Independent Design Houses in China - EEWeb

E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
Independent Design
Houses in China
A 2012 Report on Understanding the Trends and Value
Proposition of the IDH Sector in the China Market
By Glenn ImObersteg and Bruce Rayner, Embedded Developer,
Steve Cholas, Hearst Electronics, and Hector Lui, 21IDH

1
E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
Executive Summary: Key Findings from the Study
In August and September 2011, Embedded Developer LLC, in
cooperation with 21IC, China’s leading site for engineers, and 21IDH,
the leading site for Independent Design Houses in China, conducted a
ground-breaking survey to gain an in-depth understanding of the trends
driving the growth and evolution of China’s Independent Design House
(IDH) sector. The survey gathered input from over 800 respondents
representing all sectors of the electronics industry, including 245 IDHs,
504 customers, 17 component suppliers and 62 distributors
and traders.
A series of two-dozen interviews with industry executives complemented
the survey results to provide a fuller picture of this dynamic
service sector that has become a vital part of today’s product design
and development process in China’s electronics industry.
China’s IDHs have relationships with all parts of the electronics value
chain. They play a key role in supporting the design and development
efforts of their customers in virtually all sectors of the electronics
industry.
Their customers include original equipment makers (OEMs), original
design manufacturers (ODMs), and electronics manufacturing services
(EMS) providers.
Table of Contents
Section 1:
The IDH role in China’s electronics value chain Page 4
Section 2:
The evolving IDH business model Page 5
Section 3:
Aspirations, Growth and Challenges for China’s IDHs Page 6
Section 4:
Leveraging the power of 21IDH:
Providing global suppliers greater access to China’s engineering
community Page 8
Appendix: IDH Survey Demographic Data Page 9
To a lesser extent, China’s IDHs provide original component
manufacturers (OCMs) and software companies with a channel to
seed the market with their products. And they offer distributors a
channel for generating component sales to the mass market.
While the OCM relationship is central to the IDH business model in
other regions of the world, including both North America and Europe,
it is not yet as well developed in China. Instead, China’s IDH sector
emerged to satisfy the demand of local design engineers for evaluation
boards and other design and software services that were not being
met by international OCMs or distributors. Either the products and
services were not available locally or they were too expensive. IDHs
were able to fill this unmet demand at a fraction of the cost of the
OCM. Only recently, have websites such as Embedded Developer LLC’s
21IDH, begun to provide a platform for Chinese design engineers,
IDHs, OCMs and distributors to engage directly, thus helping to spur
the maturation of China’s IDH sector.
Today, 21IDH is the market leader providing access to the broadest
array of IDHs in China and the largest collection of indigenous evaluation
boards, reference designs and other services available to China’s
engineering community.
Trademarks & Copyrights
Published by Embedded Developer LLC. The contents of this whitepaper and the findings of the survey are
Copyright 2012, Embedded Developer, LLC. Transmitting or reproducing all or any portion of the Whitepaper
is not permitted without express permission of the author(s) in writing. All requests should be sent to Glenn
ImObersteg, Embedded Developer LLC, at Glenn@EmbeddedDeveloper.com. Embedded Developer China
and 21IDH are Embedded Developer LLC properties. Embedded Developer LLC is a joint venture between
Convergence Promotions LLC and Hearst Corporation.
About Hearst Electronics Group
Hearst Electronics Group is the largest publisher of product information to the electronics industry. Its
directories, e-newsletters, web sites, magazines, webcasts, inventory access tools, and databases are
invaluable resources for engineers involved in product design. Hearst Electronics Group is part of Hearst
Business Media (HBM), an operating group of the Hearst Corporation. For additional information about Hearst
Electronics Group, please visit http://www.hearstadvantage.com
About Convergence Promotions
Convergence Promotions is the premier provider of Alliance Partner Programs in the Embedded, Handheld
and Wireless industries, delivering partner programs that serve as a catalyst, bringing like-minded businesses
together. Their flagship program, Embedded Developer, is a global leader in providing solutions for engineers
in the research and evaluation phase of the design cycle. Company information is available at
www.convergencepromotions.com, and www.EmbeddedDeveloper.com.

e Profile of China’s IDH Sector
Based on the results of the study, today’s IDHs in China are typically small and
mid-sized companies of less than 500 employees that produce reference designs,
evaluation boards and custom design-related services for OEMs, ODMs and EMS
companies. (See the Appendix of this study for the full demographic profile of
survey respondents.) In addition to design services, a minority of IDHs also provide
post-design services including product prototyping, optimizing the bill of materials
(BOMs), component procurement, and assistance in the selection and managing
contract manufacturers. (See Chart E.1.)
