On the Weekly Briefing podcast: Facebook plans to maintain its business empire by building a virtual empire. But what does betting on virtual reality mean as a practical matter? A rollicking discussion with Kevin Krewell, principal analyst at Tirias Research. Also, an interview with Avnet CEO Phil Gallagher.
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BRIAN SANTO: I’m Brian Santo, EE Times editor-in-chief. You’re listening to EE Times On Air, and this is the Weekly Briefing for the week ending November 5th.
Virtual reality is another one of those technologies that people have been talking about for decades but whose biggest payoffs seem to remain stubbornly in the future. Now Facebook, one of the biggest companies on the face of the planet, is betting its future on unleashing the potential of VR.
Mark Zuckerberg’s grandiose plan to remake his troubled social platform Facebook into a VR powerhouse has cultural hurdles, of course. But Facebook will also be facing technological challenges; and furthermore, Zuckerberg could be steering his company into an area where he might run in to some formidable competition. This week, life, the metaverse, and everything with our guest Kevin Krewell, principal analyst at Tirias Research.
First, some news.
*Processor companies are compelled to publicize what’s on their product roadmaps at least two years ahead. So we’ve been hearing about Intel’s Alder Lake 12th generation processor core for so long, it’s almost a surprise to find out that Intel only just introduced the actual product. One of our top stories in EE Times this week includes a rundown on Alder Lake, on Intel’s artificial intelligence offerings, and on its new development environment, called OneAPI.
*NASA has begun the process of upgrading radio communications between Earth and space with laser-based systems. The new systems will increase data transfer rates and reduce latency. We’ve got the story on NASA’s upcoming launch of a satellite that will demonstrate the ability to not only establish such links, but also to evaluate atmospheric conditions and react appropriately to achieve maximum throughput at all times.
*We’ve also got an article on some intriguing research on using the human body’s biological network as a communications network, in this case the application is hooking up hearing aids. The concept is called human body communications.
If you are already on this podcast episode’s web page, look to your left; you’ll see links to all these stories. Or you can also go straight to eetimes.com, where you can find these stories along with all our other coverage.
Are you a crackerjack developer looking to impress friends, family and co-workers with your innovative design ideas? Well, have we got an opportunity for you! EEWeb, our sister publication, is running its first-ever design competition.
The challenge is to develop an innovative motor control system that can be built using Arduino. The contest is open to any and all, entry is free, and it’s easy to enter.
Just submit your idea for a project on the EEWeb website, at eeweb.com. You’ve got until November 19. After that, our judges will pick the top five proposals. The five finalists will receive free Arduino Portenta H7 kits, along with a couple hundred dollars each to spend on parts, as well as licenses to Altium’s development tools. Finalists will have three months to actually build their proposed systems. In March we’ll announce the top two winners.
Again, sign up at eeweb.com. There’s also a link here on this podcast episode web page that goes directly to the contest rules. Enter today!
How long have we been talking about virtual reality? The concept of creating digital environments with the use of modern computers goes back to at least the late 1960s. Computer scientist and artist Myron Krueger was using the phrase “artificial reality” in the 1970s. In the 1980s, Jaron Lanier, who created some of the first virtual reality hardware systems at his company, VPL Research, certainly didn’t invent the phrase, but he unquestionably popularized it.
The upshot here is that the idea of virtual reality – or VR – has been percolating for a long, long time. But VR has yet to truly take off for a lot of reasons. It’s neither cheap nor easy to create both rich virtual environments for mass consumption and the infrastructure necessary to sustain them.
Over the years, various companies have dabbled in VR, but among the largest companies, Facebook in particular has been dedicated to the technology. It bought goggle developer Oculus in 2014, and has stuck with that business. For the last year or so, CEO Mark Zuckerberg has been talking up VR, or as he hopes to brand it, “the metaverse.” That term definitely is not new, by the way. It was probably coined by writer Neal Stephenson in his 1982 novel, “Snow Crash.” If you like science fiction and you haven’t read it, you really ought to get to it.
