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Reference designs worldwide: understanding the IP imbalance

EDN Global Report: Does it matter how engineers in other countries are using reference designs? The answer is a resounding “yes.”

By Nicholas Cravotta, Contributing Technical Editor -- EDN, 11/8/2007

Sidebars: Reference designs open doors in Taiwan Related Articles: Defining 'reference design' Reference software Japanese engineers focus on original designs and customization Getting to market first precludes a wait for a reference design MTK pioneers complete designs and garners de facto monopoly in handsets Reference design pitfalls Reference designs improve but don't always offer full performance Reference designs: What separates Asia from the rest?

With the rising complexity of silicon and software design, it has become critical for component vendors to supply more information than just a data sheet to get engineers started on their designs. Reference designs are important ways for companies to pass on IP (intellectual property) relevant to the effective use of their products. The term “reference design” itself is a fairly ambiguous term and can even take on different meanings within the same silicon company (see sidebar “Defining 'reference design'”). For example, a company’s FAEs (field-application engineers) serving North America may use the term to refer to a paper schematic or an evaluation board with limited application software. FAEs from the same company working in Asia, however, may use the term to refer to a fully designed product, perhaps missing external plastics, that is ready for mass production (see sidebar “MTK pioneers complete designs and garners de facto monopoly in handsets”).

Some companies claim that they create reference designs to demonstrate their expertise and market leadership. The reality is that reference designs are all about selling components used in the design. Reference designs require significant expense to create, and this expense limits the number of designs that any company can offer.

How countries around the world use reference designs directly influences which ones a company will create and, more important, how they will use them to generate design wins. Component vendors make deliberate decisions about where they target their reference designs, thus placing engineers in different countries in competition with each other in a way that directly impacts their access to a vendor’s engineering and support resources. In other words, the uneven flow of IP is changing the global engineering landscape.

Global trends

It’s difficult to track trends for the use of reference designs in regions of the world. After all, it’s a fine line between describing a trend and perpetuating a stereotype. How a company approaches the acquisition of IP depends greatly upon its size, maturity, region, and culture. For example, China, with its lower cost of labor, focuses more on the BOM (bill-of-materials) charges than on the NRE (nonrecurring-engineering) charges. The opposite situation can be true in North America, where engineers are willing to program in C to save design time but at the expense of a larger program memory and a higher performance, more expensive processor. Across Asia, companies are open to reference IP from IP cores for chip design to complete system designs. Speed in bringing just enough features to market is key (see sidebar “Reference designs: What separates Asia from the rest?”).

It’s always dangerous to generalize, but if you had to describe each country in only a few words, the following trends and stereotypes might suffice. For example, NIH (not-invented-here) companies, which those in North America typically are, have a great deal of internal experience on which to fall back. These engineers focus on one application in contrast to a component vendor’s engineers, who develop application-specific IP for relatively unrelated designs from project to project. As such, the NIH engineers can produce optimal designs. Some reference materials are nice to have, especially for accounting for the obscure and frustrating nuances of a component, but they serve only as launching points for more sophisticated designs. This approach typically maximizes performance and the number of features but incurs the greatest investment and overhead.

In “after-the-fact” environments, such as Japan, engineers are also experienced and create superior products. However, they like to have comprehensive reference designs available not to build upon but to compare with their own designs. They like to work out all the details for themselves, which, like taking the time to solve a puzzle rather than looking at the answer, stretches their skills and improves their mastery of the technology (see sidebar “Japanese engineers focus on original designs and customization”). They don’t want to repeat what others have done, but they want to see how they’ve done it. The reference design acts as a final check, perhaps revealing only minor idiosyncrasies in component specs that the engineers overlooked.

The distributed-IP-design model, typical of the United Kingdom, focuses on IP management at the distributor level. European distributors typically add value and increase profits by providing not only chips, but also complete subsystems that designers can drop into a design with limited modifications. In effect, distributors act as IP brokers between component companies and OEMs. This approach can significantly impact component selection. Although NIH-focused engineers may resist such offerings, some distributors in North America are beginning to explore this approach. To learn about one European system house that always begins designing before reference-design availability, see sidebar “Getting to market first precludes a wait for a reference design.” 

Some companies, such as those in Taiwan, take an “as-is” approach, taking reference designs mostly as the component vendors supply them. Their goal is minimal investment and fastest time to market. In some cases, an ODM (original-design manufacturer) stands between component vendors and OEMs. ODMs take on the burden of understanding an application market as well as related silicon, software, and system issues. ODMs work with component vendors to create their own reference designs, which they then sell to OEMs that want to quickly get to market. For example, an ODM may create a fairly complex digital-camera design. The ODM then sells this design to multiple OEMs, which personalize the design, perhaps by creating only the external plastics or introducing a differentiating feature, such as antishake or red-eye removal (see sidebar “Reference software”).