Reference designs
Custom design work (PC board and/or modules)
Evaluation boards
Custom software development
Component purchasing (direct and/or through distribution/traders)
Product prototyping
Contact manufacturer selection and management
Turnkey product design
Bill of Materials (BOM) management/recommendations
Standard Licensed software
The IDH customer is typically a small to mid-sized company. According to the
Embedded Developer China survey, 65 percent of their customers have fewer than
500 employees. However, 6 percent have over 25,000 employees. (See Chart E.2.)
According to their customers, the IDH provides a measurable business value by
speeding up the design process, reducing time to market and lower costing. In
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3%
3%
2%
many cases they act as a complement to the customer’s in-house design
department, offering additional design capacity when needed and providing unique
design expertise that the customer does not possess. (See Chart E.3.)
The IDH relationship with component suppliers in China is in development and
characterized as one of interdependence. IDHs need access to the design information,
product and software tools from the makers of high-value components such
as microprocessors, microcontrollers, DSPs, and FPGAs in order to provide their
Chart E.1: Over 50% of IDHs offer hardware solutions such as reference design platforms, PC boards or modules, and evaluation boards.
Under 100
100 - 500
500 - 1,000
1,000 - 5,000
5,000 - 10,000
10,000 - 25,000
More than 25,000
Don’t know
Number of full-time employees
OEMs, ODMs and EMS customers
4%
2%
6%
1%
8%
Chart E.2: 65% of IDH customers, including OEMs, ODMs and EMS providers, are
small companies, with 500 or fewer employees.
14%
Services IDHs provide their customers
multiple responses
28%
37%
4%
8%
9%
14%
18%
17%
23%
services. They seek out relationships with world-class original component makers
(OCMs) that are willing and able to provide support and training. At the same
time, IDHs provide a valuable service to the OCMs in the demand creation
process, especially among small and mid-sized customers that OCMs are unable
to service directly.
#1 business value the IDH Provides its customers
Speed up the design process – improve
efficiency of design and time-to-market
Cost savings in product development
Reduce headcount of in-house
engineering staff
Access to world-class silicon suppliers
for FPGAs, microprocessors,
microcontrollers, DSPs, etc.
Other
8.6%
4.9%
0.3%
31.0%
60.3%
Chart E.3: 60% of IDH customers said the primary value the IDH provided was to
speed up the design process.
2

3
IDHs typically align themselves with a few world-class OCMs that provide training,
support and tools in exchange for the IDH creating reference designs and designing
evaluation boards with the OCMs technology. In most sectors of the electronics
industry, particularly the industrial sector, the relationships between OCMs and
IDHs have not been formalized. The exception is in the consumer sector where the
IDH model and the role they play in product development is more mature.
At the same time, the IDH relationship with electronics distributors is still fairly
nascent. However, there are examples of formal relationships where an IDH
supports the distributor’s demand creation efforts by providing design services
to the distributor’s customers and prospective customers coordinated with the
distributor’s OCM. These distributors tend to be second- and third-tier distributors
often focused on a specific end market. Two-thirds of the distributors surveyed
indicated their relationship with their IDHs is “important” or “very important” to
the success of their company.
Market Diversification
A decade ago, China’s IDHs were concentrated primarily in the consumer
electronics sector, focusing specifically on the design of set-top boxes, MP3
devices, DVD players, and cell phone handsets. However, as China’s electronics
industry has matured and diversified, IDHs have emerged to serve virtually all
major segments of the electronics industry. Today, the consumer IDH sector is
relatively mature and IDH market growth is shifting to support the needs of
China’s growing industrial sector.
According to the survey results, IDHs are most active in industrial controls,
subassemblies, instrumentation, and are present in virtually all major end markets
including communications, automotive, medical and aerospace in addition to
consumer electronics. (See Chart E.4.)
Market Segments IDHs serve
multiple responses
Industrial controls, systems, equipment and robotics
Electronic sub-assemblies (boards, modules, hybirds, and power
Electronic instruments, ATE systems, design & test equipment
Consumer electronics
Computers and computer systems
Wireless communication systems and equipment
Computer peripherals, disk drives, terminals, printers/plotters
Consumer appliances
Automotive and other ground vehicles
Medical electronic equipment
Avionics, marine, space, and military electronics
Wired communication systems and equipment
Government and/or military equipment
Office and business machines
Lighting equipment
CAE/CAD/CAM systems
Other
9.8%
9.6%
8.6%
7.1%
5.0%
5.0%
4.8%
4.8%
4.2%
3.3%
1.9%
1.3%
1.3%
0.4%
1.0%
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17.5%
14.4%
Chart E.4: IDHs are active in virtually all the major sectors of China’s electronics industry.
e IDH Business Model
The IDH business model is a work in progress with the potential for companies to
develop a variety of revenue streams from services provided to their customers.
