the mechanical concept (no redundancy, the cube design facilitates cooling), pluggable Power Supply Units instead of MicroTCA Power Modules, Power Management, and Fan Control on the backplane.

Figure 1: (click graphic to zoom by 2.2x)

The double-width form factor provides more PCB space and front panel space for a complete SBC based on an Intel Core2 Duo processor including graphics and HDD on a single AdvancedMC card. If Ethernet switching is not needed, the Kontron OM6062 AdvancedMC platform operates without an MCH. In this configuration, the backplane provides management, PCIe clocks, and direct x1 PCIe lanes from the Processor AdvancedMC to four AdvancedMC slots. The basic Kontron OM6062 configuration contains an AC power supply unit, so no extra AC/DC converters are needed.

Also included in the basic configuration is a Kontron (Figure 2) AM5010 Processor AdvancedMC with graphics and SATA HDD on board. Additional components such as an MCH or AdvancedMCs are available as options. The Kontron OM6062 AdvancedMC platform ships fully configured and tested, including an operating system installed (Windows, Linux from Red Hat, or WindRiver’s VxWorks). This configuration is optimized to industrial and medical applications, not to telecom applications.

Figure 2: (click graphic to zoom by 2.2x)

These market segments (industrial/medical and telecom) have different requirements, so the systems as offered by Kontron are optimized for their respective environment.

HS: Kontron has been strong in the CompactPCI market. Is this market being taken over by AdvancedTCA, AMC, and MicroTCA?

NH: No, not at all. Actually CompactPCI is a growing market. The established base is continuously enhanced with new capabilities, like more CPU power and more I/O. CompactPCI fits well into rugged switching and other rugged applications. Existing systems are upgraded with newer, more powerful CPU boards, featuring the latest dual-core and quad-core chips from Intel. On 6U CompactPCI we have introduced a new 6U CompactPCIBoard at Embedded World with two Intel Quad-Core processors in 45 nm technology, providing 67 percent greater performance per watt than Intel’s previous low voltage processor and chipset. A wide variety of CPU-boards, switching/hub boards, andI/O boards from Kontron help our customers to solve ever more demanding requirements of industrial applications. An example is our CP6923 CompactPCI Gigabit Ethernet Switch, which is available on three different ruggedization levels, called R1, R2, and R3. This includes different extended tempera-ture ranges, like E2 (-40 °C to +85 °C),air or conduction cooling, as defined in VITA 47 ECC4, and shock andvibration levels in accordance withEN 60068-2-27/64, similar toVITA 47 EAC6.