EBV Elektronik has launched a new service through which it will liaise with customers and chip manufacturers to develop application specific semiconductors for its customers.
Slobodan Puljarevic, president and CEO of EBV Elektronik, explains the strategy behind EBVchips: “In future, we no longer want to sell just our manufacturers’ products. Based on the wishes and requirements of our customers, we will define our own semiconductors, which our manufacturers will then produce for our customers.”
To do this, EBV conducts targeted discussions with customers in specific sectors. The company has divided these customer groups into vertical market segments – Automotive, General Lighting, RFID, Medical, Renewable Energies and Consumer. Although EBV intends to build specific chips for customers in these segments, every customer will in fact have access to EBVchips. “If the idea can be implemented and has sufficient marketing potential, we are open to all good suggestions!” says Puljarevic.
These semiconductor components have an original part number from the manufacturer and are stamped with the corresponding manufacturer’s logo. EBV Elektronik then has the exclusive global sales rights for the component for a typical period of three to five years.
As is so often the case with these things, the EBVchips concept dawned on Puljarevic under unexpected circumstances: “The idea came to me at the beginning of 2009 while skiing. At that time I already felt the crisis in the whole industry, and thus a real slump in revenues and profits. I was watching my son in the queue for the ski lift while he was using his iPhone, when something suddenly became clear to me: someone who, like Apple, offers something very special, with which it is also first on the market, has a good chance of earning more from it.
“As a distributor, we had previously been 100% dependent on our manufacturers at all times when it came to products. Now we are taking the initiative ourselves. As a prerequisite for this we required the vertical market segments, which we established within EBV in the first half of 2009. Now the EBVchips are coming from these market segments. However, we do not wish to target the upper price segment, like the iPhone, but to co-operate with the manufacturers in growing in the market via new products and to receive an appropriate margin for it.”
EBV’s vertical market segment managers create the specifications for the chips. These specifications are then taken to the manufacturer to determine if they can develop and produce that particular semiconductor. The manufacturer then begins chip design as part of its normal design process. EBV’s marketing and sales staff are all engineers, but designing the chip requires more than just writing the specifications. For this reason, the company will also have employees who function as ‘translators’ in order to translate the specifications from product marketing into the language of the chip designer. EBV will then negotiate with the manufacturer to share the NRE (non-recurring engineering) charges associated with the development of each product, or if a sufficient quantity of chips is ordered, these charges might be waived entirely.
The manufacturer takes responsibility for adhering to the specification, plus the separate matter of whether it carries out chip design in-house or contracts it out to a design service provider. As ever, EBV will act as a pure distribution channel with these new application-specific semiconductors. Liability, guarantee, qualification, delivery period, etc, for the new EBVchips are incumbent upon the manufacturers themselves.
As to which manufacturer EBV would approach for a specific chip design, the company believes that, given its knowledge of the capabilities of the manufacturers in its line card, in 90% of cases it can go directly to the one most appropriate for the product in question. In a case where several manufacturers might be appropriate, they could all be approached in order to draw a comparison.
At normal manufacturer utilisation levels, EBV says the development process takes nine months from completion of the specification to the first chips: three months for design, three months for the manufacture of the first wafers and another three months for assembly, testing and packaging.
If a controller or something similar is required for the software, EBV also provides the relevant support, meaning that it can work towards enabling its customers to access existing development tools. If necessary, it can then co-operate with the manufacturer and other partners in creating an evaluation board or possibly also a reference platform.
The quantities of EBVchips manufactured will naturally vary from one to the other. In the case of a microcontroller, for example, it might amount to a couple of million units. For a power module for wind turbines, 20 000 to 30 000 units might be more appropriate. The minimum unit quantity for the manufacturer depends on the application, chip size, casing, price and various other factors. In turn, EBV also supplies its customers with individual samples if required. If customers only give EBV marketing input, in principle the intellectual property of an EBVchip belongs to EBV. However, if a customer undertakes to receive a very high unit quantity (one million units, for example), the intellectual property could then remain with this customer.
EBV requires input from its customers in order to make this new strategy work, according to Puljarevic: “For example, if we speak to 50 customers, our specialists will ensure that an EBVchip corresponds to around 90% of each customer’s ideas. We then ascertain the quantity in which each customer requires this component. In principle, we are open to input from all customers, regardless of the potential unit figures. Whether or not this results in an EBVchip remains to be seen. It is exactly the same process with the manufacturers. They make enquiries with their key accounts, and EBV Elektronik does the same with small and mid-sized companies.”
Following this model, EBV is a key account for the manufacturer, and an interface to the mid-sized companies. It can thus offer its customers the newest and best possible integration in state-of-the-art technology – and for a better price than a solution based on standard components. Increased reliability and the advantages of the integrated solution are enjoyed by customers as something of a bonus.
Large customers – that is to say, the key accounts of the manufacturers – have always had access to the latest technologies and so always grew, but the mid-sized companies were left in their wake so to speak, and the gap between these customer categories widened further. EBV is now pooling its resources to additionally offer mid-sized companies access to completely new specifications and individual solutions with a better price/performance ratio. With EBVchips, the distributor is now an extension of the manufacturer for many thousands of customers.
