What the product consists of: know-how and IP inside the new electronics

Today, we, the Promwad electronics design center team, will answer one of the most common questions in our field: what does the new product consist of for mass markets, or rather what kind of intellectual property and know-how are hidden inside?

It would seem that the answer to this question is obvious: the idea + hardware + software + device case + proprietary packaging, etc. However, in practice, everything is not so simple. This formula lacks half the variables. Such a limited view on the development of new electronic products gives rise to myths and conjectures. For example, such:

• Any product can be easily copied and put on production in China.
• A working prototype of a new device + active interest of potential consumers = successful business (many Kickstarter project participants sincerely believe in this).
• Information leakage is a deadly threat, the author of the idea of ​​a new product should ensure complete data protection at all stages of development so that competitors cannot take advantage of it.

Under the cut, we will analyze the typical product for the electronics market and derive the full formula of intellectual property (IP) and production secrets hidden inside any gadget.

To begin to distinguish between such concepts as an electronic device and an electronic product. The device as such really consists of iron, software and the case. It can be disassembled, studied, calculate the approximate cost of the components and in some cases even reproduce, in whole or in part. But the device itself is only a cherry on a cake called the “product for the electronics market”, which we will now conditionally cut into 9 pieces:
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1. The idea. Feasibility check and technical analysis

The project to create a new product begins with an idea, even if it seems insane at first glance. Contrary to popular belief, ideas in themselves are not worth millions or even thousands of dollars, of course, if they are not the result of long-term scientific research in some applied field. After all, before the idea of ​​an electronic device has become a valuable resource, we need technical expertise and a feasibility check, only after that all project information will be gathered into a technical task and a business plan - important confidential documents that should be available to a limited circle of proxies.

At the same time, the idea itself can be openly discussed with potential investors and business partners. It is not always obvious, many young entrepreneurs are afraid to share this information, believing that the investor himself can use it to create a product or service.

At this stage, you need to understand what constitutes the core value: the original idea of ​​the product itself or plans for its production and promotion (for example, information that sales will be organized in an atypical market, or data on the technological production of this product, which will allow to achieve minimum cost and due to this become a leader in the market).

2. Development of hardware

The next piece of our conditional cake is hardware - the choice of components, the development and trace of the board for the specific requirements of the design. At this stage, the main value lies in the implementation of specific design solutions (in the description of the electrical circuit and the design of the printed circuit board of the device, as well as in the selected list of necessary electronic components).

As a rule, standard solutions are used in the development of modern electronics, which are used in millions of other typical devices around the world: circuits, component connection architecture, etc. In individual products, all hardware can be based on typical solutions.

A qualified engineer can repeat the circuitry of a mobile phone (the value of such a project will be 2-3 man-months), but it will not be able to adjust the production and assembly technology, as well as to get unique components created specifically for this phone with the same cost. Thus, he will not be able to copy the product as such. The ability to disassemble a device into components and reverse engineering is not yet a victory in the struggle for the consumer.

3. Software

What follows is the choice of operating system and device software development, including drivers, tests for production quality control, user programs, etc.

The volume of software in the total amount of development costs is constantly increasing, this is a global trend, and the labor costs of the programmer are reduced by using ready-made open source solutions. The work of the programmer is increasingly reduced to integration and optimization. Thus, the uniqueness of the software is reduced. It can be expressed only in some specific elements, for example, in unique algorithms of energy saving, voice processing, noise suppression, etc. Just these elements need to pay special attention from the point of view of protection, everything else has much less value.

For example, most of the projects in our portfolio have been developed based on open source software. For the past 10 years, we have been following the principle nothing nothing - get nothing (nothing is done - nothing will get). Our achievements in the field of Open Source are returned to the community. We help projects that we ourselves use in commercial developments: Linux kernel, busybox, buildroot, uClinux-dist, U-Boot, and others.

4. Interface and housing design

When a product gets its case and a graphical interface for communicating with the user, the architecture and interface design, the design and 3D models of the case appear in the list of intellectual property objects - all this determines the recognition and perception of the product.

Often, the visual elements of electronic devices replicate popular solutions that already exist on the market. In this case, they do not need special protection.

However, if the product has some unique visual parameters, this information must be kept secret flesh until the first announcement of the product, when this information becomes publicly available.