In addition, there’s the opportunity for China’s IDHs to build revenue-generating
relationships with their key supplier and distributor partners.
Today, IDH revenue from their customers is a combination of non-recurring
engineering (NRE) costs, fixed fee for services, cost-plus contracts and royalties.
(See Chart E.5.) In the cases where there’s a formal contractual relationship
between an IDH and an OCM or distributor, IDH revenue is based on a percent
of component sales generated from evaluation board sales and production volume
resulting from an IDH’s design win, according to interviews with IDHs, OCMs and
distributors.
Types of compensation reported by IDHs
multiple responses
Nonrecurring Engineering (NRE)
Royalties on customers’ product
Fixed-fee
Cost-plus contract
Other
3.9%
11.0%
26.7%
25.1%
33.3%
Chart E.5: IDHs rely primarily on NRE, fixed fee and cost-plus contracts for the
design work they perform for their customers. However, 27% earn royalties based
on the sale of their customer’s products.
e Future of China’s IDH Sector
The five sections of this report provide insight into the evolving business model of
China’s IDH sector, the opportunities and challenges for growth ahead and the
leadership role that 21IDH will play in that growth. Based on the survey results,
there are three key factors that will shape IDH growth in the next few years:
• High expectations. Across the board, customers gave their IDHs high marks
in 14 areas of service. Assuming they continue to execute on the
fundamentals, nearly three quarters of all respondents expect the number of
IDHs to increase over the next two years in the range of 10 to 24 percent
growth a year.
• Fierce competition. The majority of IDH respondents said their competitors
present the biggest challenge to their future growth. They view their success
as relying primarily on their ability to differentiate themselves from
competitors through superior technology solutions, and quality and
competitive pricing. As more IDHs enter the market, competition will only
increase.
• Global expansion. A majority of IDHs expect their growth to come not only
from the China electronics market but from new business opportunities
across Asia, and in North America and Europe.

Section 1
e IDH Role in China’s Electronics
Value Chain
China’s IDH sector adds value to every link in the electronics extended value
chain, from seeding component demand for OCMs and distributors, to selling
evaluation boards and customized reference designs, to providing product design
services, prototyping and in some cases providing manufacturing support to their
OEM, ODM and EMS customers. China’s IDHs are uniquely positioned to provide
small and mid-size customers with cost effective design solutions that complement
the services provided by OCMs and distributors to the larger customer base.
While the service offerings and relationships are similar across all markets,
China’s IDH sector is maturing at different rates depending on the end market.
For instance, IDHs have been serving the consumer sector (for example, providing
set-top box, MP3, DVD and handset design services) for many years so both the
supplier and customer relationships are more mature. However, the IDH presence
is not as well established in the industrial sector so relationships are less formalized.
Based on survey results and interviews, IDHs have an opportunity to build
deeper and more substantial relationships with both suppliers and customers in
these emerging areas and grow as their customers grow.
Figure 1 on page 5 captures the value to both parties at each link in the value
chain. Starting at the front end, IDHs offer demand creation services for OCMs
through the development of customized reference designs and evaluation boards
built around the OCM’s components. As such, IDHs have the potential to act as an
extension of the OCM’s in-house sales force and add services to the OCM’s
existing distribution network. In some cases, IDHs have established formal relationships
with OCMs and act as value-added resellers (VARs) for the OCM’s
products and tools targeting small and mid-sized customers.
When asked how important their relationships is to the success of their company,
the small sample of OCMs surveyed gave their IDHs an average rating of 3.4 out
of 5, where 5 is “very important.” IDHs gave their OCMs a rating of 3.7 to the
same question. And distributors gave their IDHs an average rating of 3.7. Numbers
above 3 indicate the relationship provides positive value and suggest the
companies are motivated to continue to build the relationship.
Over 70 percent of IDHs say the most important value an OCM provides is access
to design support, training and information services. (See Chart 1.1.)
The IDH offers their OEM, ODM and EMS customers services that complement
their own in-house capabilities, either by providing technical expertise they don’t
possess or by adding design capacity when needed. Over 60 percent of IDH
customers surveyed said the primary benefit of working with an IDH is to speed
the product development cycle and shorten time to market. Thirty-one percent
said IDHs contribute to reducing the cost of product development. (See Chart 1.2.)
