A joint design-outsourcing study by EE Times and Electronics Supply & Manufacturing found that logic design, physical layout, and synthesis and analysis are the chip-design functions that are most likely to be outsourced. High-level design architecture remains far less likely to be shopped out, the study found.

And a lot of the outsourced projects aren't being shipped as far as some people may assume. While China and India lead the list of offshore destinations for design outsourcing, the bulk of such work still appears to be going to U.S.-based consultancies.

On average, OEMs have been outsourcing at least part of their design activity for the past five years. They are already outsourcing more than one out of every three design projects. But while more than half of the respondents (59 percent) currently outsource a portion of their designs to third parties, 91 percent said that their companies do not plan to outsource design activity in the next 12 months.

One respondent offered a possible reason by noting that a previous decision to job out a portion of a design had resulted in the in-house staff's becoming better equipped to handle future projects. "Design resources were brought in to accomplish tasks that we had insufficient experience to accomplish [in-house] with high confidence," the respondent explained. "By assigning an internal designer to work with a contractor, we gained the experience to be able to accomplish similar designs without outside resources."

Entrusting complex chip and board layouts to teams across time zones, and sometimes across oceans, is a nontrivial exercise. Large companies seem to have a higher degree of success in managing such projects. (For our readers' take on the upside and downside of outsourcing, see "By The Numbers," page 20.)

Further, not all outsourcing destinations hold equal appeal. China is still primarily a source for low-end, cost-reducing chip and board design shrinks; India's IP-friendly environment and EDA-savvy infrastructure are earning it more outsource work (see story, page 16).

For chip makers, access to local engineering talent and booming local markets is an inducement for establishing design centers overseas. Expect the trend to accelerate.

Overall, hardware outsourcing trails software. Seventy-eight percent of the larger OEMs surveyed have outsourced software design. High-level coding/debug is the most commonly outsourced software activity, cited by 77 percent of all respondents. And of those who said they outsource software verification, 61 percent said they turn to Asia for the activity. Only 29 percent have risked outsourcing architectural design.

Fifty percent of the respondents have outsourced analog/mixed-signal/RF circuit design; 38 percent have jobbed out analog/RF verification. "We couldn't hire folks fast enough, so we outsourced one analog block," said one.

Board-level design has been outsourced by 55 percent of respondents. Among those, 82 percent have jobbed out board layout, and 62 percent have outsourced board-level circuit design. Design consultancies are the most common outsource outlets for board-level design, although larger OEMs choose original design manufacturers just as often.

The reasons for keeping design in-house vary: OEMs may have sufficient in-house resources, may be concerned about privacy and IP rights or may want to retain control over the design flow.

Some respondents told stories of outsource projects gone wrong. "Some software partners have not delivered as promised, messing up our schedules," said one. "We lost several key individuals who left as soon as they heard the company was outsourcing the software development. This meant that the product was late and the market share was never developed. The company folded, and now 135 people are out," responded another.

As for more concrete data, 65 percent said an outsourced project had taken longer than expected to complete. Yet, only 21 percent said that an outsourced project had failed to meet requirements.

One respondent was philosophical about outsourcing: "Managed properly, and with control elements fully in place, we've found that outsourced direction can be as good as or better than in-house work. The key . . . is agreement and understanding between the parties as to expectations."

Methodology
This Web survey was conducted to take a pulse reading on design outsourcing and explore opinions on this sensitive topic. E-mail invitations were sent to about 11,000 EE Times and Electronics Supply & Manufacturing readers in management positions who are involved in outsourcing decisions. The survey was conducted between Dec. 15 and Dec. 31, 2004. The 303 completed surveys represent a +/-5.5 percent confidence interval. The survey was done for CMP Media LLC, parent company of EE Times and Electronics Supply & Manufacturing, by Beacon Technology Partners (Maynard, Mass.).