Anyway, Zuckerberg recently doubled down on the metaverse, declaring that Facebook’s future will be in VR. His pitch is that the change in corporate mission is so radical it merits changing the name of the company to Meta. Facebook says the name change has nothing to do with its problems that have sprung out of its inherent refusal to take any responsibility for its business model or its actions. Hey, maybe they sincerely believe that. Anything is possible. Which explains why we’re talking about VR today.
And that brings me to introducing today’s guest. Kevin Krewell is a principal analyst with Tirias Research, where one of his areas of coverage just happens to be VR and AR. Kevin is an industry veteran, a savvy watcher of technological and business developments, and we’re pleased that he’s been a regular guest on this podcast.
Here’s my conversation with Kevin about life, the metaverse, and everything.
BRIAN SANTO: So we have noticed, you and I, that there’s this amazing new trend called The Metaverse.
KEVIN KREWELL: How meta!
BRIAN SANTO: Yeah, exactly. What’s a meta you?
KEVIN KREWELL: Hey, what’s a madda you? Eh?
BRIAN SANTO: Yeah. Let’s hope there are some people out there who remember Bullwinkle and Rocky. So, we’ve got Facebook, famously either, well, they were on the metaverse before they got into a lot of trouble. So it’s legitimately not only a distraction from whatever political winds they’re facing, but it’s a real idea that Facebook has been looking into for a while.
KEVIN KREWELL: They bought Oculus for that very reason, right? They bought Oculus because they wanted to double down on this idea of an extended connection between people using virtual reality. So Mark Zuckerberg is a true believer in that sort of Metaverse, “Ready Player One” type of view of the world.
BRIAN SANTO: Yeah, well, I guess the question is, how many more people will buy in? I mean, you take a look at, for instance, you take a look at a visionary like Elon Musk, builds Tesla, and everybody has to play catch up. I mean, Oculus has been around for a while and nobody’s really… Not nobody. It’s VR and AR still hasn’t caught fire. It’s still an idea, but it just hasn’t caught fire yet.
KEVIN KREWELL: Yeah, I’d agree, except for the fact that they have sold millions of these Oculus Rift headsets. Now the question is, how many of those are sitting in closets collecting dust? So there was definitely a sense that this was cool. This is new. Everybody wanted one. There were a shortage of them. People bought them a couple years ago, and last year to The Quest II came out. And then they used it for a little while.
And then a lot of times, they just got put aside and never picked up again. Even during the Oculus Connect event. There was a question that John Carmack, their consulting CTO, suggested that this could be a real problem. That they there’s just not people just picking it up and just getting into it. And some of it is, it’s kind of clunky still. You need these controllers in your hands to track stuff. The thing on your face is kind of bulky. You get maybe a couple hours at best of use before the battery runs out. Because they don’t have a lot of battery in it.
But there’s a whole bunch of new titles coming. And in a couple weeks, I’m gonna be at Augmented World Expo, which is one of the big events in this space, and there’s a whole bunch of new headsets coming out.
But certainly the company that has invested most in the metaverse type of concept is Facebook. They’re selling the Oculus stuff pretty much at cost. So that’s both good news and bad news. It’s good because it gets a lot of headsets out to a lot of people at a reasonable price. But it’s bad because it’s difficult for anybody to compete with them, because it’s subsidized.
You know, Mark, Zuckerberg and Facebook are throwing billions of dollars at this thing. And so they’re underpricing it to try to get it to a large group of people. So it’s kind of a mixed bag there.
BRIAN SANTO: Yeah. So a part of the question, I guess, is what you actually use this stuff for. So you’ve got different applications, some of it’s gaming, we know that there’s some that’s industrial, but those tend to be really valuable, but also really low volume.
INTERVIEWER: Yeah. And those have been around for a very, very long time. Augmented reality glasses for repair work, construction, that type of application. These types of glasses have been around for a long time, actually, for those applications, industrial.
