The journey from new idea for a chip design to a final manufactured semiconductor is a long one. McKinsey found that it takes approximately 12 to 24 months to build a fab shell and install the necessary tools. Another 12 to 18 months is required to get to full capacity.
If demand doesn’t meet projections, or if costs exceed expectations, returns can be much lower than anticipated, especially as chips get smaller, McKinsey noted. Designing a 5-nanometer (nm) chip costs approximately $540 million once you add up everything from validation to IP qualification. Compare that to the $175 million required to design a 10-nm chip or the $300 million required for a 7-nm chip.
It can be a convoluted journey as well, given the complexity of the indirect channels by which semiconductors make it to market. When considering the web of relationships between distributors, original design manufacturers (ODMs), suppliers, original equipment manufacturers (OEMs) and your own manufacturing organization, you need to seize every possible advantage when bringing any chip to market.
And this means putting a robust design-registration program into place.
In this blog, we’ll first explain why design registration is critical by naming the risks of not doing it. Then we’ll go into what to look for in a design-registration automation solution to make sure you do it right.
Design registration: a primer
Design registration is the process by which a semiconductor manufacturer collects detailed information about opportunities in an end customer product design brought to it by distributor or other channel partner, and “registers” it in some sort of system – an online database or even perhaps still an Excel spreadsheet. Design registration is intended to drive channel sales through distributors, leveraging the distributor sales and engineering resources, so they can find new markets and opportunities for these specific electronic components/parts, most of which are on the trailing edge. Frequently, you, as the manufacturer, have already collaborated with the OEM on leading edge designs.
In any event, this act of registering a design protects you from channel conflict and reduces the considerable risk of manufacturing specific designs for market because these registered designs should not require as much engineering support as it would for a new chip design. A well-designed registration program can help you as a supplier avoid channel conflict among your partners and incent them to promote your products and drive adoption and usage in a broad market you could not cover directly.
A design registration program gives you much-needed visibility into the channel. There are advantages for the distribution partner, too, in the form of preferential pricing for registered deals.
Don’t compound your risks when manufacturing across the market spectrum
Your ability to profitably manufacture a single chip is already fraught with potential pitfalls No matter if it’s on the leading edge or trailing edge. Demand uncertainty, economic volatility, and lingering supply chain woes from the pandemic all mean that you can do everything right from planning and design perspectives and still not end up with a profitable product.
That’s why you need to protect yourself as much as possible against those things that you can control. The risks of not having a robust design registration program include:
- Potentially undercutting yourself because of channel conflict: Say you are working directly with another company – an OEM, for example – to procure them a batch of components. If you register the design, you have a lot more information with which to make good deals. You might have quoted the OEM $1 for one hundred thousand units. At the same time that very same OEM can work through a distributor (or several) to see if they can get a better price – which in some cases they can, given the way the industry typically works. If you saw a quote come in from a distributor for the same design and the same or more quantity, then you might give them a lower price. Without a design registration system in place, you would see two separate opportunities here, when in reality it is the same end buyer. If you do not have this information available at the time of quote/order then you will invariably leave money on the table.
- Lack of incentive or compensation tracking causing revenue leakage: Additionally, a manufacturer might have an existing contract with a distributor to get a 3% discount on a design or a set of designs. But then later in the lifecycle that distributor says they need 10% discount to get a one-off deal done. Without the knowledge that the distributor already has a 3% discount on that specific design, the manufacturer might give an additional 10% discount to complete an order, resulting in significant bottom-line leakage. You could instead only give the distributor a 7% discount since they have 3% on the backend, which brings us to a total discount of 10% to get the deal done. Note: It is beneficial to align incentives for the originating parties of both the design and deal to drive customer loyalty across the channel ecosystem.
- No downstream visibility for predicting demand: Rather than approximating what demand might look like in coming months, capturing key aspects of the design itself you can follow the registration throughout its lifecycle, giving you a more precise idea for future demand, based on what the registered distributor is able to communicate about the specific opportunity. Design registrations give you visibility to see past channel conflict so you can work on how to track point-of-sale (POS) and other transaction details back to a specific design or program, which gives you the insight you need to profitably make manufacturing plans.
