The Value of Outsourcing in the Case of Analog IC Design and Development

Look around; in the midst of a hard-fought Presidential campaign the perceived horrors of outsourcing seem to be getting the bulk of political advertising dollars, at least from one side of the aisle.  To take the political poison out of the situation, let’s look at domestic outsourcing, in particular the example I want to highlight is one in which I am personally familiar, which is outsourcing of analog integrated circuit (IC) design and development to independent design service providers. For some background, in 1995 I started and ran an analog IC design services firm called Integrated Circuit Designs until 2007, when we were acquired by Texas Instruments as an internal design team and could no longer work with outside customers.  After a few years ‘on the inside’ I have recently started a similar design and development services firm called MIE Labs (www.mielabs.com).  Our charter is to partner with customers in providing circuit design, product development and consultation services in order to enable them to more quickly grow their business.

How would a customer benefit from outsourcing this type of activity?  Well there are many individual situations where a customer would benefit, I will highlight a few of the most common as they relate to my business: 

     1)      Customer whose core competency is in design and development of analog ICs

This is the most straightforward situation, in which the customer outsources design tasks primarily due to the fact that they have more opportunities than their internal staff can handle.  The difficulty in finding and recruiting quality analog IC designers still exists even in this economy, so outsourcing in this situation can make a lot of sense, particularly if the need is a short term one.  The design service provider can take on projects at both ends of the spectrum; where the customer does not have expertise in a particular specialized technology, for example, or on the other end where the service provider can provide turnkey services in doing spins and modifications of existing products in which the customer’s own designers have little interest in taking on.  A good design services provider will work hard to achieve a level of familiarity with the customer’s internal processes so that after a brief learning curve the outside provider looks no different to the customer than their own internal teams. 

2)      Customer whose core competency is in design and development of digital or mixed-signal ICs

In this case the customer is typically designing large systems-on-chip (SoC) with heavy digital/firmware content.  They most likely have a large staff of digital and firmware designers but perhaps do not have sufficient analog talent to address whatever small but critical analog content is needed in their chip.  Prepackaged analog IP is sometimes the answer but it is still not a plug and play situation and in many cases the analog IP must be customized for process and application.  Good analog IC design requires a critical mass of experience and expertise and most companies who are not actively doing it on a consistent basis do not have a strong analog team in place, nor does it make sense to build that team internally.  In this situation, the use of an outsourced analog design services provider is the best approach.

3)      Customer who has no core competency in IC development but needs an IC for their end product

In this case the customer needs to better integrate their end product for size, weight, power or cost reasons but they have no experience or expertise in IC design/development of any flavor.  In this case, the design services provider can provide the knowledge to make rational decisions on whether or not a custom IC makes sense, and if so, how the system should best be partitioned.  The services provider can not only perform the chip design task itself but also provide the specialized program management of both the chip design and the backend development, including interfacing between the customer and wafer fabs, assembly and test providers.

In this article I have tried to show three major situations in which outsourcing is sometimes a very attractive and reasonable alternative to trying to do everything in house.  I have used the example with which I am most familiar, which is analog IC design and development.  For those sensitive to the politics of the situation, or simply concerned that offshoring leads to communications and management nightmares, outsourcing to domestic service providers is a great alternative and should be considered as a matter of course where internal resources are short or do not match your core competencies.