What does the current Financial Crisis mean for propellerheads?
william chan
Posts: 1,326
Do we need to prepare for anything?
1. Will it mean that chip prices will go up or down?
2. Will it affect availability of the chips?
3. Will it delay the launch of Prop II?
4. Will it attract more users towards the Propeller?
5. We will have more time on our hands playing with the Propeller?
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1. Will it mean that chip prices will go up or down?
2. Will it affect availability of the chips?
3. Will it delay the launch of Prop II?
4. Will it attract more users towards the Propeller?
5. We will have more time on our hands playing with the Propeller?
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www.mercedes.com.my
Comments
5. As I see my retirement portfolio tank, I know I'll have more years ahead of me working with the Propeller! (But that's not so bad, really.
-Phil
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'Still some PropSTICK Kit bare PCBs left!
I have a horrible feeling that the work I have been chasing is no longer going to get the investment.
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For me, the past is not over yet.
I think that we're going to see a healthy surge in DIY solutions to problems over
just purchasing the nearest "china-boxed" solution. As micro-controller experimenters
we have the opportunity to lead the way.
Our current generation of Americans have a lot to learn about entertaining themselves
without million dollar hollywood effects or buying the next Wii-type gaming system.
I'm not looking forward a serious downturn, but we need it like a bad tasting medicine.
OBC
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That really depends upon exchange rates. If the dollar goes down or the yuan goes up or vice-versa then I guess it would affect Parallax pricing as it already has. Likewise for people importing from US.
2. Will it affect availability of the chips?
For foreign markets it could. If it becomes non-competitively priced it's not worth stocking nor buying. If the worse happens there may not be any Parallax.
3. Will it delay the launch of Prop II?
I'd predict not but the effect of any crisis can go far and wide with unpredictable consequences. Don't forget it's not just about business stability but also staff stability.
4. Will it attract more users towards the Propeller?
Probably, if prices fall. OTOH, people may be looking at minimising costs more.
5. We will have more time on our hands playing with the Propeller?
Do homeless shelters have PCs ?
It's usually the case, money or time, you can have one and not the other. Plenty of money to afford a hobby but no time to enjoy it or plenty of time but no money to buy what you want to play with.
I agree. Too many people in too much debt. Something had to give.
Once everyone accepts that they cannot live beyond their means everything will get back to normal.
I just worry about the national debt. We are leaving our children one heck of a burden.
I say let the banks that made the bad loans fail. Yes, some innocent people will get hurt. Let the chips land where they may. Take the medicine and get back to normal. What the government is doing is only going to prolong the agony.
Bean.
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"It is our choices, Harry, that show what we truly are, far more than our abilities."·Dumbledore from Harry Potter
www.iElectronicDesigns.com
·
Some of the questions relate to general economics and Hippy did a good job of answering them, so I'll stick to Parallax's plan.
There's no "fat cat" CEOs at Parallax. We have no debt and·a reasonable supply of·credit. It's customary in our business that we reinvest everything we earn in good times. For now we're taking a modest approach and will remain humble,·assuming that we can be reduced to a mere shell by·the current·economy, even as if we served financial industries or real estate markets.
The·primary aspect of our business management that will change is to tighten expenses and accumulate cash for any surprises, rough spots, etc.·This is achieved through awareness in our office, supply chain management,·etc. But at the same time we'll be improving our support and service to our customers and continue to release new products.·Our·response plan doesn't include staff reduction in any early phases, as·our team is·important·to our customers and vice-versa.
There will be no reduction in R&D progress. Prop II schedule does not change in any way. We've already got the equipment and team (Chip, Jeff and Beau) to continue what we started.·If there·were a storm·at·Parallax we'll keep them shielded from the chaos so they can keep working.·Even if we only had one person in the office to handle calls and shipping we'd still have R&D.
Everything we do is made possible by our·customers. Thanks to·you we'll·at least be in a position to·try to make the right decisions.
