Electronics Production | May 12, 2011
Exposing the hidden costs of using off-the-shelf analog ICs
With the demise of industry wide second sourcing and the move to developing purely proprietary designs, Analog IC companies have raised the profit bar to new heights. Less affected than their digital brethren by the cyclical nature of the chip industry, Analog IC companies have successfully carved product niches to weather the financial storms.
With the notable exceptions of cellular phones, notebooks, and other highly competitive consumer driven applications, Analog product designs can easily last for years, even decades without change. While the world cries out for "cost down" in nearly every application, most Analog IC companies respond with more expensive, feature rich choices for next generation designs. Great news if you want to redesign your product every couple of years. But who can afford that? Once a product is in production, it's difficult to implement lower cost manufacturing and procurement strategies when the chip average selling price remains constant. Our customer's engineers, who at one time were charged solely with designing to a specification, are now challenged with meeting ever-shrinking cost targets as well. The engineer has in fact become a part-time cost accountant, relying on his own technical shrewdness to seek suitable substitutes that can shave pennies from a product's cost. There are many hidden costs associated with using off the shelf Analog solutions. As you will see shortly, the biggest hidden cost is the cost of the off-the-shelf product itself. In the early years of Analog ICs, there were a handful of big players, each with a unique niche. National was the king of op amps, Fairchild the ruler of regulators, Signetics championed the timer market and Motorola controlled the communications chip sector. With only a few companies and a few Analog chip designers, each company selectively second sourced the best products of their competitors to broaden their own product offerings, ultimately giving all of them a somewhat similar product portfolio. Without product differentiation, price, service and support played an important role in winning orders. Pricing was aggressive and ASPs dropped rapidly once a second source was available. Flash forward a few decades and the landscape looks quite different. The legacy companies have changed quite a bit; Philips consumed Signetics, Motorola split into Freescale and On Semiconductor, while National ate Fairchild, then spit it out again years before TI gobbled up National. Many of their old mainstay Analog products remain, augmented now by thousands upon thousands of newer, sole-sourced, proprietary devices. Additionally, many new players have joined the Analog fray. Dozens of Analog chip companies have grown up or sprung up in the ensuing years, spurred on by the semiconductor foundries (independent wafer fabrication facilities) that have helped lower the barriers to entry by avoiding the burdensome capital costs of building a dedicated fab. Nearly all have bestowed us with more proprietary IC designs, rich in features and benefits, and not cheap. Bipolar processes, once the mainstay of Analog ICs, pretty much reached their limitations and have been supplanted by various CMOS, BiCOMOS and BCD processes that are better able to meet the more stringent power and speed requirements of today's customers. The products offered by the Analog players have changed dramatically. As Voltage Regulators like the uA723 and uA7805 evolved into more sophisticated products, the term Power Management arose, creating a whole new category of Analog chips, adding control, protection, high efficiency, watchdog timers, multiple outputs and more. Many authors have opined that competing on price is a suicide strategy, calling it a going out of business strategy. In the early years, semiconductor processes were not as stable as they are today. Yields were dicey. Second-sourcing protected the customer if their primary vendor had a manufacturing problem, and everyone did at one time or another. Second sourcing a competitor's Analog chip was never easy, always problematic. Unlike digital, where the rules are well defined in terms of what voltage a logic "1" and "0" represented, Analog chips use critical external resistors and capacitors and a second-sourced chip had to exhibit exactly the same performance with the identical external components as the original. As simple as it seems, this is not an easy feat. Many chip engineers used to argue that it was more difficult to create a second source product than it was to develop a new proprietary device. This may account, in part, for the demise of second sourcing. Nonetheless, some second sourcing was very successful and customers benefited greatly. Take for example the NE555. Sourced by some 15 different companies at one time or another, the ubiquitous 555 timer cumulatively sold in the billions of units at prices approaching ten cents. Will we ever see the likes of the 555 timer again? Not likely. In his book, "THE LONG TAIL: Why the Future of Business Is Selling Less of More," Chris Anderson addresses the dynamics of choice and explains why. The gist of the book is that the more choices we have, the less of any one item will be sold. Look at the IC Master and investigate DC to DC Converters…1'214 pages, with 25 parts per page…over 30'350 DC-DC converters from which to choose. Most assuredly, there are no billion-unit devices here. The Need for Analog ASICs With so many standard products to choose from, is there really a need for Analog ASICs? The answer is unequivocally, yes. According to market research company In-Stat, ASICs represented 59% of the Analog market in 2010, while Dataquest places the figure closer to 54%. Regardless, it is evident that the demand for Analog ASICs far exceeds that of standard Analog ICs. Why? A. Differentiation B. IP Protection C. Cost D. All of The Above ----- Author: Bob Frostholm, JVD Inc.. The rest of the whitepaper can be found under http://www.jvdinc.com
Kitron reports record performance during the pandemic EMS provider Kitron reports strong growth and record profit for the second quarter driven by Defense/Aerospace, Medical devices and Industry sectors.
Presto Engineering expands with facility move The provider solutions provider is moving to a new facility in Caen, France, which will enhance the company’s engineering and production capabilities.
Meyer Burger to set up solar production in Germany’s solar valley Meyer Burger wants to establish its own production of solar cells and solar modules in Saxony-Anhalt and Saxony.
Jaroslav Neuhauser new General Manager for Saki Europe Saki Corporation, a specialist in the field of automated optical and X-ray inspection equipment, announces the promotion of Jaroslav Neuhauser to General Manager of Saki Europe GmbH (Saki EU).
