Advertisement

Blog

The Electronics Cooperative Concept: Part 3

In the previous part of this series, we were looking at the ways the designer, supplier, and user could interact to create a technical product cooperative. We'll continue with a closer look at the revenue stream.

Another income source for designers is through ongoing engineering support to both suppliers and users on a fee or other basis. Designs require maintenance and design refinements occur over time, as engineers perfect them through increased understanding of the design and of technical concepts affecting them. Traditional companies have product maintenance engineering departments that fix design faults that made their way through to production, and that semi-customize products for large orders.

Suppliers and users have access to designers and, like lawyers, this access comes in varying degrees at a price. A designer might devise improvements in an existing design and, for compensation, offer the new, improved version of an evolving design to suppliers. Suppliers that want a competitive edge will be attracted to the improvements.

This handling of designs, through an evolving design lifetime rather than “destroy the molds and start over” every design iteration brings technological stability to the industry. Some traditional companies introduce new products that, upon closer inspection, are a new iteration of a technology undergoing refinement. Tek 'scopes were in that category in earlier decades, where a few engineers designed all of them. Decades of product refinement are paralleled by decades of refinement of the ability of their refiners.

The traditional company is burdened with the need to have both competent designers and suppliers. Both must succeed for the company to succeed. In the co-op scheme, designers become visible to both the public and to suppliers. Neither designers nor suppliers are limited to a one-to-one correspondence. Designers can provide their designs and engineering support to multiple suppliers of the same product. Designers are differentiated by the quality of their designs and the kinds of technology they address.

Suppliers are differentiated on the basis of geographic regions, technology niches, price, quality of manufacture, quality of after-sales and pre-sales support, and breadth of product-line offering. Suppliers can be differentiated by the price-quality tradeoff they choose. Designers can customize their designs to suit the supplier marketing strategy. Multiple suppliers not only give the market (users) a wider range of choices for purchasing a given design; designers also have a wider range of clients for their designs. A new supplier might want to build a product that an existing supplier is making but with some differences. The designer then has another client and more design work.

Suppliers likewise have a choice of designers from whom to select product designs. This not only gives a manufacturing and sales company more options, it also lowers the barrier to market entry as a supplier. Young business graduates eager to be entrepreneurs but having few resources or sources of capitalization, and (not having been in the engineering world) have not connected with a good engineer such as a Howard Vollum or Bill Hewlett (as in the cases of Tektronix and H-P) can call upon designer companies for a low-priced starting deal.

A free, open-source design can be selected by a startup and designer fees paid only for subsequent technical consultation. This can lead to future designer-supplier business. A prospective entrepreneur can enter into a low-barrier-to-market agreement with designers by offering them returns on the effort in various forms (revenue-sharing, company part-ownership). This benefits designers in that by being visible to the public as an enterprise, entrepreneurs can find them and provide them a clientele of suppliers. Design and supply companies can develop without having to be both, and this lessens the market entry barrier for both kinds of enterprises.

In the next (and last) part of this series, we'll finish looking at this business philosophy with an example and some suggested directions to take to move the process forward.

Related posts:

4 comments on “The Electronics Cooperative Concept: Part 3

  1. Victor Lorenzo
    December 24, 2013

    @Dennis, thanks for this new part.

    A number of years ago I was not aware of the inertia that open source communities were acquiring. Most open source projects I was following or read about were for desktop tools, servers and applications running on Linux or Windows. Some visual component libraries and script libraries for web servers were also around. But at present, perhaps also because now I follow more information sources than before, I've seem a kind of explosion in hardware open source projects.

    A few years ago starter kits, development kits and demostration kits were rather expensive and in some cases even signing NDAs was required. But now that has changed, it is possible to acquire sample kits with all the information required to reproduce them (schematics, gerbers, partlists, mechanical data, etc). NXP provides kit (LPCExpresso) under 15€, Freescale provides the FreedomBoards also for under 15€, TI provides the MSP430 launchpad for under 20€ (without mentioning the Beaglebone Black for about 45€)… and the list continues with many more options.

    What's your oppinion about this race? Thanks.

  2. D Feucht
    December 24, 2013

    Victor,

    Perhaps cheap development kits for microcomputers ia a means of enticing more designers into using a particular uC series in their designs. Thus, it makes sense that a semiconductor company would want more “bites” for their uCs while also making it easy for the designer to use them by providing sufficient engineering detail. This could be viewed as an example of pressure toward more open access for technology.

    Your example elicits a story out of me from back in the 1970s. The designers of Motorola's 6800 uP (microprocessor) spun off, joined MOS Technology in Valley Forge, PA, and developed the 6502 (Chuck Peddle) and 6522 (Will Mathys). Mr. Peddle came around Tektronix and gave the sales talk for the 6502. Then he dropped a bomb on us. At the time, 6800s and Intel 8080s were selling for a few hundred dollars each. MOS Technology was offering the 6502 for $20. I was hooked and started using it. (So did Steve Wozniak, in the Apple I and Apple II computers.) When discussing how they could sell it for so little, a Tek IC process engineer pointed out that TI calculator chips were being made at the time for $2 each; $20 would still give MOS Technology a large profit margin.

    The bittersweet ending to this story is that the 6502, which has a really fine instruction set that includes indirect, indexed addressing, has hardly survived. The Renesas 740 line is 6502-based, and the 65C02 designer (Bill Mensch of Western Design Center) has integrated it into a uC.

    I would like to see Atmel offer a 65C02 alternative for the uP core of their AVR parts (which have attractive I/O capability). I would like to see the same done with the Freescale 56F80xx series, but given the history between Motorola and MOS Technology, this probably would not stand a chance.

  3. Victor Lorenzo
    December 25, 2013

    @Dennis, thanks a lot for your oppinion and your story. It was very interesting and pointed me to read some other also interesting documents about semiconductor's and microprocessor's history.

  4. etnapowers
    December 25, 2013

    @Victor: I agree with you on this interesting story. I found particularly interesting the details about CMOS technology, I think that it is one of the most diffused technologies in the semiconductor industry.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.