Ever wondered what all the fuzz about design wins is about? You’re not alone. As a matter of fact, it’s one of the most common questions we get. Et voilà – in today’s blog post we’ll unravel the mystery of design wins for you (and why our industry most likely won’t stop fuzzing about them).
It happened again.
November 2022. No sooner had our CEO Peter and our CFO Eirik eloquently finished their presentations and Q3 numbers when questions about design wins came up.
To be fair, it’s not strange at all. Whether a journalist, an analyst or investor; many struggle to understand what a design win is, how it works and what the correlation between design wins and potential future revenue streams is.
Clearly, there’s some work left to do for us at Next when it comes to explaining design-wins and the product launches of our customers. Not to mention: the competitive landscape we’re operating within. Indeed, it is a rather unique universe, mainly driven by advanced technology. And with regards to communicating business progress to the external world – a lot of it has historically come from technology or product-oriented teams and been targeted towards other technical experts. Thus, many questions normally asked by the public or the media perhaps remain unanswered in our industry.
We dedicate today’s blog post to providing some clarity. To do that, a little bit of introduction to the biometric value chain is needed. Without further ado, let’s dive into it!
Among OEMs, ODMs and design wins – welcome to our world!
OEMs (Original Equipment Manufacturers), ODMs (Orginal Design Manufacturers) and DWs (Design Wins).
Our industry sure loves its internal acronyms, which is also one of the main reasons it’s hard to grasp as an outsider or newbie.
But just as any other industry, the landscape consists of several players with different purposes and roles in the value-chain. We are a biometrics company, but according to industry lingo, you could also call us a “fabless-company”, meaning the production of our sensors is outsourced to our dedicated partners. Our sensors are designed in US and EU at our Research and Development (R&D) centers and then produced in large volumes in Asia.
Next has its own, dedicated sales force. Mission? Build, drive and develop relationships with our customers, partners, distributors and prospects. However, in the biometrics and hardware industry, nobody really talks about customers – instead we tend to talk about OEMs. The acronym OEM stands for Original Equipment Manufacturer and usually refers to a company that builds a product designed for end-users, this could for example be a PC/laptop or a Point of Sales (POS) terminal. Well-known brands such as Apple, Dell, Newland and Canon are all examples of Original Equipment Manufacturers.
Historically, we’ve shipped most of Next’s fingerprint sensors to our Notebook customers (i.e. Notebook OEMs). A few years ago, we started to diversify our customer base. Today it includes biometrics technology companies, Point of Sales (POS) manufacturers, the fintech industry and government ID providers as well, just to name a few.
Design wins then, are simply when OEMs decide to integrate our sensors into their products. This is an essential and integrated part of our joint working process with customers. We’ll look at a hypothetical example to illustrate how it all comes together.
From innovation to commercial success: de-mystifying the process
Let’s say a manufacturer of a digital access control product had a ground-breaking new product in mind. When a new product is invented, the OEM and its designer team have lots of considerations to deal with: which components to include? Which ones are standardized, cost-effective, have good availability and which ones will require quotes and customization from partners?
Further: which functionalities and security standards are required and how will they affect the design of the new product? How will our example OEM, i.e., a potential Next customer, ensure all the components needed, especially in for example recent times of global semiconductor shortage?
Even though our example OEM and its design team can’t answer all questions instantly, they’ll now start to demand information and quotes from relevant partners. Such as Next Biometrics – with our Active Thermal fingerprint technology we can provide them with just the know-how, and state-of-the-art-technology they intend to include in the new product.
To further clarify the process, let’s take a closer look behind the production scene at the OEM.
The OEM design the product and own the overall production process. Once its sourcing process is done, the OEM decide on which partners’ components that are worthy of a design win and thus will be featured in the new product. This is the moment NEXT receives confirmation from the OEM that our sensors will be part of the new product, We won a Design-Win! But the job is not completely done yet. And as the OEM’s production and sales processes can be rather complex, at Next, we prefer to work very closely with all our customers.
From the first meeting, during the design, integration and tuning where we are securing the end-user experience and until mass production and the final product launch – we’re always there to support, guide and drive things forward together with our new OEM.
Based on our four market segments, we help our customers identify their pain points and solve them throughout the design and production process. This could for example mean helping them design their product in the best possible way – our contribution ranging from deciding on the best placement of the fingerprint sensor to the ergonomics of the sensor and so on. We also support them with all sorts of compilation of biometric data. Our purpose with this is of course to help them create a competitive product of high quality, which will have both a sustainable production process and be long-lasting.
Depending on the product segment, the OEM’s final product typically has an estimated lifetime of 3-7 years.
Thus, our example OEM’s manufacturing process takes place months, sometimes a year before the final product will be available for you at the shelves of any shop.
In the image below, you will find a generic illustration of the OEMs overall process from idea to final product and the steps involved in it.
The exact process behind the scenes will differ between OEMs. Some customers choose to switch their existing fingerprint sensor in their current product, a common example is switching from an optical sensor to Next’s Active Thermal biometric sensor. This enables them to skip a few steps in the product development process, thus speeding things up.
Interpreting design wins
In the biometrics industry, announcing design wins are generally seen as a positive sign.
There are several reasons: design wins are an indicator of both trust and business progress. Secondly, when we join forces with our OEMs and drive new products into commercial success, the previous design win now translates into recurring revenues for Next.
Let’s say Next and our example OEM successfully sell 200 000 units/year of the innovative access control product. If the included fingerprint sensor from Next ranges from $8-15dollars, now that’s up to $3 000 000 dollars in revenues per year for Next from one single design-win.
What’s our own take on design wins then? How should you interpret Next’s communication about them?
Here’s our take: For pure marketing and positioning purposes, it’s still essential for us to communicate larger design wins. We do this to be transparent about our business and its progress. However, press releasing each design win would not bring added value to you as a stakeholder or shareholder, as design wins indeed is business as usual for us. (Add to that the NDAs surrounding most design wins and you’ll see why in the end it would be quite confusing).
Trust us, we could continue this discussion for quite some time…. However, let’s wrap up today’s Insight here! Hopefully, you now got a better understanding of what a design win is.
Further questions, thoughts? Do you agree with our insights of a Design-win? Don’t hesitate to get in touch and drop us an email.