ebike system — What about the other two suppliers?

In the past two weeks I was busy on collecting news and information happened in bicycle industry due to COVID-19. I might need some more weeks to draw a clearer picture. Before I finish my drawing, I’d like to continue talking about the rest two groups. Here we go!

Software industry

Example: Lime and Bird

Let’s take Pixel as an example. Do you know how many years Google has spent to develop Pixel mobile? Probably you don’t even know what the Pixel mobile is because Pixel mobile has never had good sales in the market. If a software giant like Google can’t make their hardware popular, how can the other software companies win the hardware battle in ebike market?

In most software companies’ mind, a classic business model is selling hardware with zero profit first to earn continuous software profit then. In ebike field, the hardware should be e-system and software can be APP, diagnostic tool, cloud service, or anything like that. They normally need to invest much in selling zero-profit hardware at the beginning and look for profitable feedback in couple years.They focus very much on establishing a “profitable software”. as for hardware, they prefer to find someone else to customize an e-system for them.

This is most likely the beginning of their nightmares.

The “hardware” in ebike field costs. An e-system normally costs from 350 to 800 USD, and the supply chain of an ebike is even more complicated than that of a mobile. That means, besides focusing on profitable software business model, these software companies need to overcome the hardware barrier — building supply chain, understand hardware development, take care of inventory control, and evaluate payment term. (I’ve ever asked some of my friends they work for software companies, I have to say, near zero people know the trap of payment term…)

The other thing is design flow, which is tricky and controversial in my opinion. Software companies prefer to update product frequently accord to the market feedback. The flow SCRUM is like a winning formula in software field, while the formula might never work in hardware field. An APP can be deployed to Google play or Apple store anytime if the software is fully tested. Users can just tap an update to get a new function on their APP. however, the hardware thing is another story — do you want to “frequently update” your hardware? well…you might need to know how much you have to pay for recalling your hardware first!

I believe working with this group is exciting. Probably this is the most potential and innovative group. Think about the following questions and be prepared.

a. Do you prefer a long-term plan instead of short-term profit?
b. Can your financial status support you a long-term investment?
c. Can you take care of nearly a complete ebike by yourself?

Semiconductor industry

Example: Panasonic and Darfon

How complicated could an e-system be? For me it’s complicated, but for a semiconductor company that is probably just a piece of cake. The funny thing is: the most e-system companies who failed come from semiconductor industry.

With the sharp growth of consumer products in the past decades, Semiconductor companies have accumulated much experience producing electronic products. They have plenty of supply chain resource, they own a bunch of electronic talents, they have nearly the most advanced facilities. Moreover, they have money. They are supposed to be the group who can develop the most competitive product.

Perhaps they have too much predominance in the beginning, they forget to observe the market prudently and objectively adjust themselves to penetrate this market using the most appropriate way.

An order of ten thousand pieces for an electronic company is normal, the aggregate quantity of a product annually can be more than a million easily. The stereotype encourages them to invest more resource in developing a product than the other groups spent. They invest a lot on automating jigs, they open molds according to the standard of general consumer products, they focus on minimizing production time. These investments introduce a stable and material-optimized product as usual. However, the labor cost and overhead cost cannot be amortized effectively because the real quantity is much lower than their forecast. Eventually the product price is not so friendly.

A vicious circle therefore starts.

To solve this issue, they either push their customers to place a huge order (for their customer it’s huge, but for them it’s normal), or downgrade their development criteria to fulfill the real market demand. The former behavior looks fair, but requesting a hundred thousand pieces a year for a single customer is just like asking the customer to become the top one player in a country. The latter countermeasure looks compromised, while they could face the other challenge — how can they convince their supply chain of this adjustment? if they cannot, then the optimal cost of raw material comparing to the other groups disappear.

All roads lead to Rome. Anyone of these four groups can lead you to success. The group can be your choice if you care about the below issues.

a. Do you have a significant quantity base and look for an optimal profit?
b. Do you need electronic expertise to enrich your domain knowledge?
c. Do you have a clear spec and willing to invest in implementation?

Next, I am thinking of talking about the relationships among brands, bike factories and bicycle traders. Please keep an eye on my new dish soon.