The Secrets of Microsoft's Sync

This voice-control system for car stereos and cell phones, available only in Ford cars, is sure to be imitated

By Arik Hesseldahl

Microsoft (MSFT) has spun its wheels for years attempting to craft an in-car computer, but the company may be primed for pole position with its latest effort to weave software into auto design.

The system is called Sync, and it lets motorists control car stereos and mobile phones with voice commands. Sync was featured in a keynote speech by Microsoft Chairman Bill Gates at the International Consumer Electronics Show in Las Vegas (BusinessWeek.com, 1/7/08), and it's available exclusively from Ford Motor (F).

The automaker has sold more than 100,000 vehicles with the Sync system since it was introduced in November, says Martin Thall, general manager of Microsoft's automotive business, with 70% of those sales coming in 2008. Ford expects to sell a million Sync-enabled cars by early 2009, when the system will be available in 85% of its cars.

Why Is It So Cheap?

Part of the reason for the popularity is price. Adding a Sync system to a Ford, Lincoln, or Mercury adds only $395 to the sticker price, while adding similar features for controlling music and cell phones to other cars can cost as much as $800.

Researchers at market research firm iSuppli probed under Sync's hood for a closer look at how Microsoft and Ford managed to keep the price so low. The makers use inexpensive chips, for one thing. A teardown analysis by iSuppli found that the six major chips used in the system cost a grand total of $25. Of those, the most expensive component is an $8 applications chip from Freescale Semiconductor, the privately held former chip unit of Motorola (MOT). A second Freescale microcontroller chip costs $5.

Add in $4.80 worth of memory chips from Micron Technology (MU), a $3.80 flash memory chip from Samsung, a $1.75 Bluetooth chip from Cambridge Silicon Radio, and a $1.65 audio chip from Cirrus Logic (CRUS) and you've got most of the hardware for the system, says iSuppli automotive analyst Richard Robinson. "The secret about this system is that there's no real secret to the hardware," he says.

Adding to the cost are the licensing fees for Microsoft's software, and the voice-recognition technology from software maker Nuance Communications (NUAN). Between hardware and software-licensing costs, and assuming the markup of three to four times cost typical to the automotive electronics business, Robinson figures the system costs $100 to $150 to make. ISuppli researchers didn't conduct a full teardown, leaving out lesser components, circuit boards, wiring, and other parts. Nor does the analysis include costs of final assembly, marketing, distribution, or packaging. Thall declined to comment on iSuppli's cost estimate.