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Commoditization Ghetto? Or a Study in Semantics?

Call it what you will, commoditization is not a welcomed word in the EDA, IP or electronic hardware communities.


An abstract in an EETimes subscription publication (which I don’t subscribe to) used the catchy phrase “commodity ghetto” to describe the slide of a company’s products into highly marginalized profits. Formerly, the phase was associated with traditional commodity issues, most noticeably world food shortages or imbalances.


While electronics hardware is not considered a traditional commodity, it still can suffer from commoditization.


In the EDA and electronics markets, avoiding the commodity ghetto means becoming a “platform provider.” If you are an EDA tool vendor, IP supplier or chip manufacturer, avoiding the commodity ghetto is typically accomplished through acquisition of a software company. Software acquisitions by predominantly hardware or semiconductor IP companies mean that those companies can now claim to be “systems or platform providers.”


Do these changes work? Sometimes they do, but not often. The gulf between hardware and software worlds is too wide – in terms of engineering, sales, marketing, and even leadership.


What alternative is open to companies that feel the slide toward the commoditization ghetto? Maybe a rich activist hedge-fund investor will suddenly appear on the door step? Few corporations would find this a comforting alternative.


So companies press on, trying to reinvent themselves into system houses. Those that succeed will do so only in so much as they actually become system oriented in their approach to engineering, sales and marketing. It’s not rocket science, but it isn’t easy.


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