-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueIPC APEX EXPO 2024 Pre-show
This month’s issue devotes its pages to a comprehensive preview of the IPC APEX EXPO 2024 event. Whether your role is technical or business, if you're new-to-the-industry or seasoned veteran, you'll find value throughout this program.
Boost Your Sales
Every part of your business can be evaluated as a process, including your sales funnel. Optimizing your selling process requires a coordinated effort between marketing and sales. In this issue, industry experts in marketing and sales offer their best advice on how to boost your sales efforts.
The Cost of Rework
In this issue, we investigate rework's current state of the art. What are the root causes and how are they resolved? What is the financial impact of rework, and is it possible to eliminate it entirely without sacrificing your yields?
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
EMS Providers: The Design Partners
December 31, 1969 |Estimated reading time: 6 minutes
A trend among OEM providers is the desire for more help in the design area; and they’re looking for this on a number of different fronts. Still, the overall feel is that OEMs want more, and they want it for less. To meet this need, EMS providers are stepping out of their traditional roles as manufacturers and shifting their focus to product design, redesign, and design partnerships.
By Michelle M. Boisvert
Controlling costs and keeping them low is a continual goal of original equipment manufacturers (OEMs), who are under pressure to produce more with much less. R&D makes up a large portion of their spending. On top of having to understand the market, end-customer needs, and speculating what will succeed in a highly competitive market, OEMs are faced with having to invest significant R&D to design products. When OEMs look to reduce costs, the first place they turn is R&D. Design and redesign are two ways OEMs can directly change the cost of their product, making significant and timely improvements. Traditionally, this is where original design manufacturers (ODMs) came into play - taking over R&D efforts and absorbing much of the expense.
There are a few challenges, however, when working with an ODM. In the long term, OEMs are concerned that ODMs will compete with them because they have their own intellectual property (IP) and product roadmap. Often, because they do not have the manufacturing capabilities, ODMs will turn to an OEM. “But many of the ODMs, especially Taiwanese ODMs, develop their own channels and do have interest in the long-term to be able to brand name their own product,” says Jeff Zhou, vice president of global program management, design, and engineering, Solectron. “There’s a potential for competition to OEMs, and that’s a concern.”
Another concern is that OEMs will have less control on the pricing side when working with an ODM who offers them a standard, black box solution. Lastly, OEMs often are worried that manufacturing quality may not be as good or as high as an EMS provider. EMS providers tend to have more mature manufacturing processes and capabilities.
To remain competitive in the market and offer customers another value-added service, EMS providers now are offering design services in-house. “Our experience has been that customers appreciate the value-added service of engineering within the EMS firm to facilitate product-cost reductions and time-to-market improvements,” states Jon Eckhoff, director of design engineering, Benchmark Electronics. “The increase in demand covers a range of disciplines, including product development, component engineering, supplier-development engineering, and test engineering. We are embracing this opportunity as it increases our service offerings and raises us to another tier of service level to our customer base.”
But there is no single solution in which EMS firms are doing this. Recently, Celestica acquired Ottawa, Ontario-based CoreSim, an advanced design analysis and redesign service provider. The acquisition equips Celestica with CoreSim’s proprietary tool, Schematic Modeling, a model-based tool that identifies wiring and technology issues in schematics. This provides design analysis, which verifies and validates pre-layout customer designs to help meet time-to-market demands. The companies expect this acquisition to affect their customers in several ways. In the new product design arena, Celestica offers a set of services that can be called design analysis or independent verification, which helps accelerate new product introductions (NPIs) and reduce the number of design spins a customer will have when developing a product. They also can apply their services to cost reduction. “Because of this capability, we are able to do deeper and broader cost reduction, ensuring software backward compatibility, and also get the design change executed in a very confident and rapid manner so we can save spins in redesign,” says Blair Davies, director, Global Design Services, Celestica. In the cost-reduction realm, Celestica believes it can take risks with customers that make them equal partners in bringing reduced-cost products to market. “A typical example, depending on what we find when we do our analysis, is that we can save customers a design spin,” adds Davies.
There is no single solution. Not all EMS providers are integrating design capabilities in the same manner. Some companies take a joint approach when dealing with design.
CDMs and JDMs
Many companies take a collaborative design approach instead of offering the whole product. Solectron, for example, offers collaborative ODM solution. This begins to blur the line between ODMs, CDMs, and EMS firms. If, for example, an ODM approaches a customer with a black box product, manufacturers don’t have to risk R&D dollars. However, if the product requires customization, an ODM becomes a CDM (collaborative design manufacturer). “What we want to do is collaborate with OEMs,” says Solectron’s Zhou. “This means we’ll have a design capability as a company that can take a reference design and turn that into a customized solution very quickly and aggressively.” In this case, Solectron puts up the R&D spending, uses the customer’s knowledge about the markets and their product requirements, and turns that into a product customized according to customer specifications.
Benchmark Electronics takes a similar approach, but with a different acronym - JDM, or joint design manufacturer. “This means that the OEM has some stake in the overall product design, in conjunction with the EMS partner, making it a collaborative effort,” comments Eckhoff. Benchmark’s flexible model allows them to develop a new product concept, or step in at any phase during the product’s lifecycle to assist a customer. A customer can initiate product-design activity for several reasons, such as adding new features, redesign for obsolescence, and redesign for RoHS/WEEE initiatives. Activity related to re-design for obsolescence and RoHS/WEEE is increasing, adds Eckhoff.
The challenges with this mutual design environment stem from a traditionalist view. EMS companies are viewed as more of a service company with a broad spectrum of requests from customers in various fields. However, OEMs seek design services from EMS providers for not only low-cost solutions, but also for more flexibility in their own staffing. When an EMS firm takes over the design aspect, this frees up engineers to develop new products. This is where the EMS provider can step in and fill the void.
Conclusion
OEM cost pressures result in the search for higher margins, leading to lower R&D spending, states the IPC’s 2004/2005 International Technology Roadmap for Electronic Interconnections. These increased cost pressures, highly competitive end markets, and outsourcing trends have driven OEMs to seek alternate outlets for design and redesign efforts. In doing so, this new supply chain creates an arena for many new customer/supplier relationships.
“EMS companies are competing to satisfy the needs of OEM customers,” states Davies. “They are innovating in offerings from cost-reduction redesign, sustaining engineering, CDM, and JDM to compete for the growing design outsourcing spending. We will continue to invest and innovate to meet the customers’ needs to ensure the success of our long-term partnerships.” OEMs, EMS providers, board fabricators, and all members of the supply chain must work together not just for manufacturability and low-cost, but also to meet accelerating time-to-market demands.
ACKNOWLEDGMENTS
The author thanks Dieter Bergman of the IPC (www.ipc.org); Blair Davies of Celestica (www.celestica.com); Jon Eckhoff of Benchmark Electronics (www.bench.com); and Jeff Zhou of Solectron (www.solectron.com) for providing information for this article.
Michelle M. Boisvert, managing editor, SMT, may be contacted at (603) 891-9310; e-mail: mboisvert@pennwell.com.