In another environment, such as India, application engineers with little real-world experience don’t always have the luxury of leisurely earning their expertise. Instead, they act as “sponges,” learning on the job. In these environments, not making mistakes is critical for employment. These engineers consume reference designs, poring over boards and schematics, trying to soak up whatever knowledge they can while still producing designs as quickly as possible.

In contrast, the Chinese design environment is more of a “chop shop.” The focus is on adapting reference designs for end products and minimizing costs. Reference designs by nature are somewhat generic so that you can apply the IP you capture in them across a wide range of applications. Reference designs drive sales of components, so the more customers who can use the design, the better. This approach recognizes that a reference design probably isn’t as cost-effective as it could be and brings up images of an “engineer” ripping components off the reference board until it stops working and reducing it to its bare essentials. Swapping lower tolerance or alternative components is also common.

Marketing by educating

To increase sales, reference designs must meet the critical needs of engineers in education and reduction of overall design cycles (see sidebar “Reference design pitfalls”). For companies that don’t care about adding their own IP or advanced features, time to market is everything (see sidebar “Reference designs open doors in Taiwan”). “The more of a turnkey design they can start with, the quicker they can realize product, though the Asia market is progressively becoming more self-sufficient,” says Steve Marsh, strategic-marketing manager for the digital-signal-controller division at Microchip. “If we could do form factor, that would be even better for this subset of customers.” A speedy, successful design is critical to the survival of these companies. “They want to be able to say that they’ve done a particular application so they can claim expertise with the technology to their next potential customer,” says Marsh.

Even Korea is proving a fertile market for ready-for-market reference designs (see sidebar “Reference designs improve but don’t always offer full performance”). In addition, some reference-design creators don’t exhaustively test their designs, limiting their usage.

System companies that lack expertise in certain key areas may take evaluation boards to production. This “design” methodology quickly produces results but provides little log-term gain or understanding of why the design works. Users can repeat the design but cannot easily build on it as they could have if they had taken the time to understand it. Countries with younger, less experienced engineers are beginning to recognize this fact. For example, India and China each want to be the design center of the world, with the fastest service and output. They continue to push for turnkey, black-box designs. They would be even happier if the form factor were also complete. But don’t believe the stereotype that all they are doing is copying. These companies are soaking up information as fast as other companies can ship it to them.

India, for example, is experiencing tremendous growth. Estimates place the number of new engineering openings at 10,000 each year, which sounds like a lot until you consider that the pool of applicants competing for these positions exceeds 300,000. “Engineering offers young people a chance to escape the lower caste,” says Rick Zarr, worldwide-technology-partnership-marketing manager at National Semiconductor, “and they rely heavily upon reference designs to fill the many gaps in their experience.”

From this perspective, “engineering outsourcing” is a misnomer because engineering is more than just copying someone else’s design. “Innovation, insight, and experience are hard things to export,” says Zarr. “American culture is quite diversified, and this affects the way American engineers solve problems.” However, in addition to learning the basics of engineering, these other countries are discovering what it takes to be innovative. They also understand that, if they do something well, they not only make a great deal of money, but also get the chance to do it again tomorrow.

The perception that the United States is a think tank and the rest of the world is the think tank’s manufacturing arm is dangerously naïve, especially when you consider that the fully burdened cost of an engineer in North America is about $250,000, whereas that for an engineer in India with a master’s degree in electrical engineering is about $45,000. Design houses in India are not shy about investing in the infrastructure and expertise they need to compete and aggressively leverage their salary advantage.

For component vendors, these inexperienced engineers represent a tremendous opportunity, which they can capitalize on through reference designs. Rather than teach how to solve problems using general concepts, which they can apply anywhere, they can teach problem solving using components. In other words, instead of showing an engineer how to lay a trace or hold impedance constant, they provide a Gerber file that supplies the necessary trace. The file teaches the engineer something about traces but perhaps not enough to give the engineer the confidence to bring in a different component. In such a case, components in a reference design are more than just suggestions or recommendations. They lead to design wins and direct sales.

Reference designs also cover for lack of distributor expertise. The more product lines distributors take on, the less time they have to learn about—and pitch—each part. Reference designs open the door to innovative ways of helping distributors effectively sell parts.

Some companies offer bevies of reference designs for downloading from their Web sites. The application-specific knowledge these resources share is also component-specific, so there is a value in working even with smaller design houses, because they are learning to use a subset of the components on the market. Engineers with a mandate to produce quickly tend to design with what they already know. Reference designs effectively seed this market.

