The majority of what passes for electronic design today is laying out reference designs from different component suppliers to fit a new product shape.
@Ken, I totally agree with you that majority of them use reference designs from different component suppliers because most of them are concerned about time to market. Even if they use different component suppliers it becomes crucial to choose the component whose specs are closely match the requirement so that optimal performance can be extracted.
Ultimately I think i t comes down to how verticle integration is implemented and leveraged. It can't be done blindly, but with an eye to gaining some value in the structure.
I wonder, though, whether Wall Street supports the vertical integation model. In terms of Apple, I guess it does, but that's more about products than manufacturing. Wall Street is driven by ratios that reward low costs and high profits, and vertical integration generally requires significant investment in technologies and facilities. I'm sure there is a hybrid model that works--originally, outsourcing was done where it made sense to do so--that retains an OEM's core competencies and leverages the skills of others.
There may be many more equally important factors to be consider in vertical integration. Does the success of this integration depends on many differernt aspriration?
Bolaji, In hindsight it's easy to be critical of western managers who abandoned vertical integration but it may really be that they moved too fast and our Asian friends moved too slow. Western managers are under tremendous pressure for financial performance, much more so that their Asian counterparts and the impact of turning factories and inventory into cash was very compelling. Acceleration after the crash of 2001 was definitely a factor increasing this financial pressure. In many cases, it was also most likely the right thing to do. Balancing an intangible second order effect like technology coordination against cash is a hard thing for an MBA to do.
If I use Nortel as an example getting rid of their surface mount lines was not a mistake, getting rid of their semiconductor group was. At CES I am seeing many examples at the consumer product level where vertically integrated companies are advancing to an untouchable position against western counterparts. I am also seeing examples of western companies working at a technology level in silicon or intellectual property algorithms (Intel, Qualcomm, DTS...) where their world leadership is evident
My next blog will address how western companies may be able to fill in this coordination void caused by vertical disintegration.
Ken, Did Western OEMs give up too early on vertical integration? I know in hindsight -- and based on your presentation in this blog -- the advantages of vertical integration are many. So why did we give it up and is it still possible to move the process back inhouse to regan the benefits?
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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