Second Source—First Priority
By Bob Hult, Bishop & Associates Inc.

It’s becoming increasingly common to see recently introduced connectors cross-licensed to direct competitors. It may seem unexpected, but large original equipment manufacturers (OEMs) that demand mechanically and electrically identical state-of-the-art connectors at competitive market prices are driving this trend.

Connector manufacturers have traditionally competed by developing unique solutions to customer needs. Product families that successfully addressed a wide variety of applications could become a defacto industry standard. The Molex Mini-Fit™ family of connectors used in the consumer industry, and the Faston terminal developed by AMP Inc., are examples of proprietary interfaces that became the “Kleenex” of the connector industry. Customer concerns about adequate production capacity or uninterrupted supply drove suppliers to tool the product in multiple locations. Suppliers often maintained reasonable pricing to reduce the incentive to find lower-cost alternatives. In some cases, unlicensed manufacturers produced “plug-compatible” connectors, which offered similar mating interfaces, but may have incorporated mounting or internal differences. These reverse-engineered components lacked access to critical design detail necessary to produce an identical part. Theoretically, connectors from different sources would mate and perform to specification, but if a conflict arose, the two suppliers would often blame the other for the failure, leaving the OEM to solve the problem.

The evolving needs of the market have driven connector suppliers to re-evaluate their position on licensing. In the early years of the electronics equipment industry, leading manufacturers differentiated among themselves by developing proprietary hardware and software for their products. The objective was to create a unique standard that was so superior that it could dominate the industry. Of the companies that built their business on this philosophy, including Wang, Data General, and Prime Computer, only Apple has survived to serve an evangelistic group of users. Other computer manufacturers, including Compaq, Dell, Hewlett Packard, and Toshiba, chose to build their products to conform to the established IBM PC architecture and found that they could participate in a huge market with plenty of room for innovation. That standard continues to dominate the personal computer industry to this day.

Components designed for military and aerospace applications require exceptionally high levels of reliability and ruggedness. These industries have long demanded connectors meet stringent military standards. These standards may go as far as requiring documentation that tracks the source of metal ores that are used in the manufacture of the shells and contacts. Absolute mechanical compatibility and durability between components manufactured by multiple sources are insured by rigorous test procedures defined in the specification. Satisfactory performance is required before a connector is placed on the qualified parts list (QPL), allowing equipment manufacturers to purchase the part. A downside of components defined in a formal standard is the tendency to freeze the design, which limits the ability for the product to evolve as new technology is introduced.

An expanding galaxy of formal and special interest group standards-writing organizations have insisted on defining components that can be licensed to any manufacturer at a “reasonable and non-discriminatory” fee. When critical components are available from multiple sources, designers enjoy greater availability, as well as assurances that prices will not be controlled by a single source. Standards organizations see this as a critical requirement of a broadly accepted system packaging standard.

Equipment manufacturers, including telecom, who have traditionally focused on proprietary designs, are increasingly espousing the concept of building to an industry standard. The design cycle can be significantly reduced when the mechanical envelope, power distribution, and cooling strategy, as well as signaling protocol, have already been documented. Limited design and development resources can be focused on adding unique features that can differentiate products from the competition. Users benefit from having many more choices, with greater granularity that closely matches their specific needs, while enjoying market-driven prices. The performance capabilities of the specified connector are often fully documented, which can save valuable time in testing and qualifying the interface.

The Server System Infrastructure (SSI) standard was an example of an equipment platform promoted by a consortium that included Intel, Dell, and IBM. The objective was to define a mechanical and electrical structure for servers that equipment manufacturers could utilize to fast track new servers to the market. The standard itself was not particularly successful, but the blind-mate power connector defined by the specification has become the defacto-standard interface for the power supply industry. Several manufacturers of this interface have tooled the connector in a great many configurations, and the success of this interface continues to spawn new iterations with ever-higher levels of performance.

The electronic industry is now in the process of adopting a policy of offering certified second sources on many existing high-volume product lines, as well as part of the initial rollout strategy of entire new interfaces.

By nature, input/output connectors have always required plug compatibility from multiple sources. A successful I/O connector must be capable of mating with connectors from sources scattered around the world. The familiar RS-232, 25-position D-subminiature connector is an example of a military standard connector that evolved to address a huge range of commercial and consumer applications. Literally hundreds of connector manufacturers participate in this market and offer a host of variations, while maintaining plug compatibility.

More recently, the Universal Serial Bus (USB) connector has become a defacto standard with many global sources, making it a classic commodity product. The migration of USB from 1.0 to 2.0, and the upcoming 3.0, demonstrate how standardized interfaces in the commercial world can adapt and grow in performance.

One-piece edge connectors used as backplane interfaces have been available in a variety of contact designs and centerlines. As data rates have crossed the gigabit threshold, engineers recognized that minor variations in design could have a significant effect on the electrical performance of their channels. Two connectors on the same centerlines and separable contact design could have different internal dimensions and tolerances, allowing one connector to pass and another to fail. Selection of a specific connector family would tend to lock in that sole source, limiting choice and eliminating any price leverage. Servers, storage, and communications equipment often are designed with a progression of models in mind, offering a clear performance migration path and scalability. The backplane has become a critical element in these systems and the selected backplane connector family often remains unchanged over the years these products evolve.

The large OEMs that account for a vast majority of connector business found that being captive to a single source over the extended life of a product was an unacceptable limitation. These OEMs began to demand that electrically identical second sources be licensed as a condition of being selected for new equipment designs. As a result, every major multi-gigabit backplane connector system today—from Amphenol TCS, FCI Electronics, Molex, and Tyco Electronics—have licensed certified second sources.