Ken Gracey
Parallax, Inc.
Post Edited (Ken Gracey (Parallax)) : 10/10/2008 4:23:37 PM GMT
I think one thing fuelling 'the panic' is that no one's sure where it will end, or what positions companies are in. Those with sound foundations and level-headedness will undoubtedly do better than others and it looks to me that Parallax fits that bill.
I cannot see Ken or any of the other Parallax staffers throwing in the towel unless they were chained up, weighted down and drowned in a river. I'm sure they'd be working in a shed or garage if they had to.
Ken's reply must be one of the most reassuring I've read in recent weeks. It's not all doom and gloom - not yet anyway !
If we specifically talk about Parallax and similar companies. As some of their business is based on hobbyists, I could see as many citizens have less disposable income to spend on hobbies. Wallets are snapping shut as people are uncertain about their jobs and savings, some even their homes.
Parallax may slow down, but hopefully everything will be back to normal in some time, be it several months, or several years, no one knows.
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Brian
uController.com - home of SpinStudio - the modular Development system for the Propeller
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In the short term, people are just plain scared to spend money. Parallax may have a difficult year ahead even with being responsive and reducing costs. But most solid companies take 2-3 years to really go out of business - one bad year won't do it. And with Parallax, they may have yet another surprise product.
Inflation has pretty much been stopped, so I don't think prices will continue upward. And shipping costs might even come down.
The bigger question in my mind is whether electronic components have just gotten too darned small to interest new hobbyist. And whether computer hardware and software systems have gotten too sophisticated to attract people that want to learn beginning programing. The industry has evolved, but it has also matured to the point that many may no longer think of it as a new frontier.
If anything, I see Parallax making more educational product at the university level and less for kids.
Costs are not the only thing that make Parallax products a success. Much of their success is through offering an educational entry that is perceived as an opportunity to explore a technical career. The presentation, support, and documentation of their products is just as important as the products themselves. A lot of their competitors have failed through just throwing the product at the customer and saying good bye.
Since they do such a good job in these areas, I have become very loyal to Parallax and enjoyed many hundreds of hours of participation.
Thanks everyone for putting up with me. I know at times it has seemed like dumb and dumber.
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It's sunny and warm here. It is always sunny and warm here.... (unless a typhoon blows through).
Tropically, G. Herzog [noparse][[/noparse] 黃鶴 ] in Taiwan
Credit is hard to get. This will have a very material impact on capital investment and overall economic output. Companies world-wide are reconsidering the new 'super-widget maker machine' they were going to purchase - it means there's going to be less widgets for everyone & that those widgets won't be as efficiently produced as they could have been.
Inflation is certain. More dollars will be chasing less goods (lower production). Right now, prices have come down a bit because of demand decline. The new money that's coming into the market will take a while to be distribute itself throughout the market (see: Velocity of Money). To quote Milton Friedman, "Inflation is a Monetary Phenomenon."
Hotspots will be mainland China (unhappy when the purchase power of their eurodollars evaporates), capital intensive businesses (I expect to see about 1/2 as many movies released in '09 compared to '08), financials (obviously). Expect tech to slow, but probably lagging by 5-6 months. btw, I think Taiwan will be largely spared, just like in the '97 crisis.
Only thing I take issue at is the criticism of our low savings rate. While I agree that savings is a good (great!) thing, the reason why savings has been so low for so long is that the interest rate on Savings is very, very low. Why is it low? Because banks don't need money from depositors to make loans. They can use the Fed to secure an unlimited amount money to loan out at almost no cost. Blame low savings on the Fed, not individuals.
Beyond the science, what's the practical application? The 101 is a little less crowded on my commute. Sandwiches at work are now $4.95 instead of $4.25. I might get layed off (who knows?). I could use some time off, anyway. It sure would be fun to have a full week to work on my development board.