According to EBV, reception of the EBVchips concept by semiconductor manufacturers has been enthusiastic, and substantial discussions have already taken place. Many manufacturers have been waiting indirectly for years to receive bundled and detailed information of precisely what is needed by the thousands of customers purchasing via distribution.
“Until recently, we were not organised in the appropriate way to implement a strategy such as EBVchips,” explains Puljarevic. “Through the introduction of the vertical market segments, we have restructured these areas so that we are now in the position to provide targeted EMEA-wide support for these segments in order to obtain the required information for EBVchips. If we had sent a field applications engineer (FAE) to customers before we had established the vertical market segmentation structure, to ask which chips they required, this FAE would have gone to automotive and consumer and medical customers, and that would not have worked. We therefore structured the market segments first.”
Regarding the issue of IP, EBV Elektronik is the owner of the intellectual property of an EBVchip. All relevant semiconductor manufacturers have already signed a non-disclosure agreement (NDA) with EBV to ensure that its ideas remain protected. In a similar way, EBV must also sign NDAs for the manufacturers to protect their trademark rights. All IP blocks, including relevant third-party IP, can be incorporated into the design possibilities of each manufacturer.
EBV intends to launch its first EBVchips shortly, but needs to align the processes first, and all participants are still in the learning phase. Which is understandable, given that this is a completely new idea. EBV is keen to quickly get to the stage where it knows the whole procedure better and gains a deeper understanding of how long the design phase takes for the manufacturer, how long the manufacturer requires for testing, qualification, etc, how long it takes before engineering samples are available and how long before the first orders arrive.
According to Puljarevic, “When these processes are in place, we can then begin to integrate chips from various manufacturers. We already have partners in a position to combine various chips on a hybrid, but that is still a vision of the future at the moment. The whole thing must first be internalised as a concept of all participants – employees, manufacturers and customers. We already have many good product ideas in the pipeline, but we will proceed in a structured manner, one step at a time.”
Initially, EBVchips will be very solid, not overly complex products. However, they will also be offered in areas such as the power modules for wind turbines. There will be products featuring a great deal of expertise but for which the project still remains straightforward. EBV already has definite ideas in the automotive and renewable energies market segments, including metering and general lighting. For example, certain LED controls and drivers in combination with controllers lend themselves to this sort of application.
When it comes to consumer electronics, EBV is working on a somewhat different approach. For example, its manufacturers already offer special controllers that have a multitude of peripheral elements. As consumer customers do not need all these peripheral elements, the corresponding chips are too large and so actually too expensive for the application. Therefore, EBV is planning to downsize certain ICs to obtain a smaller component in smaller modules with fewer pins, which is therefore also more reasonably priced than the original IC. In this way, EBVchips can be adjusted precisely to the desired price level. As a result, EBV’s activities move not only towards high integration, but also in the opposite direction for cost efficiency.
In order to make prices for EBVchips more attractive, the company will often order a large batch and then store the products. In this way it obtains the components for an attractive price, but must finance the whole batch. The procedure takes place in exactly the same way as with standard products: “We have products worth around 250 million Euros in stock, approximately half of which we ordered at our own risk,” explains Puljarevic. “This means that we have no concrete orders from our customers for half the stock, but we have known customers, projects and markets for 41 years. Despite the financial crisis, EBV Elektronik continues to be profitable, so we have sufficient reserves at our disposal to be able to finance new projects. With our parent company Avnet, we also have financial security, meaning that we can implement our strategy much more easily.”
To ensure long-term availability of EBVchips, for example in the case where a manufacturer is bought out or discontinues a technology, the opportunity typically arises to place a last order. However, because EBV owns the intellectual property rights for the specification, it can at any time have the component produced by another manufacturer. In extreme cases, it can also approach a foundry with the existing masks. In the event that a chip was developed by a manufacturer that ceases to exist, EBV could obtain the masks and approach another manufacturer.
When asked whether he sees a risk of EBV’s competitors copying the concept behind EBVchips, Puljarevic’s response is a pragmatic one: “That is a valid question. In summer 2009, we informed the public that we are now vertically segmenting the market, and there are already other distributors who are emulating us and trying to arrange their organisation in exactly the same way as us. However, this conversion is a time-consuming process.
“Our idea with EBVchips will certainly be copied, but an exact copy can never be as good as the original. EBV Elektronik has redefined distribution again and again as a future-oriented trendsetter, from FAEs through services such as laser marking and programming and the most up-to-date logistics solutions, right up to intensive design-in support of customers with reference platforms developed in-house by EBV. So if other companies copy the basic idea for EBVchips in practice, we will already be on hand to implement new ideas. I am also going skiing again soon…”
For more information contact EBV Electrolink, +27 (0)21 402 1940, [email protected], www.ebv.com
| Tel: | +27 11 236 1900 |
| Fax: | +27 11 236 1913 |
| Email: | [email protected] |
| www: | www.ebv.com |
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