January 7, 2007
News - IP Obesity
about 2 years ago
I feel like a common thread between most successful OSHW companies is that they have low non-recurring engineering expenses invested in their “IP.” Most sparkfun products (maybe I’m wrong, but I can’t think of any examples) look like they took about ~1 engineer-week of time to design. So you design a new product and sell it in modest volumes at cost + some small profit margin. Sparkfun sells a couple thousand products (400+ which they designed), so their revenue isn’t super dependent on any one product, and their profit margins aren’t high enough to sustain competitors undercutting them on a small number of products.
I work as a hardware engineer doing ASIC design. As an example, it might take ~20 people 4 years to design an ASIC, at an NRE cost of ~$20-30 million. You need to sell enough of your chips when you’re done to recoup that cost, and if you don’t, you don’t have a company. If we released the GDSII files for our chip and a competitor released a clone 4 months later (without incurring that ~$20 million development cost), our company would be out of business. It just seems like the business model is really hard to make work if you inherently have high NRE and need to recoup your costs with a reasonably high per-unit profit margin (leaving room for a competitor to undercut you buy selling it at cost + small profit margin).
How would Sparkfun go about selling a product that cost ~$5 million in engineering/development work to produce? How would one apply an OSHW model in such a scenario?
No public wish lists :(
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