BRIAN SANTO: Right, right. Those companies are doing okay, but their business model is kind of a low-volume thing. You know, Zuckerberg, Facebook, they’re talking about millions, maybe tens of millions. And then there are other companies in the industry that are interested in VR, or could have an interest in VR, they’re positioned to do it. But part of the question is, what is VR? I mean, it sounds like Zuckerberg is thinking about this, like this social universe. You know, you talk to Microsoft, they’re talking about maybe gaming for the Xbox. What’s the metaverse? And is it different from company to company?
KEVIN KREWELL: Well, let me just clarify that Microsoft has yet to actually promote a VR solution for Xbox. Sony, though, has PlayStation VR. And they’ve been using that for gaming. Yeah, Microsoft has focused on the industrial applications, the visualization. They just announced Microsoft Mesh, which is a co-presence type of application. And this is actually very similar to what Nvidia has been talking about with their Omniverse, which is kind of a mix of 2D reality through flat screens and 3D using VR or AR headsets to allow people to cooperate on projects, if it’s a work project, or cohabitate spaces.
I mean, some of it is, you know, we’ve talking about Zoom fatigue. People are just tired of doing flat video conferencing. If you’ve got more of a presence through a holograph, or holo presence of some sort, maybe that’s more natural, and maybe that’s more interactive, and it feels more like you’re in touch with the other person and coexisting in a space of virtual rooms, I would say.
So there’s advantages there. Whereas Zuckerberg is definitely more social, although the lead application for VR has always been gaming in that regard. But Mark wants it to go beyond gaming. He wants this kind of co-presence in a VR world. And that’s pretty much “Ready Player One” type of environment, where you go into a virtual reality environment, you work with other people, they have their own avatars, you build stuff, you trade stuff, and it becomes its own virtual economy as well. And again, this is not completely new. I mean, if there’s anybody old enough to remember Second Life…
BRIAN SANTO: What do you mean old enough to remember? Second Life still exists, man!
KEVIN KREWELL: I know. It’s still around. And then there was a follow-on, Sensar, from the same guys, which was a better virtualization environment. But yeah, Second Life, which was really designed just for 2D screens, but a virtual place where you could build and trade and sell items in a virtual economy, as well as like, you know, companies like IBM would have virtual reality meetings in Second Life.
So we’ve been kicking this thing around for a while. And what’s getting better is the hardware. And the company that actually does most of the hardware for standalone VR and AR is Qualcomm. Qualcomm is positioning themselves as the lead in this area, and they’ve continued to invest in it. You know, Samsung had dabbled in it and then sort of lost interest. There are other companies that could do more work in this area, like MediaTech, Huawei, whatever. Those companies haven’t really stepped up yet to a volume platform, whereas Qualcomm has created their own version of the chips, specifically for AR or VR. They’ve invested more in this space than anybody else has, and keep building reference platforms and such.
BRIAN SANTO: In your estimation, is the set of skills you need for building a virtual reality platform unique? Or could someone like a Huawei or MediaTech or whoever just decide, okay, we’re committing to this. Bing! We’re in and we’re competitive. Or if somebody were to make that decision, they’d be playing catch up with Qualcomm?
KEVIN KREWELL: Well, they’re playing catch up with Qualcomm just because Qualcomm has done the most work so far. So you have to catch up with what they’ve already invested into developing reference platforms, understanding 6DOF type of tracking, all the tracking algorithms and the working with the vendors in terms of optics. The optics have to be tuned for VR and AR.
BRIAN SANTO: And that’s not insignificant.
KEVIN KREWELL: No, no, it’s not. But it’s not to say that nobody can’t do it. They’re just a matter of making the investment. And I think what is, everybody’s waiting for the market to really develop. There’s probably not enough market share for everybody to get involved. So all right, Qualcomm’s got it for now, if at some point in time the thing really takes off, it really starts selling tens of millions of units, then I expect other companies will step into this space.
