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Product teardowns more than gee whiz
Product deconstructions have become popular Internet fodder for consumers, but serious-minded teardowns deliver real value to electronics companies in the form of market trends, design insights, and patent-dispute resolution.
By Drew Wilson, Contributing Editor -- Electronic Business, 10/9/2007
The product teardown has come out of the backroom.
The disassembly and analysis of a product has been a standard internal practice for major OEMs and chipmakers for decades. Now the process has caught fire on the Internet. Online publications, engineers and hobbyists are increasingly opening up the hottest products and showcasing the guts for a wider audience. Hyped gadgets like Sony's Playstation 3, Nintendo's Wii, and Apple's iPhone all fell victim to dissection for blogs and video sites like YouTube—sometimes within hours of their release.
Though those popular teardowns typically fall into the "gee-whiz" category, the process can also provide in-depth analysis, influencing product designs or even settling billion-dollar patent disputes.
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"You can make a correlation between teardowns and improvements in your own designs," says Tony Keirouz, director of applications and marketing for microprocessors, memories and RFIDs at STMicroelectronics.
ST has been tearing down products and chips internally as a standard operational procedure for years. Keirouz' division does a couple semiconductor teardowns each month.
"With microprocessor teardowns, we look at how big their analog, digital, and SRAM is," he says. "If a certain block we are doing is 1 mm2 and the competitor's block doing the same function is 0.6 mm2, there's an issue there. You never want your IP block larger than a competitor's that's doing the same function."
The insight gleaned from the silicon teardown can challenge ST's engineers to match or exceed what the competition is doing, he says.
Third-party teardowns of complete systems can also deliver value to chipmakers. ST isn't always allowed to disclose that its chipsets are inside a customer's box. A third-party product teardown, however, can help reveal and publicize such design wins in hot products, Keirouz adds.
David Carey, CEO of Portelligent a 7-year-old teardown firm, says his company's analyses have provided valuable business intelligence but adds that his clients don't reveal how they use the information. "At some level we've influenced forward-looking plans, but I can't point to any one product," Carey says. "We supply business intelligence and we're not usually privy to how that's used by companies."
Portelligent selects key handheld consumer devices to take apart and analyze. Results include a detailed bill of materials that lists, among other things, component and manufacturing costs. The teardown reports then go into a client-accessible database.
Carey estimates his teams do up to 150 teardowns annually. A recent example was Apple's iPhone. Buyers of the analyses span a variety of companies in the business chain, each with different reasons for wanting a detailed look inside a product, Carey says. Manufacturers can see what direction the market is going and decide to enter or exit a market segment. Equipment buyers, such as wireless operators, want to understand the cost structure of the equipment they buy. Financial analysts want to monitor which companies won or lost design-ins.
Non-governmental organizations, patent lawyers, and startup companies also want to know what's inside the leading-edge products.
Eric Pratt, senior director of iSuppli Corp's Teardown Analysis service, says that companies are increasingly benchmarking their own product design and cost structure with results from an independent third party. The reason: more outsourcing.
"Many companies use ODMs [original design manufacturers] and EMS [electronic manufacturing services] to design and produce products and have no idea what's inside," Pratt says. "A teardown helps them understand the true material cost of the system they're being provided."
In consumer products, material costs typically make up more than 90% of total system cost, Pratt says. In addition, material costs drop up to 40% over the life of a product, which could be a mere 8 to 12 months.
"A change in material cost could make or break the success of a particular product," he says. "We try to identify where the subtle differences are in material costs."
iSuppli's analyses have influenced product design changes, but nondisclosure agreements prevent the company from discussing such instances, according to Pratt.
Teardown...or reverse engineering?
Beyond the teardown services, some companies deconstruct products and components to an even deeper level. This is the domain of companies including TAEUS International and Chipworks.
Art Nutter, CEO of TAEUS, explains that a product teardown has a more general aim than reverse engineering, which has a very specific objective in mind. At TAEUS, engineers dig all the way down to the circuitry and software-code levels to search for suspected IP violations.
Semiconductor devices need to be deprocessed, which involves slicing the device vertically to analyze the dozens of layers, he explained. As they wipe away each layer, analysts photograph the chip in exquisite detail—a single layer might require up to 10,000 images. The analysts then stitch the images together and map each layer to the next layer in order to understand how the chip functions.
In the past, TAEUS helped resolve a DRAM patent dispute between Texas Instruments and Samsung; his firm also uncovered Intel patents inside Digital Equipment Corp.'s servers.
TAEUS recently completed a reverse-engineering job that proved a patent for electronic postage machines made by Japan's Ricoh had been infringed, Nutter says.
Patent litigation typically involves huge potential cost. For example, a customer recently commissioned TAEUS to reverse engineer analog circuits to check for IP violations. The cost for the job was $1.75 million but the client gauged the value of the analysis to be in the "mid-nine figures," Nutter says. "That's how much it's worth to these guys."
Since he started the company in 1992, Nutter says, a general rule is a TAEUS client received a 100-to-1 return-on-investment.
TAEUS also deconstructs products from industries like healthcare, industrial automation, and automotive. Currently, battery technology for hybrid cars is getting a lot of scrutiny, as well as power-management techniques in general, Nutter says.
Big companies have the internal resources to reverse engineer products. "But you need your top technical talent to do reverse engineering and the same people have other responsibilities, like designing new parts," Nutter says.
The company has a few hundred engineers available to work on projects at any given time. A current analysis of wireless-semiconductor devices for an unnamed client involves 120 people working on three different devices simultaneously.
"This is an engineer's dream job," Nutter says. "You get to take things apart and get paid for it."