In many cases, they have established cross-licensing agreements that far transcend the level of intellectual property that has been exchanged in past licensing agreements. In order to provide intermateable, interchangeable, electrically identical products, engineers from both companies work together to ensure that production tooling results in indistinguishable components, and rigorous testing programs allows the certification of finished assemblies. These agreements typically include the exchange of detailed production drawings, electrical models, and test data. Both companies have a vested interest in ensuring that the final products are mechanically and functionally identical. Suppliers compete on customer support, availability of the full range of connectors, technical reputation, and price.

Customers as well as suppliers gain from this arrangement. Connector manufacturers can expand their range of product offerings without the time and expense of designing new products internally. They can quickly fill product gaps to keep pace with customer needs. They can enter a rapidly growing market with less risk and take advantage of their global manufacturing resources, which allows them to offer competitive prices while maintaining acceptable profit margins. A competitive market demands that suppliers tool new products for high volume and low cost, which limits their price flexibility, but allows them to participate in leading-edge product markets.

Connector manufacturers carefully consider their choice of competitor that may be granted a second-source license. A company’s engineering expertise and level of customer support, as well as manufacturing resources, are all critical to ensure that the second-source company is capable of producing quality connectors. The failure of a second source could impact the overall success of a new product. Providing a competitor with detailed technical information on leading-edge interfaces introduces concerns about the control of critical intellectual property (IP), as well as delivering information that can be used to sell against the primary source. Although the process exposes a company to some risks, such as in instances where shortcomings of the original product are identified or product improvements become a threat, but most manufacturers have come to accept this as a part of doing business.

Customers gain from having assured second sources and pricing leverage. Designing in a new interface from a sole source can be risky. Initial volume pricing can be high, and there is a possibility that the supplier may discontinue a product if sufficient market fails to develop. Buyers fear disruption of critical product inventory in the event of fire or other catastrophe impacting a manufacturing plant. Access to multiple certified identical sources is the solution.

A second-source license confers the right to tool a product, but typically does not include a requirement to offer the full extent of the product line. Designers who specify a key interface with a licensed second source must verify that the second source has actually production-tooled the specific parts required. High-speed backplane connectors, for instance, are offered in many sizes and configurations. A licensed second source may choose to tool only a subset of the entire family based on customer demand.

The trend toward providing a second source is extending to additional interface types. Mezzanine connectors have traditionally been a relatively small niche market, but they face similar technical challenges in high-speed channels. As a result, we are seeing the announcement of new mezzanine connectors simultaneously naming a certified second source. The cross licensing agreement between Tyco Electronics and Hirose is a good example. Both companies introduced these new products at DesignCon2009. Cross licenses will result in Tyco tooling the Hirose IT3 mezzanine connector under the brand name STRADA ZConn3Series, and Hirose tooling the Tyco STRADA Mesa mezzanine connector. Both products represent leading-edge, high-performance interfaces.

Samtec, a leader in developing small centerline mezzanine connectors, recently licensed Molex as a second source for their SEARAY Series of mezzanine connectors. In exchange, Samtec is able to offer the HD Mezz mezzanine connector from Molex.

Even the power connector market segment, which has remained largely a proprietary connector segment due to relatively low volume and need for customization, has begun to adapt to second-source agreements.



 

FCI and Tyco recently announced a cross-licensing agreement that will allow FCI to manufacture and sell the Tyco MINIPAK HDL and MULTI-BEAM XLE connectors.

FCI has licensed Tyco to manufacture and sell their Pwr TwinBlade and HCI power distribution connectors. (See more on this partnership in Industry News.)

It is quickly becoming standard practice to assure customers that electrically and mechanically identical equivalents are available for all leading-edge interfaces and this is likely to be the case for the foreseeable future.

Bishop & Associates Comments:

1. Large OEMs have insisted that mission-critical components have second sources before they will be considered for new designs.

2. Compatible multiple sources have always been a part of many I/O connectors and sockets, but second sourcing has recently been expanded to include new high-performance backplane, mezzanine, and power connectors.

3. Leading connector manufacturers have accepted the need to offer certified second sources and often include this in the initial rollout of new product families.

4. Connector manufacturers risk providing their competitors with valuable product knowledge, but see this as a cost of doing business.

5. Failure to participate in the licensing of these advanced interfaces may lead some connector manufacturers to fall behind in technical expertise, further stratifying the industry.

6. In some cases, a license has been provided to a competitor, but after a review of the potential market, the second source has chosen not to tool the product until a larger market develops.

7. Connector product managers of high-performance interfaces must decide if they should make substantial investments in developing state-of-the-art products, or if obtaining a license from a competitor and becoming a second source is the most cost-effective strategy. Innovative industry leaders carefully examine potential licensees to determine what they may receive in return for granting a license. The perception of industry leadership is also a factor in these decisions.

8. The availability of certified second sources could accelerate the adoption rate of new high-performance interfaces by reducing the risk and lowering initial prices.

Robert Hult
Director of Product Technology, Bishop & Associates, Inc.
Robert Hult has been in the connector industry for more than 36 years. Hult began his career as a sales engineer for Amphenol. He joined AMP in 1972 and served in several management positions through 1996. In 1997, Hult joined Foxconn as group marketing manager for Intel in Chandler, Arizona, USA. Prior to joining Bishop & Associates, Hult was the regional application engineering manager for Tyco Electronics.

Hult graduated in 1968 from Bradley University with a Bachelor of Science degree in electronics technology and a minor in business.