And it’s not even to say that a company like Facebook or the other vendors in this area don’t build their own chip. Facebook has capability of doing chip designs. Google does. Right now Google I think has been there, done that. I think they’re holding off getting involved in the metaverse at this point in time. But you know, they could at some point in time say, This is too important. Facebook’s in it. Microsoft’s in it. We at Google need to be in it as well. So there’ll be another player I could see getting involved.
BRIAN SANTO: Yeah, It’s interesting that you brought up Second Life. I’m of the opinion, having seen a lot of different technologies develop, Second Life was a great idea that was maybe a little bit too early, a little bit before the technology could really deliver on the promise.
KEVIN KREWELL: Oh, yeah.
BRIAN SANTO: And socially too early. I mean, the notion of living in a virtual space wasn’t really there. And now I’m thinking that’s no longer the case. I haven’t actually played the Farmville games. Where you actually have digital economy and people are trading resources and interacting with each other. And it’s on a flat 2D screen. I can see where there is culturally a greater openness to jump into a virtual world because they’ve already kind of been there. It was 2D. Going 3D probably would not be that big of a jump.
KEVIN KREWELL: Yeah. You know, one of the things that’s sort of interesting about how 3D gaming has evolved. The original video game started off in arcades, and then it migrated to home consoles, and then PCs and home consoles became, and arcades have sort of withered. There’s a Dave and Busters around still, but you don’t see too many arcades as you used to.
BRIAN SANTO: I was in Central Oregon last weekend, and they have a virtual reality arcade.
KEVIN KREWELL: Yes, that’s exactly the point I was gonna make. That there are now more virtual reality arcades. Now, because of the COVID vaccine, those guys had to shut down for a good part of the time, but they were developing arcades for real virtual reality type of experiences, multi-people experiences using VR headsets and such.
And there’s some interesting stuff that you can do with that environment, where you can actually make a space in virtual reality look bigger than it physically is, by actually changing your perception. And you can actually think you’re in a bigger space than you actually are wearing a VR headset.
But yeah, that’s sort of like we had the headsets first, and now we’re getting the arcades. So it’s a little bit backwards, but yeah, arcades are starting to show up.
BRIAN SANTO: Wow, cool. So what do you feel, as a guy who’s watched technology develop over the years? What are your expectations for this as a legitimate business? Is it still too early? Are the conditions right? What do you think?
KEVIN KREWELL: I don’t know it. It could be one of those situations where it sounds better in theory than in practice. And I think part of that is the hardware needs to get better. And then there’s going to be this mixed reality blending between VR headsets with pass-through cameras, so you can sort of see what’s around you, and they can make stuff that way. Versus AR headsets, which are sort of like glasses but will have projected images on the glasses in your eyes. Your field of view. So there’s a blending of those. And I think that’s what we’re waiting for.
One company that was very deep into the AR side was Magic Leap. And they’ve got hundreds of millions of dollars invested in them. And they just didn’t reach their potential, and they’ve taken a step back, rebooted the company, and are a little more focused, but they’re still having struggles there. The AR side is just waiting for the right technology, the right field of view, optics Everybody believes it’s going to come. But it’s gonna take some time. That’s definitely a situation where the technology needs to be better.
But I think most people are more excited about that idea — especially us who wear glasses. The people that don’t wear glasses, they may not be as thrilled to the idea of having to wear glasses, but I don’t mind. Where you can project images and see overlays in your eye. And that’s pure science fiction. And I think that could be really cool. And I’m more excited about that.
But that’s still five years out I think. The VR stuff is here now. Clunky as it may be. It can get better over time, lighter headsets. I think there’s a lot of work can be done to make the headsets lighter and more comfortable. But yet balancing battery life and performance. It’s a lot of engineering trade-offs there too. But those are here now, and you can get a feel for what’s possible by using those.
