Mumbai, Maharashtra, India
With increasing levels of competition in consumer electronics, computing, as well as communications and entertainment equipment markets, companies are outsourcing their electronics R&D activities on a larger scale. In addition to the considerable cost savings generated, other notable benefits of outsourcing include better productivity and greater competitiveness through accelerated development times. Developing countries are proving to be the fastest growing markets for outsourced electronics R&D and transnational companies either conduct offshore R&D or outsource to third-party design houses.
A notable trend seen in the R&D outsourcing market is the progress toward establishing global R&D networks. In accessing the global pool of talent in educational and research organizations, transnational companies are setting up R&D centers or labs in various geographic locations and time zones. This enables companies to stay close to manufacturing centers, perform round-the-clock R&D, track regional technology innovations, and above all, increase productivity. Siemens AG, for example, has established a global network for R&D in the field of electrical and electronics engineering research. Among its 45,000-strong pool of R&D scientists, only 51 percent are estimated to be based in Germany, with the remaining 49 percent spread across the company's global R&D network.
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"In a highly competitive electronics market, the time factor is an important driver of global R&D networks, since development time has a direct impact on the revenues and profit generated by a newly developed product," notes Technical Insights Research Analyst Vishnu Sivadevan. "Considering this, the fact that mobile phones are developed in a time span of three months is a typical example of the immense benefits of optimized global R&D regimes in accelerating development times."
Nevertheless, despite the overwhelming advantages of outsourcing, a key challenge that confronts companies is the risk of an electronics design manufacturer turning into a competitor. In many cases, a large part of the product development process is in the hands of electronics design manufacturers and as the capabilities of third-party design house and electronics design manufacturers rise; there is a looming fear of the electronics design manufacturer becoming a competitor.
Further, an added challenge corporations face in terms of ownership is related to intellectual property rights. While there exist standards to maintain control over intellectual property rights, they are insufficient to ensure that there is no technology leakage. One remedy for this could be for corporations to take special initiatives to oversee the management of intellectual property.
"In addressing the critical shortfalls of outsourcing R&D, original equipment manufacturers (OEMs) that outsource such activities will have to implement R&D models that protect the intellectual property interests of the company," says Sivadevan. "As the industry progresses from outsourcing manufacturing to outsourcing almost everything, companies will have to implement methodologies that protect the R&D landscape of the home country as well as the interests of onshore R&D employees."
Outsourcing R&D in the Electronics Industry, a part of the TI - Electronics Device Subscription, provides a technology overview and outlook for outsourcing R&D in the electronics industry. The study has been segmented into technology and applications viewpoint, technology adoption factor analysis, as well as assessment of global innovation and opportunities. Further, this research service includes detailed technology analysis and industry trends evaluated following extensive interviews with market participants. Analyst interviews are available to the press.
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Outsourcing R&D in the Electronics Industry
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Shwetha Thomas, Frost & Sullivan, + 91 (022) 4001 3429 sthomas@frost.com
Samantha Unnikrishnan, Frost & Sullivan, +91 (044) 4204 4667 sunnikrishnan@frost.com
Source: Frost & Sullivan (Business Wire India)
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