Global Sources
EE Times-India
 
EE Times-India > EDA/IP
 
 
EDA/IP  

Chips, reference designs not enough to sustain IC cos

Posted: 22 Aug 2008     Print Version  Bookmark and Share

Keywords:chips  reference designs  semiconductor companies  chip vendor 

Making chips and developing reference designs may no longer be enough to sustain traditional semiconductor companies, especially Application Specific Standard Product (ASSP) vendors.

The most recent example of this trend is California-based Stretch Inc., a chip company that specialises in software-configurable processors. Stretch this week announced its move into an add-in card business to deliver video surveillance solutions.

Today, system OEMs and system integrators are increasingly averse to long development cycles and high system costs, and appear more eager than before to shift their system houses' responsibilities to other guys—namely, chip vendors.

In return, more and more semiconductor companies, beyond designing chips, are left holding the bag for every job from optimising designs to building boards, and having them qualified and certified.

Stretch will offer real-time D1-resolution H.264 encoding on a PCI Express add-in card for video surveillance applications.

By taking its own PCI Express reference design kit, Stretch is now launching three different cards: VRC6016, VRC6008, and VRC6004, with 16, 8, and 4 channels respectively. Strech's production-ready Digital Video Recorder add-in cards will be pre-qualified and pre-certified for RoHS, FCC, and CE, leaving OEMs very little to do. By this time, few players in the industry will be surprised by the chip vendor's transitioning to a board supplier.

After all, the semiconductor market has already seen Intel Corp. succeed in the motherboard business, while graphic chip suppliers compete fiercely in the graphic add-in card business.

What's new here is that this trend is spreading among smaller semiconductor players.

Bob Beachler, vice president of marketing at Stretch, is the first to acknowledge that moving into the board business wasn't exactly his company's original plan.

Driven by customers

"This is driven by our customers," Beachler said. "When we began engaging with customers, they asked for boards—to save them the trouble of designing and manufacturing [the whole system]," he explained.

Stretch is not alone in being compelled to get into the board business. So is Cavium Networks, said Beachler.

Cavium provides highly integrated semiconductor products that enable intelligent processing in networking, communications, storage, wireless and security applications. Cavium's portfolio ranges from processors to accelerator boards.

And what's triggering the trend?

Beachler put it simply: "For major North American or European companies, manufacturing is no longer a value-add to them."

Cisco, for example, might harbor hopes of getting into the video surveillance market, but the network equipment giant doesn't have a manufacturing line. The company would rather buy certified boards and spend their resources developing unique services and applications that run on a DVR board.

While Stretch didn't know it was destined to enter the board business, Beachler claims that its six-month-long journey [of transition] has been "quite painless" and "profitable."

Beachler explained that his company can use for board assembly everything it has learned from negotiating silicon assembly. "I buy wafers from TSMC and test in Taiwan," he said. Similarly, "I buy PCBs from another company and assemble them at another place. I use the same people I use for systems. It's a similar negotiation process."

In fact, Stretch is not doing everything itself.

For example, Stretch designs the board but a sub contractor provides PCBs. Jabil does assembly and test. Further, Stretch uses outside services for certification and another firm for accelerated life test and temperature cycling.

Dealing with contract manufacturing and PCB layout "is not our end customers' value-add," said Beachler.

Can this be profitable?

But after shouldering everything from board assembly to certifications, can Strech be still profitable?

Beachler says yes. "Now we are selling a system. It's a higher dollar value." Stretch today sells a board priced at Rs.32,143.85 ($750), instead of selling a chip at Rs.1,071.46 ($25), he explained. "Now, I am working with higher top-line revenue and a higher gross profit."

Beachler acknowledged that the company will end up having a smaller overall gross margin than it had in its semiconductor days. The semiconductor business usually offers a 60 " 65 per cent gross margin, compared to 15-35 per cent for the system business.

Through the launch of the new VRC6000 series cards, Stretch is offering not just their chips but also boards for Digital Video Recorders used in video surveillance.

What other systems business will Stretch get into?

For network cameras, "There is so much more involved " including optics for lenses," said Beachler. Stretch has no intention to enter the network camera board business. "That's where you draw the line. The key is to know where your core competency ends," he said.

-Junko Yoshida
EE Times





Comment on "Chips, reference designs not enough ..."
Comments:  
*  You can enter [0] more charecters.
*Verify code:
 
 
Webinars

Seminars

Visit Asia Webinars to learn about the latest in technology and get practical design tips.

 

Go to top             Connect on Facebook      Follow us on Twitter      Follow us on Orkut

 
Back to Top