Jeff Bier’s Impulse Response—Small Processor Companies Have it Tough—But Not Impossible

It’s a tough world out there for small processor companies. It’s tough to attract new customers, and tough to support the ones you manage to get. A key challenge is the trend towards customers consolidating their purchasing: many system companies prefer to use fewer unique processors in their systems, for both business and technical reasons.  From a business standpoint, using fewer different processors (and thus, using fewer vendors) can help streamline procurement and provide negotiating leverage with suppliers. And from a technical standpoint, using fewer different processors can simplify development and facilitate re-use of software and know-how.

One result is that it’s getting harder for small or specialty processor companies to woo system designers away from whatever processor(s) they’re already using, even when the alternative offers a compelling technical advantage. 

A second challenge for small processor companies is the magnitude of the investment required to develop and field a new processor—which is huge.  Aside from the cost of developing the processor itself, processor vendors are now also expected to provide a sophisticated tool chain, complex reference code for key applications, and numerous software components.  Funding this development is one challenge, and getting it all done properly is another.

All of this doesn’t necessarily mean that small processor suppliers will go extinct, however.  For one thing, savvy buyers understand that consolidation is a double-edged sword—a little can be good, but too much can lead to over-dependence on a few suppliers.  If those suppliers decide to raise prices, or have trouble delivering enough product, the consequences can be painful.  Furthermore, if system designers are overly constrained in processor selection, their designs may suffer in terms of functionality, performance, cost, or energy efficiency—making it difficult to field a competitive product. At some point, the advantage of having fewer suppliers must yield to the advantage of building a better product.

The market is tough, but not impossible.  Small processor vendors can provide attractive and innovative alternatives—and that’s in everyone’s best interest.

Jeff Bier is the president of Berkeley Design Technology, Inc. (www.BDTI.com), a benchmarking and consulting firm focusing on embedded processing technology. Jennifer Eyre White of BDTI contributed to this column.