Reference designs are not simply about showing engineers how to design around a component, such as a processor. In fact, for secondary-component vendors, reference designs can be their most powerful marketing tools. Consider a company evaluating a digital chip that has little idea of how to implement any associated analog circuits. If it selects the digital chip, the company will most likely also go with the secondary components in a reference design that makes up the analog support circuitry. The same situation applies to RF subsystems, power supplies, assembly-level algorithms, and whatever other expertise a company lacks.

Many component vendors leverage associated design wins through cobranding with noncompetitive suppliers. Jointly developing a reference design reduces investment cost and increases the overall exposure of a design because multiple companies and distributors distribute the reference design. Also, cobranding increases the number of reference designs a company is associated with, a factor that some companies believe indicates market leadership. Partnerships can range from developing application notes together to creating whole portions of a production-ready design.

UK distributors execute another form of cobranding by combining suppliers to create reference designs. “Distributors are looking for ways to increase profits by adding value beyond simply supplying components,” says Alan Hutton, partnership manager for Europe at National Semiconductor. “More and more, they are accomplishing this by providing complete subsystems.”

Selling systems through cobranding has many advantages. First, it spreads the investment of creating the reference design among several vendors. Second, it enables vendors to highlight features that their customers may not understand well. For example, a design may benefit from implementing dynamic-voltage scaling on the main processor. Because a relatively inexpensive microcontroller manages scaling, it may seem more complicated to implement than it is to someone unfamiliar with the technology. By having the scaling as part of the reference design, an engineer can experiment with it firsthand and see its potential benefits. Additionally, the implementation may reveal useful “best practices” or show how to reduce the number of required front-end components.

If the engineer likes the feature, the processor vendor wins because this factor may help lead the customer to select this component. At worst, another customer gets educated on the technology behind the feature. And the engineer can implement the feature with no additional design expense because it is possible to just lift the dynamic-voltage-scaling circuit straight from the reference design.

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This win is key for the other vendors involved in creating the reference design because it helps tie secondary components to the selection of a primary component. It becomes a system sale rather than a tool sale of a single component, which distributors like because they can sell several parts at once. Although an engineer could select the main processor and choose different components to implement dynamic-voltage scaling, it is tempting just to take the entire subsystem because someone else has specified all the components.

Component vendors or distributors sometimes team up with local design houses to create region-specific reference designs. For example, these vendors and distributors will use regional vendors as sources for secondary components on a board. If the secondary components come from a foreign or more expensive source, this approach significantly reduces the value of the reference design. The effectiveness of cobranding in China, India, and the United Kingdom, however, can have a negative impact for other countries. When China and India ask for reference designs, they purchase components. The NIH attitude of requiring a reference design just to look at a part and not necessarily buy it yields fewer returns. Additionally, because NIH engineers tend to trust their own designs more than those from component vendors, the sale of secondary components is less certain. Ideally, these engineers don’t want to depend on reference designs.

As a result, cobranding tends to be more effective in China and India, prompting companies to focus their efforts at those companies from which they get a better return. This factor potentially impacts worldwide engineering outsourcing. As more design decisions and sales move offshore, so does a company’s focus of its limited design resources. To some degree, the refusal of NIH engineers to demand and use more comprehensive reference materials leads to a shrinking willingness of component companies to provide them any.

The knowledge gap

The competitive edge that engineers gain from specialized knowledge is shrinking and will continue to do so for many mainstream applications. Reference designs that supply basic hardware and software functions make it possible for smaller players to enter markets with a relatively small up-front investment. “Reference designs, especially software algorithms and libraries in our case, are key enablers to help accelerate product time to market,” says Richard Fischer, applications-engineering manager for the digital-signal-controller division of Microchip. “If we provide a complex algorithm, either for a vertical application or for a horizontal technology, this gives us a broader base of customers for our processors.”

Providing more of the overall design or subsystem continues to play an ever-growing role in selling silicon. “It’s one thing to say what a customer should achieve as it relates to performance; it’s another to actually walk in the shoes of the customer by designing a complete system and realizing that performance for yourself,” says Kanika Carver, digital-imaging marketing manager at Texas Instruments. “These system-level designs are much more complex than first imagined, requiring system-level IP versus components. The more we provide of the complete solution, the more we learn, and the more effective the silicon and software we can offer.”

Differentiation, therefore, no longer focuses on the product level, but on the functional level. Differentiation continues to refine, narrowing down to specialized feature support or extreme cost cutting. In this way, reference designs also narrow the gap between mature companies, which focus on developing most of their own technology, and aggressively agile companies, which focus on carving away a small portion of large markets for themselves.