Sponsored content by Pegasus Components GmbHThe open market for electronic components as an opportunity in the current crisis. The past few months have also led to bottlenecks in the market for electronic components. The open market offers an attractive solution. Independent distributors like Pegasus Components react quickly and flexibly. Through procurement and stock items they offer a reliable as well sustainable alternative.
Polytronics will acquire TCLAD, the thermal management business of Henkel Polytronics Technology Corporation plans to, through its subsidiary, acquire the entire assets and business of Insulated Metal Substrates panels and circuits of Henkel's TCLAD division (including the plant and facilities of approximately 100,000 square feet located in Prescott Wisconsin the employment contracts of around 273 employees), but excluding debts.
AT&S starts partnership with design company IMST GmbH With the aim of jointly developing high-frequency technology solutions, AT&S has concluded a strategic cooperation agreement with IMST GmbH in Kamp-Lintfort, Germany.
Heidenhain opens new expanded Western US HQ This includes the expansion of its executive, sales and technical support offices, as well as demo facilities in San Jose, California.
Delphi Technologies awarded new power electronics business Delphi Technologies is making new strides by securing new power electronics business wins in the second quarter of 2020 with three Chinese OEMs. The new business is scheduled to launch in the 2021-23 timeframe.
Sponsored content by Nordson ASYMTEKConformal Coating Results — When You Need Better Than Just "Good Enough" Conformal coating contributes to product quality and reliability, but it is typically viewed as a process that tolerates sufficient results, or "good enough." That view is changing as more advanced and diverse electronic products enter the consumer marketplace, from the Internet of Things to self-driving vehicles.
Mycronic combines US operations in new facility near Boston Mycronic US says that all of its operations have been integrated into a new 102,000 square-foot facility in Tewksbury, near Boston, Massachusetts.
Lynn Electronics acquires West Coast cable assembly company Pennsylvania-based Lynn Electronics, a manufacturer of fibre optic and copper cable assemblies, has completed its acquisition of Coast 2 Coast, LLC (C2C), an Anaheim, California cable assembly manufacturer.
Fictiv and Jabil team up for agile 3D printing collaboration The collaboration aims to accelerate and de-risks product development in the move from prototyping and low volume production to large scale global fulfilment.
TT expands with new industrial electronics manufacturing facility The UK-based electronics manufacturing specialist is expanding the footprint of its Global Manufacturing Solutions division by opening operations in Kuantan, Malaysia.
Sponsored content by ASMASM Impact – Release Summer 2020: SMT technology leader presents new products in compact livestream ASM’s new releases for this summer are innovative, smart, and deliver great gains in productivity. ASM will present these new solutions, the premiere of the ASM Works software suite and many more innovations around the integrated smart factory in a compact livestream with expert chats and spin-off sessions.
GE Appliances invests $62 million at its Louisville facility The manufacturer is gearing up to build high-end refrigerators and expand capacity at its manufacturing facility in Louisville, Kentucky., creating 260 new jobs.
Eaton buys new facility – merges busway operations from multiple sites Power management company Eaton has purchased a new facility in Hodges, South Carolina, establishing a new home for Eaton’s busway product line currently spanning three facilities across Greenwood County.
AIM adds new facility in Brazil AIM Solder has opened a new wholly-owned facility in Manaus, Brazil. This new stocking facility, which represents the only legitimate source of AIM products in Brazil, enables the company to support a growing Brazilian market.
PFOA now in REACh and POP regulation On 4 July, PFOA - perfluorooctanoic acid, its salts and precursor compounds - was included in the POP (Persistent Organic Pollutants) Regulation (EU) 2019/1021 and at the same time also came into force in the REACh Regulation (Annex XVII, entry 68).
Manz AG receives further Battery order Manz AG is expanding its successful partnership with an international battery manufacturers in the Energy Storage segment with a further major order in the mid double-digit million euro range.
Advantech and Interlatin to set up JV in Mexico Industrial IoT specialist, Advantech, says it is establishing a joint venture subsidiary in Mexico with its channel partner Interlatin.
Mercedes-Benz takes equity stake in Farasis Mercedes-Benz is taking another important step on its journey towards CO₂--neutral mobility. The Stuttgart-based car manufacturer has launched a strategic partnership with Chinese battery cell manufacturer Farasis Energy (Ganzhou) Co., Ltd., including taking an equity stake.
A new EMS provider sees the light of day EMS providers DataED and Bestronics merge to launch a new player – Emerald EMS.
Tektronix joins the fight agains COVID-19 Tektronix has shifted its focus from supporting vehicle manufacturing to assisting with ventilator production.
ABB completes divestment of Power Grids to Hitachi ABB has reached a significant milestone in the company’s transformation towards a decentralized global technology company, with the completion of the divestment of 80.1% of its Power Grids business to Hitachi.
Germany amps up domestic battery production with massive state subsidies The German government is investing more than EUR 1.5 billion in battery cell research and production.
Internal promotions and executive retirements at Kimball EMS provider, Kimball Electronics, has made two new internal promotions aimed at contributing to the company accelerating its strategic growth plans.Load more news
- U.S.: Cancellation of Preferential Treatment for Hong Kong to impact chip industry
- Apple to start mass producing Mac SoC, projected to cost under US$100
- Arm to strengthen focus on core semiconductor IP business growth
- ALLOS Semiconductors has sold its high power electronics and RF business
- Delphi Technologies awarded new power electronics business