The benefits of design registration
Semiconductor manufacturers rely on complex channel relationships to achieve their sales objectives. A streamlined design registration entry, approval, and execution process plays a critical role in managing such objectives. The benefits of deploying an industry-leading solution are as follows:
- Strengthen customer loyalty: Data and analytics should be a core part of the design registration system you deploy. Real-time insights at the time of selling enable you to maximize margins for each individual deal. By using channel data management, you can see transaction data history for a specific customer aggregated across multiple distributor partners and regions or on specific designs to better understand that customer’s consumption or demand across fulfilment channels.
- Increase margins: Because you will know the precise details of all registered designs and the accompanying deal details, only your registered distributor partner will be eligible for special negotiated prices.
- Increase forecasting accuracy: Rather than approximating what demand might look like through your channel partners in the coming months for a newly released product, capturing all those design opportunities in a registration gives you invaluable insight into what to expect in your market in the months ahead. And with design to quote-to-end-customer order or debit integration, a closed loop solution enables manufacturers to rapidly analyse the business activity of all their distribution partners, enabling better channel practices.
What to look for in a design registration automation solution
But even if you have already tried to implement a design registration program, you may not be having much success with it. If done right, it can maximize the effectiveness of complex channel relationships. But if done manually – or automated just partially or using a hodgepodge of point solutions from different vendors – the process can be time-consuming, stymied by silos, and ultimately will fail.
When choosing a design registration automation solution, make sure you can:
Automate business rules using a centralized console
Design registration approval should be automated. You should be able to define business rules in advance that drive workflow across all involved persons and departments. The definition of rules should be ‘glass box’ so it can allow any high-tech organization to manage the criteria for approval, providing a nice system to check and balance design registration.
Leading design registration solutions enable distributors or other partners to submit design registrations online, using a portal or an integrated online form. This enables all stakeholders to collaborate: distributor and manufacturer personnel as well as sales representatives. Such solutions also offer real-time alerts, online task managers, and the ability to attach and annotate relevant documents.
Take advantage of a robust pricing engine
When the manufacturer can depend on the information captured via design registration it can take the next step to intelligently inform price. Leading design registration solutions provide powerful pricing engines to detect any leakage between requested quotes and approved registrations. By automatically calculating the appropriate enhanced revenue/price based on predefined rules and agreements, closing the deal can be accelerated. The way this works is that the customer specific pricing for the design is directly referenced during the time of quoting, ordering, and fulfilling; all of which could occur through the Rosetta Net network. In this way, when a distributor requests a debit for this specific quote, they can receive immediate, real-time authorization.
Integrate tracking and reconciliation
Leading design registration solutions also allow manufacturers to specify which parameters from a deal can be matched and automatically updated to stay on track for corporate decision making. This automation process can include the tracking of billing and POS transactions posted, which is then referenced against all registered designs. All of this is used to determine if any deal, quota or milestones have been achieved, in turn impacting revenue, accruals and payments.
Have transparent and accurate visibility into the demand pipeline
Leading solutions provide timely, trusted visibility into the stages and statuses of business in your pipeline. As production orders come in, design win statuses are updated to provide all stakeholders with real time visibility into the stages of deals, including when and if they close. Manufacturers and distributors can further leverage this information for reporting, forecasting, and incentive compensation.
Access actionable intelligence
You should also look for a solution that offers a reporting dashboard that provides immediate critical business information to sales operations personnel, channel managers, and senior management alike. This helps you track and manage your business and increase the effectiveness of both market tactics and strategy. Metrics and key performance indicators (KPIs) such as customer profitability, distributor pricing, and pipeline visibility make managing design registrations much simpler.
How Model N Can Help
Integrated channel design registration is embedded into all aspects of Model N’s revenue management solution. Model N provides streamlined collaborative automation for every step of the design-registration process, including business rule automation and the visibility into the pipeline required to understand of all relevant transactional relationships.
If you are interested in learning more about how to automate parts of the design registration process feel free to schedule time with us to learn and explore this opportunity, schedule time with Model N.