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When does an ADAS cost become an investment for OEMs?
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Insight
Jun 3, 2022
When does an ADAS cost become an investment for OEMs?
Is perception really reality? It’s a phrase we hear often. Got a disagreement at work? “Perception is reality,” you may be warned. Read something that doesn’t sit comfortably with you? “Perception is reality.” Dressing to make a good impression? “Perception is reality.” But is it really?
Can perception influence reality? Or is it simply an aphorism used to convince others that one person’s perception reflects the truth more accurately than the truth itself?
Take the automotive supply chain as an example. With the widespread transition away from internal combustion engines towards electric vehicles with more autonomy, traditional bills of materials have been turned upside down. Instead of engine components comprising the majority of vehicle costs, electronics are becoming a major cost.
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Yet here lies a potential dilemma for carmakers. Electronics are something of a black box to automotive OEMs , particularly in relation to safety-critical items such as Advanced Driver Assistance Systems (ADAS). For too long vehicle electronics have been the domain of the supply chain. Never before have OEMs had to understand the costs and electronics associated with these systems.
This makes justifying a small cost to change materials a battle between perceived costs and operational costs – or perception and reality. For example, the move from a standard tin-silver-copper solder (SnAgCu) ‘SAC’ and tin-silver (SnAg) alloy to a high reliability alloy such as Innolot is likely to be a perceived increase to automakers, since the material cost is slightly higher. However, if thermal cycling tests have proven Innolot to improve solder joint reliability by some 40% compared to a traditional SAC alloy, this perceived cost becomes an operational cost.
Why? Simply because that small cost could result in a major improvement to overall vehicle safety and therefore further minimize the risk of a warranty-related recall as a consequence of electronic failure. When you calculate the potential cost of such a recall, that small material increase quickly becomes insignificant.
Battle between perceived costs vs operational costs
There’s a famous John Ruskin quote that resonates on the topic of perceived supply chain costs versus operational costs.
"It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money - that's all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”
As carmakers move towards Level 3 autonomy and beyond, the operational rigors that vehicle electronics must withstand will only increase, with ADAS bearing the brunt. Ensuring these systems have hard-wearing hardware materials with high thermal conductivity properties and long lifecycles will be critical to the safe and reliable operation of vehicles.
Therefore, the perceived cost of new materials must be weighed against the potential cost of failure, for an accurate and effective decision to be made. After all, it’s as Ruskin says, when you pay too little, you sometimes lose everything. In the case of an ADAS-related recall, this could mean money, brand reputation and consumer loyalty too.
Take control of supply chain costs
To truly understand the importance of viewing electronic hardware as an operational cost, rather than a perceived cost, you can use the hypothesis below.
If the average cost to design a Level 2 autonomous vehicle is $47,000, of which 30% is electronic content, comprising $14,100 of the overall cost, then ADAS represents about 20%, or $2,820. Replacing traditional materials with more robust, innovative new alloys and conductive adhesives, would represent less than half a percent of the overall vehicle cost, so small as to be insignificant. That’s a tiny increase that could bring potentially large rewards.
Rather than viewing that ‘<0.5%’ as a perceived cost, it is important to view it instead as an operational cost; understanding the performance benefits that it may bring. If we assume that alloy was MacDermid Alpha Electronics Solutions’s Innolot, which has been proven to improve solder joint reliability by some 40% compared to a traditional SAC alloy (228 BGA), then it is clear that any increase is actually a strategic operational cost that will deliver Return On Investment (ROI) in terms of reliability and longer, more effective performance. The reputational benefits of improved reliability are much more difficult to quantify but are no less valuable.
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So what of the phrase perception is reality? Have we completely proven that perception is actually rarely a reflection of reality at all? Is perception in fact merely a lens through which we try and view reality, influenced by our experiences, conversations and viewpoints? I guess that would very much depend on your own perception of reality itself.
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