I’ve got the Oculus Quest, Quest 2. I had the original Oculus Rift. I still have that, actually. And so I’ve dabbled in it. But there’s some cool stuff. Cool games like Beat Saber’s a great game. There’s a bunch of really cool games in it as well. But I’m still waiting for the real wow thing that makes me want to put it on every day. And that hasn’t happened.
BRIAN SANTO: Yeah. Yeah. Google Glasses are like what now? It’s like six,, seven years ago? Was it that long ago?
KEVIN KREWELL: Oh, yeah. Every else thought they were dorky.
BRIAN SANTO: Well, yeah. And some people were kind of hostile. I kind of got it. But it was also interesting, because Google glasses were coming out just as the communications companies were thinking about rolling out 5G, and their thing was, Oh, you don’t have to do heavy glasses. You just need to be able to connect into the ubiquitous 5g network. So much for ubiquitous 5G networks, but the idea being that if you had pervasive networks with the kind of bandwidth that you can bop, bop back and forth to, you could feed those glasses and make them lighter. And I’m wondering to what extent you hear anything about that.
KEVIN KREWELL: Well, Qualcomm is still pitching that idea. I think that’s it’s still part of the 5G thing. Now, Google glasses was the 4G LTE timeframe. So it was too early. The other thing is, especially with Google Glass, it had a very limited heads-up display on just one side of the glass. It wasn’t AR, it was really more of a heads-up display, as you might call it. And the amount of information that you could display in that could easily be handled by 4G LTE.
The other thing was that it could record video, and you could compress and stream that video back up to the cloud as well. But the video is what freaked everybody out. Because that’s like, You’re recording me? You’re looking at me? Where are you? And it what took a while for people to accept the idea that somebody was wearing glasses that recorded video that could be recording you.
And then Snapchat did their own glasses. So there are a number of glass solutions here with cameras in it. They still haven’t taken off because the biggest problem is battery. You try to make it light, where’s the battery? So one of the solutions, this is what Magic Leap did. And this is what they used to do with regular AR, augmented reality, glasses. They would wire down to a puck, more or less, a standalone little device that would have the batteries in it, it would have the processor, so it wasn’t heavy on the headset. The other thing is, people are going to get a little freaked out if you put a 5G headset or 5G radio right next to you.
BRIAN SANTO: Right next to your head.
KEVIN KREWELL: Yeah, right next to your temple. Having the radio removed from your head a little bit is not a bad idea. There are also — and this is also common right now — is tethered. So your phone is still used as your connectivity and for your compute. And then the glasses are just basically a dumb display in a sense. So that’s another way of getting around the cost/weight issue. But the idea is, you now have a tether. Maybe you could do it with Bluetooth 5.2 has maybe low power, you could stream it. It all depends on if you really want to do high resolution video on the displays, Bluetooth is not good at that. It’s thought to be really a WiFi solution. And then once you put WiFi there, you’ve got radio and batteries and stuff. So it’s a bit of a trade off.
BRIAN SANTO: Hmm, interesting. All right. Have we exhausted this subject for the moment?
KEVIN KREWELL: Like I said, this is going to be a developing story over the years. We’ve been watching it develop, it’s still not going away. I think the buzz has gotten bigger due to the Facebook event. And Microsoft talking about their Mesh for business applications and co-presence type of applications. It’s going to be a subject for years to come, and I think it’s going to evolve and it’ll get better and eventually maybe we’ll hit that tipping point.
BRIAN SANTO: So while I got you, I wanted to ask you to do two minutes on supply chain. Nobody’s talking about the supply chain!
KEVIN KREWELL: It’s so totally lost and nobody’s talking about supply chain. Not even the President of the United States is talking about supply chain. Oh actually, no, he is.
BRIAN SANTO: My mom said supply chain the other day. I’m like, what’s coming out of your mouth, Mom?
KEVIN KREWELL: Somebody had a Halloween costume. It was just a sweatshirt and stuff, and the sign was “Stupid supply chain! I can’t get my Halloween costume!”