Reference designs enable more companies to work with complex technology and create viable products. It’s not that IP is disappearing from those that possess it but rather that it is trickling down faster than it ever has before. Not everyone is thrilled about the increase in shared IP. For example, a GPS (global-positioning-system)-module manufacturer has made significant investment in developing designs. Understandably, the company may be unhappy when an RF-silicon vendor wants to further educate its customers with a production-ready reference design.

This prospect can be either exciting or disturbing. India is hungry and learning fast, and everyone wonders what impact that thirst for knowledge will have on the engineering establishment, because the power in a technocracy is based on limited access to knowledge. A major shift is in progress, with countries such as India working to acquire expertise and the ability to provide quality comparable with that from other countries.

For all the talk about a global economy, most companies still focus primarily on preserving their own pieces of the market pie. Is an equal distribution of engineering expertise good for the world, for each country, or for a particular company? Outsourcing has long been a volatile topic. Is it possible for India to pull itself up the technology ladder without pulling someone else down? Electronic design continues to become more complicated, and the number of layers of companies involved in a design continues to increase. There is room for more players in the design process than ever before. And, given the size and the myriad distinct demands of the global market, there is also more room to specialize.

You can reach Contributing Technical Editor Nicholas Cravotta at editor@nicholascravotta.com.

Reference designs open doors in Taiwan

Given the complexity and cost of system-design challenges that R&D engineers are facing, IC vendors provide their customers with reference designs that reduce time to reaching volume production by enabling manufacturability. Simplifying the path toward production is especially important for the Taiwanese electronics industry, which excels at low-cost mass production. “It is impossible for us to use a chip in our system if it comes with no reference design,” says Allen Su, a senior engineer at Powercom Co Ltd, a provider of power-protection products, such as solar-cell, solar-panel, and UPS (uninterruptible-power-supply) products. Many sources, such as chip vendors, distributors, and VARs (value-added resellers), are available for reference design in the industry. But the robustness of reference designs varies from company to company. “Some provide us only a data sheet and associated rules used in designing PCBs [printed-circuit boards] based on the chip, while others offer a more complete solution,” says Aren Chen, a supervisor of the R&D division at Vivitek Inc, a manufacturer of IP (Internet Protocol)-surveillance and multimedia-communication products, including network cameras, video servers, and recording software. Both Su and Chen agree that reference designs from foreign companies are more general-purpose, targeting diverse customers. Both engineers report that they must make significant efforts to meet their application requirements if they want to adopt these designs. “Foreign IC vendors can probably do a customized reference design for their first-tier customers but not for everybody,” says Su. Chen also has experienced insufficient support by an international IC vendor. The company used such vendors for DSP sources but later found that it could not adapt the operating system with the selected DSP product and that the product was too costly. To address these problems, the company developed its own SOC (system on chip), which is an unusual approach among system makers in the Taiwanese market. In addition to improved performance, the SOC offers flexibility, according to Chen. Both Su and Chen believe that products from local IC makers are more complete than offerings from foreign chip suppliers. The reason for this superiority could be that local IC vendors leverage a geographical advantage and learn precisely what their customers want. Moreover, the Taiwanese vendors offer competitive costs and speak the same native language. To fill the gap with small to midsized system makers in Taiwan, foreign IC makers cooperate with local distributors or VARs to promote their products. Actel, for example, recently announced a reference design in Taiwan to enable intelligent system- and power-management implementations. “To better support our local customers, we had expended our sales network by working closely together with local distributors and VARs,” says Rick Lain, the company’s director of sales for the Asia-Pacific region. “We have three VARs in Taiwan to deliver more specific solutions based on our chip to its targeted customer.” Distributors are other active sources of reference designs. “The mindset of our development in reference design differs from that of IC vendors,” points out TW Lin, vice president of R&D and the field-application-engineering department at Zenitron Corp, a distributor of semiconductor and electronic components. “Business is business. IC vendors’ reference designs always focus on how to let their chip perform better. In contrast, our focus is on manufacturability.” Sometimes, the company provides almost a prototype or board ready for mass production, according to Lin. Reference designs from IC vendors, especially from foreign IC vendors, are not available for manufacturing, says Lin. “For example, if an IC vendor bases its chip on a six-layer PCB, then we have to convert it into a four-layer PCB and find cheaper replacements for other components on the board. Meanwhile, we also take care of issues such as EMI [electromagnetic interference], signal integrity, and other electronic characteristics,” he says. “All we have done is assist our customers in reducing the cost and accelerating the time to market for their products.” For more information Actel: www.actel.com Powercom Co Ltd: www.pcmups.com.tw Vivotek: www.vivotek.com Zenitron Corp: www.zenitron.com.tw