ISG Provider Lens™ Engineering - Service Partners - U.S. 2019 - Automotive Manufacturing Engineering
Automotive Product Engineering
Connected cars and autonomous vehicle adoption is higher in the U.S. compared to other regions and technologies are being rewritten in the vehicle development space. This is leading to collaboration between design and manufacturing teams, thus producing innovation in vehicle technologies such as telematics, powertrain and automatic driving.
With digitization setting into the automotive space, relationships are changing. Vehicle OEMs are adopting long-term partnerships with Tier 1 and Tier 2 suppliers. Such collaborations are cracking the traditional T&M pricing models and new, more technologyfocused business models are being revealed, for e.g., managed services with more shared risk and reward and outcome-based services.
As a part of smart city infrastructure, Tier 1 and 2 suppliers are focusing on electric mobility solutions, including battery systems and charging stations for the personal and public transit markets. With the surge of connected mobility, automotive OEMs are rapidly moving towards engineering research and development (ER&D) services for advanced driver assistance systems (ADAS). OEMs and technology builders are bonding to invest in co-innovation labs. Providers are also making partnerships with academia to bring forward innovative sensors, 3D mapping and software integration capabilities.
As an early-mover opportunity, IT services companies are strongly focused on leveraging their in-house software capabilities to address client-centric needs in the connected and autonomous product development spaces. In addition, their embedded and hardware integration capabilities, coupled with advancements in 3D printing, are directed at improving in-vehicle connectivity and telematics solutions.
Augmented reality (AR), virtual reality (AR), software-defined networks (SDN) and 5G are currently are being tested in the U.S. Technology suppliers, telcos, cloud providers and IT services firms are partnering with automotive OEMs and suppliers to materialize those technologies in real time for commercialization.
Automotive Manufacturing Engineering
Significant engineering R&D investments are being made in the U.S. to manage automotive noise generation. Partnerships are also being made among OEMs, suppliers and academia to address noise reduction.
U.S. providers are among the forerunners in adopting the new pricing models in engineering services. These pricing models are largely framed for offering consulting services, plant automation, product lifecycle management (PLM) and Industry 4.0 functionalities.
Digital thread penetration is getting deeper in U.S. automotive manufacturing. It is being used to get an end-to-end integrated view across the plant, which helps in bringing digital manufacturing technology and modernizing IT/OT capabilities.
Aerospace Product Engineering
Electrification in the aerospace industry has been driven by the MEA (more electric aircraft) movement, which conceptualizes replacing mechanical and hydraulic systems with electrical systems. The industry, however, has been facing challenges to finding replacements for heavy power electronics boxes with heavy electromagnetic interference (EMI) filters, hydraulic flight control actuation and a few other components. The success in MEA architecture was a result of the adoption of secondary electric power distribution systems that are solid state and power control based, electric braking systems and nobleed system architecture.
Other activities are ongoing in the area of lightweighting, which has compelled OEMs to relook the interiors. From a materials perspective, primes have been active in implementing composites in aero structures such as titanium fuselages, composite-based engine pylon components, aluminum-lithium alloy fan blades and micro lattice structures for use in aircraft walls and overhead bins.
OEMs and Tier 1s are gradually looking for end-to-end transformational partners and are moving away from typical labor arbitrage-driven outsourcing models. OEMs and operators are looking for more risk-reward and outcome-based pricing models for engagement; such models encourage innovation and can reduce time to the market.
Aerospace outsourcing projects are mainly governed by mechanical activities followed by electrical and software engineering. Embedded systems engineering, however, has been gaining a lot of traction recently.
Aerospace Manufacturing Engineering
OEMs have been significantly inclined towards component sourcing for cost advantage. As a result, those manufacturers hold the OEMs hostage and make better margins than the OEMs.
The aftermarket promises higher profit margins, on which the OEMs are presently losing out. The service providers tend to leverage the cutthroat competition that is prevalent between airlines and OEMs in the aftermarket business. Tier 1s have been continually and aggressively acquiring smaller players to build combined muscle to negotiate with the OEMs.
Despite of a level of component insourcing demonstrated by a few prime aircraft manufacturers/assemblers, service providers are in an advantageous position. This is because the increase in in-house manufacturing by manufacturers/assemblers would necessitate building an experienced workforce to establish and integrate these separate divisions within the organization. OEMs are leaning more on service providers to further build these capabilities in-house.
Most of the Tier 1 manufacturers are focused on building an integrated platform strategy and gradually outsourcing all offerings that they see as non-core. While the Tier 1s are recalibrating their strategy with respect to the dynamics of the modern aerospace industry, service providers that are capable of taking up more turnkey responsibilities are being preferred.