BRIAN SANTO: That’s brilliant!
KEVIN KREWELL: There was a cartoon with Cookie Monster, and he’s asking, “What’s this about supply chain affect cookies?” Everybody’s talking about supply chain.
BRIAN SANTO: So is anybody doing anything about it? It’s like the weather. Everybody complains about the weather, but nobody does anything about it.
KEVIN KREWELL: For one thing, it’s obviously a very complicated, multifaceted problem. There are some macro problems with supply chain, like big ships stuck in harbors. But there are also issues of labor shortages in certain key areas. You know, the problem with the chip shortages may not be on the leading edge of foundry capacity, but on some of the trailing edge foundry parts. Because if you’ve got an older process node that you’re using for some microcontrollers and stuff, you don’t invest in a lot more capacity in that space, because those things are relatively inexpensive. And you don’t buy new equipment; you use your existing stuff that’s been refurbed. So they’re really inexpensive to produce.
But buying new equipment to do that is usually not economically a very good investment, because you think people can move up to the next node eventually. And then you build more capacity than you need eventually. So there’s that trade off.
Yeah, and in some of it may have been planning. The automobile industry is one of the ones that’s gotten the most attention. There was, I think, a glitch when COVID first hit, where they shut everything down. So a lot of capacity moved. And then when they restarted and said, Hey, we need a whole bunch of cars. That capacity didn’t come online as fast as they had hoped.
Tesla may have been hit the least, because so much of this stuff is new, that they didn’t have a lot of legacy older parts in their design. So that may have been one of the advantages of a company like Tesla, which is relatively new designs.
There’s a lot of structural issues here. And some of the stuff’s trying to get resolved. I mean, some of it is rules and regulations, like the Port of Long Beach changed some rules for how many shipping containers you could stack, just so they could stack more of them. And so there are lots of little structural issues along the way that they’re trying to iron out. And they’re having meetings in Europe over supply chain between the G20 leaders.
But this is gonna last for a while. A lot people are saying it’s going to last well into 2022. It’s going to affect different industries different ways. There was a report that Porsche is shipping cars that don’t have all the chips in it, that they’ve deleted some features in order to ship some cars. Which I said there’s actually gonna be collectors of those cars, because they’ll say, oh, wow, a stripped down Porsche! That’s better than the one with all the bells and whistles. Make it a special edition.
BRIAN SANTO: Yeah, there’s lemonade out of lemons. Right?
KEVIN KREWELL: Yeah, exactly. But yeah, but I think there’s a lot of structural issues and, not all of it you just throw money at and anything in the chip business takes many months to fix. You buy new equipment, you bring it online, if you have the space in your shell to facilitate, then you got running lasers, you got to make sure the wafer reels are correct. And that takes many months before you can start manufacturing in volume. So there’s a lot of long-term improvements that are required to get us back in shape.
And then memory is fickle. So you put too much capacity in memory, and then all of a sudden, you have too much capacity if the market shifts a little bit. And so then you’re getting killed because you’re not utilizing your fab sufficiently. So it’s a tough balancing act for the semi guys.
BRIAN SANTO: Memory’s always been fickle, but I’m getting a sense that the awareness of the supply chain and how it’s set up, people seem to be highly aware and actively doing things to make sure that when everything pulls out, supply chains are more rational. But at the same time, it seems as if everything that could go wrong at the same time is people not going back to work when we expected them to do so; ships are hanging out at sea, a ship getting stuck in the Suez Canal, you know?
KEVIN KREWELL: Oh yeah. That was a major problem from for like a month I think it was!
BRIAN SANTO: And people are supposedly still working that out, you know?
KEVIN KREWELL: Yeah. So there’s no ability to sort of grok this whole thing, you know. The Suez Canal being blocked was a major problem. And the efforts to fix that problem fell upon some local people in Egypt who weren’t prepared to fix this kind of problem. So that was a major issue. It’s trying to resolve that. And it’s crazy!