5. Licenses

The owner of the future product may become the owner of various licenses. For example, contract for the use of certain audio / video formats (mp3, AAC, MPEG 4, Dolby, etc.).

These licenses will affect the cost of the product. If we are talking about publicly available technologies, most likely the conditions for acquiring a license will be the same for all market participants. However, if under the project you can obtain an exclusive license or use the special conditions of the licensor, then these contractual terms can significantly affect the functionality and / or cost of the final product and ensure its uniqueness and additional protection.

6. Electronic components

Electronic components and other components set the price of the device, its quality, delivery time and warranty. All this together affects the competitiveness of the product.

One of the key criteria for the success of the entire project is the price of components, so the optimization of the material list (BOM) and the development of partnerships with distributors are of particular importance. Device developers together with distributors compile a list of potential replacements to reduce the cost of the final product or improve its technical characteristics.

According to the results of this stage, the product owner receives contracts with certain delivery times and exclusive prices for processors, memory chips and other important components of the device. As a rule, there is an enormous amount of work behind each such contract: the experience of negotiating, the company's reputation, the results of cooperation with global technology suppliers, etc.
The value of these contractual conditions is manifested precisely at the production stage, since at the design stage, only general conditions are usually specified, or work with suppliers is limited to the selection of key components.

7. Device manufacturing

As a rule, the choice of a particular manufacturer is still under development. Such forethought allows to take into account the technological capabilities and requirements of the manufacturer, as well as to include the cost of its services in the project budget.
As a result, the owner of the device will receive a list of specific contracting organizations that possess certain technologies for the production of electronics and body parts, as well as information about where and how the assembly and packaging of the finished device will take place. The most valuable information at this stage is the selected technology, price, quality and time.

8. Market entry and sales start.

The project goes to the finish line: preliminary orders are shipped, the first shipments of the new device to retail networks are organized.

Of course, a marketing plan is being drawn up during the concept development process. It is difficult to overestimate the importance of this document, because the same product can gain popularity or fail miserably due to different approaches to its promotion.

At this stage, the owner of the product on hand appears set of delivery, manufactured according to mass production technologies: the finished device in the original packaging with instructions, a set of cables and other necessary accessories.
Also a very valuable component of the project is information about the schemes and regions of sale, this includes the analysis of markets and potential suppliers, concluded supply contracts, transfer of rights to exclusive sales, the approved price of the product, a list of related products and services.

9. Technical support

The list of project costs also includes the organization of after-sales service for the device, and this, in turn, affects the price of the product and its attractiveness to customers. At the stage of organizing technical support, a list of events and conditions that are provided to the end user (warranty service, technical support, etc.) appears.

Thus, if you build a diagram of the formation of the cost of financing a project to develop a product for the electronics market, taking into account the development, production and sales, you can build two conventional diagrams for various types of electronic products:

• Fig. # 1 is the allocation of costs for the implementation of a project for the development, production and sale of measuring scientific equipment for serial production from 1 to 10 pieces.
• Fig. No. 2 - cost allocation for a smartphone designed for the mass consumer electronics market with a serial size of 1 million units.

In the first case, the main value of the product lies in the development, and in the second, in promotion and sales. Of course, these figures will vary significantly depending on the specifics of a particular project. It is extremely difficult to obtain this information in detailed form on foreign products, since It refers to a trade secret. Information technology analysts can operate only with publicly available data about the company, insider messages, and also conduct their own research.

The main conclusion that can be made on the basis of these examples and our list of 9 points is that the owner of the product should clearly realize the value of each phase of his project and first of all focus on his core competence (it is she who should provide increased protection) . Everything else can be outsourced.

So, if you create a unique high-tech product in a limited series, the most valuable project information is most likely the name of your customer and the scientific component of the device. If you work in the mass consumer market, a unique sales scheme and attractive design can be your trump card. If you are creating electronic products for use in industry, the price, reliability and maintainability of devices may be key elements of the project.

Competent control of information received by external teams, and a reasonable division of tasks for highly specialized performers can significantly reduce risks. You should not be afraid of information leaks at the secondary stages of the project, which constitute an insignificant part of your personal intellectual property chart.

We will continue to write about the development of sophisticated electronics for mass production, if this is your topic - welcome to the list of subscribers of our blog on Habré .