When asked how important their IDH was to their company’s success, the
combined set of OEM, ODM and EMS customers gave their IDHs an average of
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Criteria IDHs use when evaluating a relationship with a OCM
multiple responses
Access to supplier support/information service
Price
Brand awareness
Ready supply of chip samples
Access to software tools
Access to a design forum/community
Other
4.1%
0.8%
14.7%
13.4%
29.7%
37.3%
Chart 1.1: The most important value an OCM provides the IDH is access to
information, support and training.
#1 business value the IDH provides its customers
Speed up the design process – improve
efficiency of design and time-to-market
Cost savings in product development
Reduce headcount of in-house
engineering staff
Access to world-class silicon suppliers
for FPGAs, microprocessors,
microcontrollers, DSPs, etc.
Other
8.6%
4.9%
0.3%
31.0%
60.3%
Chart 1.2: OEMs, ODMs and EMS providers place the highest value on the IDH’s
ability to accelerate their design process and time to market.
5 = Very important
4
3
2
1 = Not important
The importance of the IDH relationship
to the success of the OEM, ODM and EMS
Don’t know
3%
3%
10%
Chart 1.2: OEMs, ODMs and EMS providers place the highest value on the IDH’s
ability to accelerate their design process and time to market.
3.5 out of 5, where 5 is “very important.” Fifty three percent of respondents gave
their IDH a rating of 4 or 5. (See Chart 1.3 on page 5) Customers gave similar
high ratings when asked how well their IDHs performed in 14 specific areas,
including overall quality of services, quality of reference designs and evaluation
boards, day-to-day working relationships, access to OCMs and speed of delivery
of service. (This data is available upon request from Embedded Developer China.)
24%
29%
31%
4
71.9%

5
One reason the ratings are consistently high is that competition among IDHs is
stiff, which drives performance. Indeed, the top ranked challenge to revenue
growth identified by IDH respondents was competition from other IDHs. Providing
fast service and being technically sophisticated are essential to the IDH’s success.
According to survey results, IDHs appear to be rising to the challenge of both
faster service and sophisticated design solutions:
IDH services to the electronics value chain
SUPPLIERS Services provided by IDH Value derived by IDH
OCM Demand creation services (e.g. Training and support from OCM
reference designs and evaluation
boards to seed the market)
Identifying new customers Preferred access to the OCM’s design tools,
reference designs, evaluation boards and
product.
Providing customized designs built Advanced briefings on technology and
around OCM products product road maps
Component sales to the IDH Revenue potential from demand creation
and their customers (uncommon)
Average rating of the OCM rating of IDH 3.4 IDH rating of OCM 3,7
importance to the
success of their company
by OCM and IDH. Scale
1-5, with 5 being "very
important."
CUSTOMERS Services provided by IDH Value derived by IDH
OEM, ODM and Customized reference designs and Revenue from NRE, fixed fee for services,
EMS Providers evaluation boards royalties on product sales
Customized design services Access new markets
Complement internal design team
to speed design process and
time-to-market
New design ideas
Reduce overall cost of design Grow with the customer
Provide post-design services
including prototyping, PCB
assembly, EMS selection for
OEMs and ODMs, BOM analysis
Gain market expertise
Average rating of value
of relationship by OEM
3.5 N/A
Average rating of value
of relationship by ODM
3.7 N/A
Average rating of value
of relationship by EMS
3.8 N/A
DISTRIBUTORS Services provided by IDH Value derived by IDH
Distributors and Traders Demand creation (e.g. reference Revenue from design wins from component
designs and evaluation boards) sales
Custom design services for
customers
Component samples
Component sales to IDH and their Access to new customers
customers
Prototyping, BOM management,
PCB assembly services to
customers
Average rating of value
of relationship by
distributors
3.7 N/A
Figure 1: Summarizes the value that the IDH provides and the value the IDH derives
from its relationships with suppliers, customers, and distributors. In all cases, IDHs
received above average ratings for the services they provide.
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• 50 percent indicated they can produce a new standard design in less than six
months.
• 70 percent can design a custom board in less than six months.
• Over 40 percent are designing with 32-bit processors and microcontrollers.
Section 2
e Evolving Business Model
Today, IDH revenue comes primarily for the sale of services and products to OEMs,
ODMs and EMS customers. The most common form of compensation reported by
IDHs in the survey was non-recurring engineers (NRE) fees for product design,
followed by royalties, fixed-fee and cost-plus contracts, in descending order. These
results were confirmed by customers. (See Charts 2.1 and 2.2.)
Types of compensation reported by IDHs
multiple responses
Nonrecurring Engineering (NRE) fees
Royalties on customers’ product sales
Fixed-fee
Cost-plus contract
Other
3.9%
11.0%
26.7%
25.1%
Types of compensation reported by customers
multiple responses
Pay NRE fees
Fixed fee for services
Pay royalties on product sales
Other
3%
33.3%
Charts 2.1 and 2.2: The view is consistent among IDHs and customers regarding
forms of payment for services. NRE fees are the most common, with royalty
payments reported by about one quarter of all respondents.
