As system design turns to chip suppliers, how can OEMs achieve product value-added?

frozenviolet

As system design turns to chip suppliers, how can OEMs achieve product value-added? [Copy link]

The industry chain moves down and comprehensive solutions prevail

This has led to a trend in which the electronics industry chain is moving toward the consumer end. If consumers are considered to be at the bottom of the chain, then the electronics industry chain is moving downward: OEMs spend more time on understanding consumer needs, product definition, and customer service; while chip suppliers are launching more integrated SoCs, they also provide system solutions that were originally completed by OEMs; in order to speed up product development, chip manufacturers have purchased more processor core IP licenses than in the past, rather than developing them themselves; IP suppliers are also more dependent on advanced commercial EDA tools. In short, electronics manufacturers are paying more attention to customer needs and are increasingly inclined to purchase "semi-finished products" or even "quasi-finished products" to quickly complete their product development.

For example, chip suppliers provide system solutions (or total solutions ) to reduce customer costs, shorten development cycles, and reduce design complexity. Ray Stata, co-founder and chairman of the board of directors of Analog Devices, who recently visited China, emphasized: "There are two major development trends in the electronics industry today. One is the transfer of global electronics manufacturing to Asia, especially China, and the other is that customers require more solutions."

Figure 1: Ray Stata, co-founder and chairman of the board of directors of Analog Devices: The development trend of the electronics industry is that system suppliers will transfer more and more R&D work to chip suppliers.

He explained that relentless price pressure and rising R&D costs mean that more R&D needs to be done by chip suppliers. For OEM customers, if chip suppliers provide system solutions, since R&D costs are shared by multiple customers, costs can be reduced, while speeding up the time it takes to bring OEM products to market and reducing the number of suppliers.

In fact, providing system-level solutions has become ADI's future development strategy. ADI, which has a wide product line including analog signal processing, digital signal processing, analog-to-digital/digital-to-analog converters, wireless technology (RF) and power management, regards system solutions as a magic weapon to avoid fierce competition and gain competitive advantages. ADI also focuses on the three major markets of handheld devices, portable TVs and high-definition TVs.

Stata said that for ADI, this means a shift from a "product-centric" strategy to a "customer-centric" strategy. The former's business model is that one product has many customers, provides components and focuses on technology; the latter means that there are many products for each customer, provides solutions, and focuses on the market and applications. In order to complete this transformation, ADI is making adjustments in many aspects, including management procedures, personnel concepts and organizational structure. He pointed out: "Changing people's concepts is the most difficult, especially from the original concept of selling components to now providing a complete set of solutions. This is a very difficult challenge. So we also need system experts, so that we can understand customer requirements more thoroughly, especially for the large-volume consumer market. We need some complete solutions to enable such products to be launched faster, and of course we have to provide better costs."

While chip suppliers are providing more integrated SoC and system solutions, they are also using more IP and core licenses to complete SoC development. Multi-core has become a development trend in SoC design, and processor core supplier Tensilica has been driving this development trend. General-purpose CPU + hardware logic (hardware accelerator or coprocessor) has always been the mainstream architecture of embedded SoC. General-purpose CPU comes from general-purpose core licensees such as ARM and MIPS, while hardware logic is implemented by SoC designers themselves through RTL development. However, RTL development also has its own weaknesses, such as long development cycle, poor flexibility, and difficulty in adapting to complex and changing technology development trends. Take mobile phones as an example. Various audio, video and wireless standards and technologies have flooded in, and RTL development is difficult to cope with.

At the end of the 20th century, Tensilica launched the revolutionary configurable processor core Xtensa, which replaced RTL development for audio, video, packet processing, storage network processing, image processing and encryption, and was used as a coprocessor to complement ARM or MIPS cores. Dr. Chris Rowen, President and CEO of Tensilica, proudly stated that each customer uses an average of about 6 Xtensa cores in an SoC, and the core of Cisco's most advanced CSR-1 router, the Silicon Packet Processor, integrates 188 Tensilica configurable processor cores!

Figure 2: Dr. Chris Rowen, CEO of Tensilica: Configurable processor cores accelerate SoC design

In order to speed up SoC design, Tensilica launched the "Diamond" series of standard processor cores at the beginning of this year, which include both optimized audio coprocessors and general-purpose CPU cores that directly compete with ARM and MIPS cores.

The question of comprehensive solution: How to achieve product differentiation?

For OEMs, comprehensive solutions can help them launch products with lower costs and higher technical complexity in a shorter time. However, one of the negative consequences of comprehensive solutions is that products from different manufacturers share a common platform or solution, and a large number of products are similar, making it impossible to achieve differentiation. Some even believe that comprehensive solutions are a way to squeeze OEM profits and an anesthetic that corrodes engineers.

Zheng Yonghui, president of ADI Greater China, believes that OEMs should focus more on differentiation on the consumer side and outsource the front-end design to chip suppliers. He said: "Every manufacturer or system supplier has its own strategy, but for a component supplier, our direction is indeed to provide more solutions, and the most important thing is design. The whole world has become more complex, and the increasing investment in design, including product parts, is actually something that many companies cannot afford alone, so we provide more design convenience through comprehensive solutions."

Figure 3: Zheng Yonghui, President of ADI Greater China: The comprehensive solution provides OEMs with convenience in front-end product design, and differentiation comes from the back-end

He said that the biggest difference of many products is the added value at the end. For example, almost all PCs use the same platform, but Dell computers have achieved value innovation through supply chain management and customer service. MP3 is not new, but the success of Apple iPod comes from the innovation of business application model. He pointed out: "Through comprehensive solutions, we turn a very complex equation into a very simple equation for OEMs to digest, so that OEMs can shorten the design process, so that OEMs can have more products, come up with more value, and make products richer. Therefore, the competition among OEMs is not about product technology, but about the management of the entire diversified demand."

Stata pointed out: "This transformation cannot be achieved overnight. Every company, including chip and system suppliers, has made its own contribution to the industry. The strategies of each company are different. The overall trend is that system suppliers will put more and more R&D work back to chip suppliers because chip suppliers can provide this system solution." He said that system suppliers will first define market demand in the future. In addition, they will provide various services to the terminal market. In the future, it may not only be system suppliers that define the technical architecture of the product, but chip suppliers may also be able to do this work.

What is certain is that in order to cope with technological and market challenges, the electronics industry chain is moving downward, and comprehensive solutions are the inevitable development trend of the electronics industry. However, how to get rid of technological dependence on suppliers while achieving differentiation of products and services will be one of the biggest challenges for Chinese electronics manufacturers.