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The U.S. saving rate isn't as low as "they" say because "they" don't count the money that most workers put into their 401K.
I don't know why they don't count this (I guess because it is not insured).
Bean.
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"It is our choices, Harry, that show what we truly are, far more than our abilities."·Dumbledore from Harry Potter
www.iElectronicDesigns.com
·
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle
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For me, the past is not over yet.
You have to keep an eye on the Chinese, some of them are up to all sorts of tricks! One company we approached about manufacture told us they could get an expensive part at about half the price we can get them for here. We bought a sample, and it was old, non-RohS stock!
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle
Post Edited (Leon) : 10/12/2008 9:31:56 AM GMT
Ken Gracey
Parallax, Inc. ·
However, we were assured that the units were current stock. Of course, they might not have known about RoHS marking and had been diddled themselves, by their supplier.
Then there is the contaminated milk, and lead paint used on toys.
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle
I have a friend who had a TV game device manufactured in China. Her American made
hand-built prototype was perfect, but cost several hours of assembly, and parts nearing
a hundred dollars US. The unit which came off the assembly line retailed at $30 US and
naturally had been cheapened in design to achieve that price. Sadly there were serious
assembly errors, and the cheapened video circuit design really showed when compared
to the output of the prototype.
With China, it seems you can't have things both ways.. (Except in Parallax's case,
which is still a complete mystery to me) The typical American consumer wants to be
able to purchase consumer electronics inexpensively. They don't think about the
fact that they will likely throw the device out within a year or two because of the
of quality of the design was traded to get the price down.
Burns me even more the use of Smile wallwarts and regulators which trade electricity
off in heat are in every thing we get from them now... blah! now I've gone and
derailed the thread.. Sorry for the rant.
OBC
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New to the Propeller?
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They also do assembly if you want that. Frankly, the less intermediates, the better the price. If there is one thing that is consistent in purchasing manufactured goods abroad, all the big concerns eliminate any and all middlemen as they really hurt the bottom line.
Quality control, especially RoHS, may be problematic as such exporter do have a tendency to cut corners when they can. Ken is absolutely right about 'long-term' relationships. Chinese value stability in their lives much more than getting rich quick. They are fully aware that ramping up a production line that has a very short lived demand is a way to financial ruin.
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It's sunny and warm here. It is always sunny and warm here.... (unless a typhoon blows through).
Tropically, G. Herzog [noparse][[/noparse] 黃鶴 ] in Taiwan
BTW, I wouldn't be surprised if my friend in HK gets into trouble. He's always complaining to the authorities about problems with the infrastructure, like pollution, and copying his complaints and photos to me. He got up the noses of the local police yesterday over something quite trivial.
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle
Post Edited (Leon) : 10/12/2008 4:43:14 PM GMT
One fine detail about Parallax and their relationship with China is that they have an office over in the Pacific rim. That may make a world of difference when you're readily available to check their work right on the SPOT! Unfortunately, I don't remember exactly where, but in the Pacific rim should be close enough insofar as convenient travel is concerned.
Regards,
Bruce Bates
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When all else fails, try inserting a new battery.
Competitors start reading here.
To tell you the whole story I'd need to go back nine years, about fifty airline flights, and many thousands of dollars and many months of mistakes. The process of getting to where we are today doesn't read like a "doing business in China" book which may speak about how to exchange business cards and give/receive gifts, and it's hardly even about electronics per se, but could be summarized as the following: face time, persistence, support and care of your partners & suppliers, making new friends for the long-term, avoiding e-mail and contracts, putting your staff and their families in China, and making real financial investment. Just the same way we like to work with our customers. Without you, there's no us. Without them, er. . .we're a bit smaller and far less competetive.