BRIAN SANTO: We’ve been talking with Kevin Krewell, principal analyst at Tirias Research. Kevin and his partner Jim McGregor and their friends are going to be joining us regularly once a quarter as we move forward to talk about current events and to provide wider business perspective.
Kevin and I were just talking about the supply chain. A fundamental element of the supply chain in the electronics industry is the distribution business. Some of the biggest distributors are multi-billion dollar multinational conglomerates, and they’re absolutely critical in getting the right parts to the customers who need them, when they need them.
Whenever there’s any merger & acquisition activity, there’s always the possibility that there will be some fallout for distributors. In other words, M&As carry the potential to disrupt the supply chain.
Following its acquisition by Analog Devices Inc. last year, Maxim’s business has been consolidated under Avnet competitor Arrow Electronics Inc. The two rank among the largest distributors in the world. A disclaimer here: EE Times is part of AspenCore, and AspenCore is owned by Arrow.
Anyway, Maxim accounted for approximately $500 million of Avnet’s annual sales, which reached $19.5 billion in fiscal 2021.
Barb Jorgensen is the editor of our sister publication, EPSNews. Phil Gallagher is the CEO of Avnet. Barb caught up with Gallagher, who was in his office in Phoenix, the day after Avnet’s fiscal Q1 earnings call. During the conversation, you’ll hear Gallagher reference Farnell. That’s Avnet’s catalog business.
Here’s Barb Jorgensen with Avnet’s Phil Gallagher.
BARB JORGENSEN: So first, supplier consolidation. It’s not new. This isn’t even the most recent move with Analog Devices buying other companies. So talk a little bit about the history of that if you would.
PHIL GALLAGHER: Yeah. Thanks, Barbara. Thanks for having me on. And hope everybody’s doing well. Yeah, we did have a good quarter. Actually a great quarter. Both the Avnet core, and of course, Farnell’s part of that. Farnell had a record quarter in the July-August-September quarter. So again, really proud of the team navigating these interesting market conditions in the working environment, ass you and I were talking.
I’ve been with Avnet since 1982. So consolidation is not new, it’s part of what we deal with. And that’s where the word adaptability comes in, and perseverance. And as you know, Barbara, we’re in our 100 year anniversary this year. And if you’re not going to adapt, you’re not going to last 100 years. And I say that for distribution in general because consolidation can affect you positively or negatively or neutral. Depends on the situation.
And as I said on the analysts call, the earnings call yesterday, when I started, some of our top product lines were General Electric, RCA, Intercell, Fairchild, Motorola, National Semiconductor, Intel, AMD. And they’re the only two that are left out of that group. Okay? So it is just something that continues to evolve.
Who’s next? We don’t know. We don’t sit in boardrooms nor do I even try to speculate. And we’ve been on the positive side of a lot of these. Infineon acquired Cyprus, and we got Cyprus back. Microchip acquired Microsemi, we got Microsemi. Renaissas acquired IDT. And Dialogic recently. We’ve been the benefactor of those. And finally we want to talk about the positives.
This most recent one, the ball didn’t bounce our way. You know, the incumbent with Analog Devices is going to pick up Maxim. And I want to assure our customers and engineering communities out there, we will work with you on that supply chain. Be sure there’s no disruption to service from us from the supply chain or from a technical standpoint.
From a size standpoint, it’s roughly 3%. So in the grand scheme of things, it’s 3% of our revenues. It’s really something that’s very, very overcome-able. And matter of fact, we said on the earnings call, it will have no effect on the balance of our fiscal year, which goes through June.
As far as engineers go, 30% of our business is captured in engineering designs. So we’re absolutely committed to that. We’re not reducing our field application engineers, we’re not reducing our account management or inside sales teams, it’s not large enough to do that. But we are going to repurpose them to our other suppliers. And if you look at Maxim, for example, some of the biggest parts of the Maxim portfolio were data to interface. Well, we got some great solutions in data interface. You got Renaissas, we got microchip, NXP, ST Micro and Op Amps, you got On Semi, you got Renaissas, microchip. So I go through the line card, Diodes, inc.
