When a comet connects with the Yucatan at high speed, it kills off the dinosaurs — but not all the dinosaurs. Some survive to become birds. When the great ice sheets encroach on the future sites of London and Copenhagen, the Neanderthals leave their northern caves and set up housekeeping in balmy southern Spain and let the Baltic shiver in the cold and the dark.
They’re agile. They change. They adapt.
There’s an extinction-level event going on in electronics today. It’s the extinction of the Field Application Engineer. The comet in this case may be the Internet, with its demand for quick turnarounds and its lack of market attention span. Or maybe it’s the relentless economic push of the what’s-new-right-now business. Possibly it’s the new ease with which electronics can be designed and produced, which wasn’t available even five years ago, and that new ease is drawing startups into an arena that was too costly for them previously.
The conditions are these: electronics component distributors once enjoyed huge single-source sales. They worked with a relative few large companies that produced electronics in quantities measured in millions. Component distributors could afford to put Field Application Engineers in the customers’ offices to help design and support new products, but now the average production run has decreased. Average production runs have decreased in the last 35 years to an estimated 50,000 units, and one electronics blogger recommends holding initial production runs to the 10K range.
Most IoT devices start in the 1000-unit range. Research company Gartner Group reports that by 2020, 50% of IoT solutions will be made by companies three years old or less. At three years or less, those are startups, and they’re not going to produce large runs right out of the box.
Average runs have not decreased because there are fewer electronics companies. Quite the contrary. Wikipedia lists 149 pages of electronics companies. There are a lot of electronics companies. They’re just making shorter runs. The overall mass of production is up.
This chart shows what’s going on:
With many companies making many short runs, distributors can no longer afford to put teams of Field Application Engineers on site at a given company to help design new products. It’s understandable. If 50% of manufacturing consists of 1000-unit startup runs, sales channels just can’t justify the FAE model of doing business.
Arrow Electronics, a Fortune 500 company, has started “Five Years Out,” a program to build a community of designers and engineers, and draw them to Arrow — rather than sending FAEs out to work with them. In an arrangement with Indiegogo, Arrow offers design support at the concept level — and afterwards, certification for the product. That process may bind successful new ventures to Arrow, a distinct advantage for Arrow.
While large manufacturers still are producing large runs, smaller companies are taking advantage of new technologies. Much like Amazon Web Services made it easy for startups to create experimental web-based services and businesses with a minimum of investment in hardware, new technologies are making it easy to design, develop, prototype, and manufacture electronics hardware without the up-front investment in plant and equipment. Small companies can produce professional-quality electronic devices without the Field Application Engineer at their elbow, and in some cases without much engineering required at all. This is part of the “abstraction” phenomena already seen in web development (WordPress), music, (GarageBand, Audition, Audacity), ebooks (InDesign), and video (Premiere), which puts the capability of professional production within the reach of even a high school student.
If experience is a guide (and it should be) production runs may become even smaller and even more highly customized in the future, especially in the industrial electronics sector. It’s a race not to the bottom, but to the cost-effective micro-run.
It’s time to be agile. To change. To adapt.