HOW and WHY things work!

The Art of the Teardown...

As a child I spent a lot of time taking things apart. My parents were relieved when a Miss Peach cartoon identified my behavior as explorative engineering rather than plain old fashioned destroying things. I was reminded of this again by the rash of recent blogs/articles by companies such as UBM Techinsights and Chipworks that estimate the cost of the iPhone 4 and similar devices-du-jour through teardowns. An excellent blog post last week by Steve Cheney recalled for me there’s a lot more to the story than simply documenting the bills of material (BOM) and estimating component costs.

Yes, it is interesting to know that the 16 GB iPhone 4 costs Apple approximately $188 in material and that you can buy one from AT&T (with a 2 year contract) for about the same price ($199). However, as a consumer, knowing this is simply “academic” since I can’t use this data to change the outcome: I either buy the phone or I don’t. Is there more to the story? Is there any real commercial value to a teardown?

Bolaji Ojo of EE Times recently wrote an article “Tearing down the ‘teardown’ analysis” promoting the value of the teardown for a very small group of interested parties but questioning its value beyond that. I can’t argue with those listed who benefit from teardowns starting with the marketing of the firms that do the teardowns along with the media outlets who publish it – i.e. eye candy for engineers and gadget geeks. [Note that United Business Media owns both EE Times and UBM Techinsights.] Obviously component suppliers who need to remain silent about their inclusion in the latest “hot device” also benefit from the publicity. And day traders and investors who don’t have research groups telling them who is buying from whom and what the margin is on the final product certainly benefit. Also included as beneficiaries are lawyers anticipating class action suits over the performance of the product or design errors.

I agree with the statements: that this is “outdated information on products that were designed months previously” and “if you have to wait for a teardown analysis to determine your position in an OEM’s design network and supply chain, you’ve already lost a role in the next-gen device and who really needs to be looking so far backward when the future is beckoning?“. However, there are benefits for others beyond those listed and those that should have / would have had the data before the product’s release:

Competitors – There is a lot that can be learned by studying a competitor’s product in detail. Yes, it obviously isn’t what your competitor is currently working on for their next product but it can yield lots of important information. With the list of suppliers and BOM costs, combined with your knowledge of manufacturing costs the gross margin of the product can be calculated. Then, using estimates of development costs, overall product return on investment (ROI) and profitability can be calculated and compared to one’s own products.

Beyond the obvious costing and financial exercises, it can show you many other things including how your competitor solved a particular problem, what their overall quality level is, and how they architect their solutions. With the high degree of design reuse that is typical, it may give you clues as to what is in their next generation product.

Using your competitor’s BOM provides an opportunity to exercise your internal manufacturing systems and Design For X (DFx – manufacturability, testability, serviceably, etc.) guides. You may find some incorrect assumptions in your tools or that your competitor has found ways of doing things that your guidelines “prohibit”.

You may even find that your competitor is approaching the market in a radically different method. Back in the early 1990’s at Hewlett-Packard our New Product Introduction (NPI) team participated in many teardowns of competitor’s mini-computers. In particular I remember one for a “fault tolerant” system where each functional block of the system was duplicated. For example, there were two system cards that each contained a complete central processing unit (CPU). If one card went bad the system simply switched it off and the system sent out an email for a replacement. The system then ran at 50% capacity until FedEx showed up the next day and the IT person did a simple board swap of the bad card without shutting down the computer. When we ran our hardware reliability estimating tool against the BOM we calculated the system would have a failure in time (FIT) rate of approximately 1 failure every 2 to 3 days! Whereas our systems had a FIT rate measured in years. Now maybe something wasn’t going to really fail every few days but what we learned was they had a totally different approach to system reliability: the CEO may not notice FedEx delivering a replacement board a few times a year since the computer is still working (albeit it might be slow for a few hours) but will certainly notice when the system goes down even if it is once in a five year period!

Designers – Like architects who study both historical buildings and works of other architects, designers should study both competitive products and products from other industries to learn how others approached the requirements and challenges of a given product. “Cross pollination” of design ideas is critical to innovation . Otherwise, designers may simply continue turning out variations of previous designs or fail to think outside the box.

Market Research & Forecasting – Knowing a company’s product and the associated costs allow you to make intelligent predictions about their future products. Back to what originally caught my interest in his post: Steve Cheney makes a very solid case for what the next version of Apple TV will look like (a cloud-based device that is basically an iPhone without a screen) based on the boundary conditions of market pricing and gross margins. He may not be 100% right, but I would rather base a business decision on data such as this than simple rumors.

Legitimately obtaining and reverse engineering of competitors’ products is essential to successful product development. And keeping abreast of published teardowns is helpful to understand a particular market. However, simply reading a teardown firm’s report won’t reveal quality issues, manufacturing techniques, or potential product defects. Hands on teardowns provide much rewarding first-hand knowledge (including some you may not want to share). Therefore, when possible, do it yourself!