I’m about to contradict myself. I’ll admit this upfront just in case you’ve read my article titled Even Electronics Design is now a Commodity. I’m going to stand by the article, though, but I’d also like to present the contrarian view that the commoditization of the electronics design chain should be celebrated and not panned as a negative development.
Fact. The design chain is the electronics industry’s tastiest pie. That’s why everyone wants a piece of it. For years, though, OEMs had the design chain cornered and by extension all associated supply chain fulfillment functions, including manufacturing, purchasing, product lifecycle management and end-of-life disposal. Component suppliers were consulted during the design phase but often they fought only for “sockets,” which when won guaranteed sales of the device to the equipment vendor. That, anyway, was the concept. Of course, oftentimes purchasing departments have been known to replace the design engineer’s preferred components for similar ones on the basis of pricing and other factors. Suppliers lived in dread of such moments.
Back then, component distributors weren’t too involved in design chain activities and were happy to support the production of devices developed without their input. Broadline distributors weren’t always too worried about whose products survived purchasing’s winnowing actions, knowing fully well they generally would be able to supply the desired parts, irrespective of vendor. Even so, this wasn’t always a great position to be in and many supply chain services providers, including distributors, wanted to be “in” on design chain discussions.
As manufacturing outsourcing accelerated in the 1990s, support services providers began trying to convince OEMs to involve them in the design phase of product development. They argued this would make the process smoother and eliminate or reduce frictions down the line. The OEMs were initially reluctant, worried critical IP and design knowledge could be spirited away. However, as they cut back on internal resources, OEMs eventually opened the doors to design chain collaboration a crack and years later threw them wide open.
The situation is completely different today. OEMs have largely turned over not just the supply chain to outside support services providers but they’ve also thrown in many design chain functions too. Some OEMs don’t even have design teams anymore, preferring instead to leverage resources available at suppliers, distributors and contract manufacturers.
Now, everyone is involved in design chain decisions and management. Distributors, especially, have developed vast online and human resources for supporting OEM and EMS provider design chain activities. In some cases, they’ve become virtual extensions of customers’ design chain departments. Some have gone even farther. Distributors like Element 14, Electrocomponents and even bigger players like Arrow Electronics have gotten into the “reference design” business where they independently shoulder product development, pull in and qualify components on the board and then make this available to all interested parties, including traditional and newly minted OEMs.
Numerous benefits have accrued to the industry following the liberalization of design chain functions to include component suppliers, distributors and independent design firms. Combined with outsourcing, the opening up of the design chain to everyone has helped to further drive down prices while increasing the range of products available to consumers and corporate buyers. There have also been numerous negative side effects, the most devastating of which is the commoditization of the process.
But the focus on the commoditization of the design chain may be wrong. The larger role distributors and contract manufacturers now play in the development of electronics equipment has democratized the process, giving all stakeholders a role and the opportunity to influence the system. Suppliers no longer have to wait silently while OEMs decide which components should be used, a jaundiced selection process that may be influenced by the personal interests of the design engineer. Now, they actively advocate for their products. Some go beyond this to demonstrate what’s “possible” and how OEMs can use these products beyond the internal design engineers’ imagination.
Distributors, too, no longer watch the design chain process passively. The Raspberry Pi Foundation, Premier Farnell and RS Electronics have demonstrated with the Raspberry Pi computer that anyone with a great idea – notwithstanding their position within or even outside the electronics industry – can today initiate design actions, make a great product and garner great publicity along the way.
As to the commoditization scare, electronics manufacturers have been dealing with this for quite a while in other segments of the industry. They will trounce it in the design chain too.
Back to the question: Whose design chain is it? If your company plays a role – any role – in bringing an electronic device to market, then it also owns a piece of the design chain.
Bolaji Ojo is editor-in-chief and publisher of Electronics Purchasing Strategies. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at email@example.com.