We’ve got a phenomenal current line card that can help us navigate the Maxim TI, which is now three years old. But more important, the engineering community needs to know we’ve got the solutions in total that can help them with their designs.
BARB JORGENSEN: You alluded to this a little bit yesterday on the earnings call, too. And I think it’s something worth expanding a bit on. With Texas Instruments, we had them begin with discontinuing their basically a distribution incentive program called demand creation. And then has really, you know, limited its volume distribution now, which is probably pretty much what the channel was doing with TI.
And with analog, with its acquisition of linear, consolidated its volume business under a single global distributor, and it’s following suit with Maxim. In general, what does this say about the semiconductor industry and its reasons for doing this? Are they margin-driven? Is it a direction of sales that they’re going in? I’m not smart enough to draw any conclusion. I’d like to hear your thoughts on that.
PHIL GALLAGHER: We don’t talk about them much anymore. Yeah, they started that 15, 20 years ago. So there was a clear trend where their direction was. More direct, less reliance on the channel, which is continuing to happen, even though they’ve already consolidated into one. If you look at Maxim, about 30% of our business was tied to design. The balance was fulfillment, which really [UNINTELLIGIBLE]. And it’s still 30%, even with some of the line losses we just talked about.
So I think there’s a growing reliance, frankly, on the channel for hitting that that longer tail customer. There’s no doubt, the most efficient way for these suppliers to go to market is through distribution. Okay, it’s their most profitable channel to the market. I don’t have any suppliers that I can speak to that are looking to move away from demand creation or design incentives through supply chain. So are there gonna be adjustments to it? Yeah, there’s always gonna be adjustments to it.
We’re actually investing more in online design services support, in addition to our field application engineers. We’re adding centers of excellence around certain technologies. We’re increasing our software print. I mean, you look at lines like Xilinx. We’re 75, 80% of their business and their designs. And we do reference designs for them.
So it’ll change, of course it’s going to change. And we’ll adjust as we always have, but again, we don’t see us at risks there. Lines like Monolithic Power Supply. Great line. Okay, starting up, been around for a few years, actually. But they really rely on us to help hit those customers that they just can’t hit from an efficiency standpoint.
BRIAN SANTO: That was my colleague, Barb Jorgensen, editor of EPS News, and Phil Gallagher, CEO of Avnet. Barb has a story on EPS News with details about Avnet’s strategy following the purchase of Maxim by ADI.
And that concludes this episode of the Weekly Briefing. Thank you for listening.
The Weekly Briefing is available through iTunes, Spotify, and Stitcher, but, if you go to our web site at eetimes.com/podcasts, you’ll find a transcript, along with direct links to the other stories we’ve mentioned and other resources.
The Weekly Briefing is produced by EE Times. It was Engineered by Taylor Marvin and Greg McRae at Coupe Studios. The Segment Producer was Kaitie Huss.
I’m Brian Santo. See you next week.
BRIAN SANTO: Did you just use the word “grok,” you old hippie?
KEVIN KREWELL: Yeah, I did.
BRIAN SANTO: Oh, man.
KEVIN KREWELL: Man.
BRIAN SANTO: Okay, fine. You’ll have to teach the kids what that means. I’ll put like a little editor’s note in the transcript.
KEVIN KREWELL: It’s used enough in the text, basically.
BRIAN SANTO: Oh, yeah. Sure.
KEVIN KREWELL: I think they’ll know what grok means. “Stranger in a Strange Land” is the book. And it was written in Santa Cruz, actually.
BRIAN SANTO: Now that I didn’t know!
KEVIN KREWELL: Yes.
BRIAN SANTO: Man, I gotta go back to my Heinlein.