In many cases, royalty revenue complements NRE and other fees. However, for
a minority of IDH respondents, royalty revenue was their exclusive source of
revenue. In these cases, the customer is typically a small startup with limited
capital and is unable to cover the NRE cost of the design. The IDH agrees to defer
compensation and provide the design services in exchange for a percent of future
sales. IDHs are willing to take this business risk in order to access a new market
and potentially grow their business as the new customer grows. This was captured in
the survey results, as 41 percent of IDH respondents said they select new customers
based on their ability to provide access to new markets. (See Chart 2.3. on page 6)
The fees IDHs charge customers for design services range fairly widely and depend
on a number of factors, including complexity of the design, hours required,
and industry knowledge. To gain insight into how variable pricing is, IDHs were
asked what they charge for a typical microcontroller-based evaluation board and
reference design for both an 8- or 16-bit system and a 32-bit system. (See
Charts 2.4 and 2.5.on page 6) The results indicate a wide range of pricing for
both systems.
23%
23%
51%

Criteria IDHs use to decide whether to work with a customer
multiple responses
Opportunity to penetrate a new market
Market share position
Brand awareness
Financial stability
Other
1.0%
17.2%
14.9%
In addition to revenue derived from customers, IDHs have the potential to earn
revenue through direct relationships with OCMs and distributors as a result of
demand creation services. While these relationships are fairly common in North
America and Europe they are not standard practice in China and are only now
starting to emerge in the industrial sector.
21IDH is providing IDHs with a channel to build formal relationships with OCMs
and their distributors. For instance, 21IDH provides OCMs and distributors leads
to engineers who are purchasing reference designs and boards, the ability to
track design wins, and a mechanism to provide procurement services. As these
relationships mature, the IDH will play a larger and more important role in the
OCM’s strategy in China.
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26.0%
40.9%
Charts 2.3: Besides revenue generation, the most important reason IDHs choose to
work with a new customer is the opportunity to enter a new market.
Standard fee an IDH charges its customers for an 8- or 16-bit
MCU evaluation board and reference design excluding the cost
of the hardware and software
15,000 or more RMB
10,000-15,000 RMB
7,000-10,000 RMB
4,000-7,000 RMB
0-4,000 RMB
7.5%
19.7%
19.7%
21.1%
31.9%
Standard fee an IDH charges its customers for a 32-bit
MCU evaluation board and reference design excluding the cost
of the hardware and software
15,000 or more RMB
10,000-15,000 RMB
7,000-10,000 RMB
4,000-7,000 RMB
0-4,000 RMB
12.3%
14.8%
20.7%
25.1%
27.1%
Charts 2.4 and 2.5: There is a wide range of prices IDHs charge their customers for
evaluation boards.
The series of interviews with IDHs, OCMs and distributors revealed how these
relationships are structured in China today. A typical process is for the OCM to
contract with an IDH to provide tools, training and service in exchange for the
IDH acting as a value-added reseller (VAR) for the OCMs products. The IDH may
have a few complementary VAR relationships with OCMs to serve a specific end
market. When an IDH sells a design to a customer and the product goes into
volume production, the IDH receives payment from the OCM on component sales.
In some cases the OCM’s distributor fulfills the order.
Some IDHs prefer not to establish exclusive relationships with OCMs as they
believe these relationships limit their business opportunities in the marketplace.
In these cases, revenue is derived exclusively from the customer.
Section 3
Aspirations, Growth and Challenges
for the IDH
China’s first generation of IDHs emerged a decade ago in the high-volume
mass-market consumer electronics sector. This is the most mature segment of
China’s IDH market and where the VAR model is most prevalent. In comparison,
China’s industrial markets – instrumentation, medical, automotive, aerospace and
others – are not as mature and the IDH sector is in a formative stage of development.
Based on interviews, the expectation is that IDHs in the industrial sector
will mature in a similar way as they have in the consumer market. That is, they
will develop formal relationships with OCMs and distributors, the sector will
consolidate through acquisitions and mergers, and some IDHs will emerge as
OEMs and ODMs.
According to the survey results, the vast majority of IDHs aspire to sell their own
branded products. That is, they want to become OEMs. (See Chart 3.1.) Indeed,
the majority of IDHs interviewed said they are already selling their own branded
products.
IDH: Is your company’s goal to sell your own branded products?
Yes
No
Don’t know
2.2%
15.2%
Chart 3.1: 83% of IDHs aspire to become OEMs.