I'll skip the mistakes for the most part. Some of the mistakes we made in the beginning were thinking they were like us. Doh. They didn't care to read our e-mails or sign contracts, and these documents did nothing to solve problems when they were encountered. We also spent too much time here, and not enough there. We didn't know about networking. We'd ask about pricing too early; today it doesn't even come up. We'd make requests that we couldn't follow through upon for whatever reason, and we assumed that their lack of quality was because they wanted to cheat us and save some money. We didn't know that any given request would take significant effort from all parties, so we learned to focus our mission and requests. Maybe it wasn't this bad, but like anything, practice helps improve the situation.
We have several core beliefs related to working in China. First, our Rocklin office will remain a manufacturing center for any process we wish to undertake (chip shooting, SMT and reflow, CNC milling, kitting) as a business. Today we have a vibrant manufacturing staff of eight running the show in our Rocklin office, and we want to grow their abilities. This keeps us self-reliant in the event of political problems affect supply from China (and these problems are with governments, not the people).
We also want our team in China to succeed. We want them to prosper.
Next, it is imperative to choose the right products to manufacture in China. These must be products free of any bugs and with existing substantial volume. No speculation on volume, at least for us. The products should use parts available from China, unless you wish to provide the parts from the USA (very difficult to import components into China). You will have greater success if you can repeat the same manufacturing process over and over again. Test procedures need to be complete and simply, written in Chinese, with photos and a PASS/FAIL result.
Depending on the extent of your operations in China you also need a business license. Herein lies the largest hurdle, and requires the help of Hong Kong accountants and business people. There are many different models, and they vary by region. Nearest Hong Kong you can have Wholly Foreign Owned Enterprises (WOFEs), Representative Offices (RO) or even nothing. There are many precedents, too, like you need to rent a space. To rent a space you need an address. To have an address you need to register with the police. To do that you need the right visa. The list goes on and on.
If you are using contract manufacturing, the business license does not apply. But, you still need the visa and friends.
And most importantly, you need to be there. Can't do this remotely. Here is the toughest aspect for a small business like Parallax. No amount of money can make this possible - it takes a motivated staff who believes in the products and customers. Only effort can achieve this part. We didn't do this with brute force.
We have put Aristides (and his whole family) in China for a solid year in the past, and now we are in China half the time. In our factory we have a full Parallax team to administer the QA/QC, to shuttle parts back and forth, manage container shipments and to communicate with Rocklin. The team in China includes engineers, administrative people, inventory, and managers. They work in the factory in a nice office, just like an extension of Rocklin. Our problems have vaporized. The factory is a collaboration and builds nearly only Parallax parts with a staff of 50. They have every single manufacturing tool we have in Rocklin, and they love to work. We cross-train our staff from Rocklin with the staff in China, arranging trips when possible. We treat them the best we can, or should I say the "best they allow us to". Chinese are so humble and they refuse gifts up to 3x, yet we're still Americans so we try our best to do what we think is right in our narrow scope.
And your contacts in China will become your friends. You will travel with them and meet their families, and learn to be comfortable in their system. They will also come to your country when they can, and will even stay at your home. And in my opinion life will continue to become more interesting.
There is much sensitivity about manufacturing in China in the USA, and when we discuss it (even in this forum) we may subject ourselves to anti-American thoughts. We don't like to hide much about our business except our core IP, and we also think it is important to act in a global market. Labor and parts from other places will only become more accessible, and being able to work with foreign suppliers makes a more stable business.
Ken Gracey
Parallax, Inc.
Ken, your post was excellent and really captured the important factors associated with doing business in China.
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Timothy D. Swieter, E.I.
www.brilldea.com·- Prop Blade, LED Painter, RGB LEDs, uOLED-IOC, eProto fo SunSPOT, BitScope
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Post Edited (Timothy D. Swieter) : 10/12/2008 11:58:23 PM GMT
This well may be China's biggest challenge next year.
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www.fd.com.my
www.mercedes.com.my
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle
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For me, the past is not over yet.
Leon
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Amateur radio callsign: G1HSM
Suzuki SV1000S motorcycle