The Five Percent Solution

What happens when someone offers to do it better for less and guarantees it?

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By Jack Harding

When it comes to internal operations, “Do it yourself is dead.”

By internal operations I mean all those activities from netlist to EOL (end of life). After all, nobody makes their own EDA tools or wafers. So, why are there a thousand companies with teams of 5 to 200 all doing the same job and, in many cases, poorly? How good can you be at making one or two 65 or 40 nm chips a year? Where’s the learning curve? How do you justify the idle time? Where’s the buying power? And the fixed cost!

I was talking recently to an operations professional I’ve known over the years and said, “Imagine someone standing in front of your CEO, CFO and VP of sales saying, “No matter what [Fred] makes your chip for, what if it can be done for 5% less and guaranteed.”

His eyes widened and said the usual, “But I have the double secret, sacred handshake with [supplier] and I’m the only guy in the world that has his substrates delivered by carrier pigeon daily at noon.”

“Great, like I said, 5% cheaper and guaranteed.”

This time his head fell and he said, “But I love going to Asia and getting all that supplier attention and, besides, what will I do?” You get the picture. Operations guys working in small and medium-sized companies will be working for the aggregators soon much like EDA absorbed the thousands of developers dotted across the electronics landscape. The economics of a slowing industry demand it and it is unavoidable. And why not? How much waste can an aging industry absorb before management looks around and says operations has to go, like EDA, fabs, assembly, IP, layout and everything else? It’s inevitable and it’s happening now.

Like the admonition from the Borg on Star Trek, “Resistance is futile. You will be assimilated.”

Jack Harding is the CEO of eSilcon