82.6%
However, customers don’t take the threat too seriously as most IDHs are still
small. Indeed, only 15 percent of OEMs, ODMs and EMS providers believe IDHs
will pose a competitive threat in the next two years. Fifty six percent expect IDHs
to become more like ODMs over the next few years and 23 percent expect they
will remain as IDHs. (See Chart 3.2 on page 7)
6

7
Customer view of how IDH will evolve over the next few years
Will become more like ODMs
No changes in the IDH model
Will become a competitor
Combined EMS ODMs OEMs
Don’t know, other
Chart 3.2: In general, customers don’t see IDHs as a competitive threat.
89% believe they will either evolve into ODMs or stay as IDHs.
11%
As for growth in the IDH sector, there’s broad consensus among IDHs, customers,
suppliers and distributors that the number of IDHs will increase over the next
two years.
Seventy percent of all customers expect the number of IDHs to increase over the
next two years. And 55 percent expect the annual growth rate to be in the 10 to
24 percent range. (See Chart 3.3.) Similar figures were reported by OCMs and
distributors. The implication is that currently, demand for IDH services exceeds
supply and there is room for more companies to enter the market.
Less than 10%
Between 10% and 24%
Between 25% and 49%
Between 50% and 74%
Over 75%
Don’t Know
5%
4%
15%
14%
11%
6%
By how much do you expect the number of IDHs to increase a year?
OEMs, ODMs, EMS
2.3%
0.4%
12.8%
12.8%
Chart 3.3: 70% of OEMs, ODMs and EMS providers expect the number of IDHs to
grow in the next two years and over half predict the rate of growth to be between
10% and 25%.
Asia/Pac
Europe
North America
Other
17%
19%
17.1%
Regions outside China IDHs are currently selling
products and services
7.8%
23%
26.7%
23.9%
30%
31%
41.7%
41%
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51%
56%
66%
54.7%
Chart 3.4: 37% of IDHs are currently selling products and services outside China in
all the major regions and 40% said they plan to sell overseas in the near future.
This trend is reflected in current registrations at 21IDH, which listed over 250
IDHs and over 740 evaluation board as of January 2012. IDH registrations at the
market-leading website have been averaging 12 to 15 a month and the pace is
accelerating, with more than 30 new evaluation boards added every month. It is
estimated that by the end of 2012, 21IDH will include over 500 registered IDHs
and over 2,000 evaluation boards.
For a majority of IDHs, part of that growth is expected to come from outside
China. Indeed, 37 percent of IDHs surveyed indicated they are currently selling to
customers in Asia, North America and Europe. (See Chart 3.4.) And nearly 40
percent said their goal is to sell overseas in the future.
There are a few challenges IDHs face in their quest for growth. At the top of the
list is competition from other IDHs, followed closely by the quality and cost of the
products and services they sell. Interestingly, IDHs do not see relationships with
OCMs or potential competition from ODMs as a major threat to their growth. (See
Chart 3.5.)
Competition from other independent Design Houses (IDHs) or third-party designers
Quality of the product and/or service we provide
Cost of the product and/or service we provide
Relationships with Original Component Manufacturers (OCMs)
Competition from ODMs
Chart 3.5: IDHs’ biggest challenge is the fierce competition they face from other
IDHs. Their success is determined by the quality and cost of the products and
services they provide.
Other
In a fiercely competitive market with many small companies, the IDH’s objective is
to create differentiation in terms of quality, cost and technical prowess. Through
differentiation they establish trust and build stronger relationships. And it’s the
relationship with suppliers and customers that will enable IDHs to remain competitive
and grow. Indeed, the most important source for new design ideas – an
important component of future growth – is the IDH’s customer. (See Chart 3.6.)
Customers
Conferences/events
Online publications
Research Institutes
Company websites
Universities
Print publications
Government ministries
Other
The IDH’s #1 challenge for revenue growth
5.2%
6.2%
4.4%
1.8%
11.4%
9.8%
10.1%
Chart 3.6: More than any other source, IDHs rely on their customers to provide
them with new designs ideas, which spur growth and help solidify relationships.
1.3%
6.1%
6.1%
Where IDHs go to research and identify new design ideas
multiple responses
17.6%
21.5%
28.9%
36.0%
33.4%

Section 4
Leveraging the Power of 21IDH:
Providing Global Suppliers Greater Access
to China’s Engineering Community
Embedded Developer China (21Embed) believes that China’s independent design
houses hold great promise for accelerating the pace of product design and
spurring growth in China’s electronics industry. We commissioned this path-breaking
study to document the role the IDH sector is playing in the industry and to
quantify just how important the IDH sector is to the success of the OEM, ODM
and EMS customer community as well as component suppliers and distributors.
Periodically, we will conduct follow-on release to ensure we stay on top of the
trends and developments within China’s IDH sector.
With confirmation of the value IDHs bring for the market, Embedded Developer
LLC launched 21IDH in late 2011 to provide Chinese engineers with a domestic
design resource that leverages the potential of the growing Chinese IDH sector.
“Our record of tools transactions in China through Embedded Developer indicates
a strong trend within the Chinese engineering community towards buying
indigenous tools over tools those available from tools suppliers outside China,”
said Glenn ImObersteg, CEO of Embedded Developer LLC and publisher of
Embedded Developer China (21Embed) and 21IDH. “The reasons include familiarity,
price, shared access, and application-specific and targeted Chinese solutions.”
Since its launch, 21IDH has emerged as the premier platform for IDH activity in
China. As of January, 2012, 21IDH lists over 230 IDHs and 740 evaluation boards.
The site has been averaging 6-10 new IDH registrations and more than 30 new
evaluation boards every month, and the pace is accelerating. By the end of the
year, 21IDH expects to include over 500 registered IDHs and over 2,000
evaluation boards.
The website is a powerful and unique source for reference designs, evaluation
boards and other services designed specifically to serve the needs of the
engineering community at small and mid-sized OEMs, ODMs and EMS providers
across all market segments. 21IDH provides a bridge that allows these engineers
to engage with the IDH community and, through association, with the component
suppliers and distributors that support their services.
In 2012, 21IDH is offering component manufacturers and distributors customized
micro-sites within the 21IDH Platform so they can actively participate with IDHs
to engage the community of design engineers in the new product design process.
This unique service includes building custom branded landing pages for component
manufacturers and distributors that list the products and services provided
by the registered IDHs that design with their products. Aligning their brand with
this set of IDHs provides an opportunity to accelerate growth for IDHs, OCMs
and distributors.
E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
In addition to serving China’s domestic design engineering community, 21IDH is
investing to grow the program internationally. This includes opening channels in
North America and Europe to provide Chinese IDHs access to the global design
community. In addition, Embedded Developer is planning an IDH test laboratory
in the US that will provide a certification process to qualify evaluation boards for
sale outside China.
“We will continue to encourage the ingenuity shown by Chinese IDHs and will
assist them in growing their programs in North America, Europe and across Asia,”
said ImObersteg. “We encourage component suppliers and distributors to join us
as we build the platform that will connect China’s IDH sector with the world.”
For your copy of the complete IDH survey results and information regarding
participation in the 21IDH program contact Bruce Rayner, 21IDH Business
Development Manager at Bruce@EmbeddedDeveloper.com, or Glenn ImObersteg,
CEO, Embedded Developer LLC, at Glenn@EmbeddedDeveloper.com.
For additional information, please visit www.embeddeddeveloper.com/21IDH
8

9
Appendix
Survey Description and Demographics
In August and September, 2011, Embedded Developer, in cooperation with 21IC,
fielded two online surveys in China: one to independent design houses (IDHs)
and the other to their customers (OEMs, ODMs, and EMS providers). In addition,
original components manufacturers (OCMs) and distributors also responded to the
customer survey. Combined, the study included 245 IDH respondents and 504
customer respondents, as well as 17 suppliers and 62 distributors and traders.
In addition to the online survey, Embedded Developer conducted two dozen
interviews with IDHs, OCMs and distributors. These interviews complemented the
survey results and were conducted to gain additional insight into the business
strategies of the IDH and the valuable role they play in the new product design
process. Across the board the interviews supported and confirmed the survey
results.
Below are highlights of the respondent demographics.
Job function. (See Charts A.1 and A.2)
• Fifty-five percent of IDH respondents were engineers and 35 percent were
corporate or sales and marketing managers. The average age of the IDH
respondent was 31.
• Eighty two percent of customers (OEMs, ODMs, and EMS providers) were
engineers and 13 percent were either manufacturing or corporate
management. The average age of the customer was 34.
Engineering
General management and Sales & Marketing
Manufacturing and Procurement
Test & Measurement and QC
Academic and other
Chart A.1
Chart A.2
Engineering
Manufacturing and Procurement
General management and Sales & Marketing
Test & Measurement and QC
Academic and other
IDH job function
4.8%
3.0%
2.6%
OEM, ODM, EMS job Function
1.4%
7.5%
5.2%
4.2%
Location. (See Chart A.3 and A.4)
• Virtually all of China’s provinces and municipalities were represented in
the survey, with the highest concentration of both IDH and customer
respondents based in Guangdong province, and Beijing and Shanghai
municipalities.
• Combined, 34 percent of OEMs, ODMs and EMS providers and over 50
percent of IDHs were located in Guangdong, primarily Shenzhen and
Guangzhou.
E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
34.8%
81.7%
54.8%
Guangdong
Beijing
Shanghai
Jiangsu
Zhejiang
Shenzhen
Chart A.3
Hebei
Shanxi
Shandong
Tianjin
Sichuan
Hunan
Jilin
Chongqing
Liaoning
Hangzhou
Chengdu
Anhui
Fujian
Nanjing
Qingdao
Hefei
Henan
Yunnan
Changsha
3.5%
2.6%
2.6%
2.6%
1.3%
1.3%
1.3%
0.9%
0.9%
0.9%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
Location of IDH facilities
5.7%
5.2%
4.3%
3.5%
3.5%
8.3%
25.2
23.5%

Guangdong
Beijing
Shanghai
Jiangsu
Zhejiang
Hubei
Shandong
Henan
Sichuan
Fujian
Shaanxi
Tianjin
Liaoning
Hebei
Chongqing
iangxi
Hunan
Anhui
Inner Mongolia
Shanxi
Xinjiang
Guangxi
Jilin
Guizhou
Hainan
Heilongjiang
Chart A.4
4.2%
3.8%
3.6%
3.0%
3.0%
2.8%
2.4%
2.2%
2.0%
1.2%
1.0%
0.8%
0.6%
0.6%
0.6%
0.4%
0.4%
0.4%
0.2%
0.2%
0.2%
10.2%
9.0%
7.4%
6.2%
Size of company. (See Charts A.5 and A.6)
• Eighty-seven percent of IDH respondents worked for companies with fewer
than 500 employees. Fifty-seven percent of these companies had five or
fewer facilities.
• Sixty-five percent of OEMs, ODMs and EMS providers surveyed were
employed by companies with 500 or fewer employees and 77 percent of the
companies had fewer than five facilities. However, 12 percent of respondents
worked for companies with 5,000 or more employees and 21 percent of the
companies had five or more facilities, implying that IDHs services are not
exclusive to the small and mid-sized market.
E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
Location of customer facilities Number of full-time employees IDHs
33.7%
Chart A.5
Under 100
100 - 500
500 - 1,000
1,000 - 5,000
5,000 - 10,000
10,000 - 25,000
More than 25,000
Chart A.6
Don’t know
Under 100
100 - 500
500 - 1,000
1,000 - 5,000
5,000 - 10,000
10,000 - 25,000
More than 25,000
Don’t know
4.8%
3.5%
0.9%
0.0%
2.2%
1.7%
4%
2%
6%
1%
8%
14%
31.3%
End Markets. (See Chart A.7 and A.8 on page 11)
• Both IDHs and their customers were well represented in all the major
electronics end markets with the greatest concentrations in the areas of
industrial controls, systems, equipment and robotics
28%
37%
10
55.7%
Number of full-time employees OEMs, ODMs, EMS providers

11
Industrial controls, systems, equipment and robotics
Consumer electronics
Wireless communication systems and equipment
Electronic instruments, ATE systems, design & test equipment
Electronic sub-assemblies (boards, modules, hybirds, and power
Wired communication systems and equipment
Medical electronic equipment
Automotive and other ground vehicles
Consumer appliances
Computers and computer systems
Lighting equipment
Computer peripherals, disk drives, terminals, printers/plotters
Avionics, marine, space, and military electronics
Office and business machines
CAE/CAD/CAM systems
Government and/or military equipment
Other
Chart A.7
Industrial controls, systems, equipment and robotics
Electronic sub-assemblies (boards, modules, hybirds, and power
Electronic instruments, ATE systems, design & test equipment
Consumer electronics
Computers and computer systems
Wireless communication systems and equipment
Computer peripherals, disk drives, terminals, printers/plotters
Consumer appliances
Automotive and other ground vehicles
Medical electronic equipment
Avionics, marine, space, and military electronics
Wired communication systems and equipment
Government and/or military equipment
Office and business machines
Lighting equipment
CAE/CAD/CAM systems
Other
Chart A.8
E M B E D D E D D E V E L O P E R • 2 0 1 2 C H I N A I D H R E P O R T
Primary end products of OEMs, ODMs, and EMS providers
multiple responses
3%
2%
2%
2%
2%
2%
5%
5%
5%
4%
4%
Typical products designs and services provided by IDHs
multiple responses
7%
9.8%
9.6%
8.6%
7.1%
5.0%
5.0%
4.8%
4.8%
4.2%
3.3%
1.9%
1.3%
1.3%
0.4%
1.0%
12%
11%
10%
9%
14.4%
17.5%
16%