Anthony Ambrose's President's Perspective


Anthony Ambrose will share his thoughts on the business environment, Data I/O and answer common questions from shareholders.


Data I/O Matters!

Mar 06 2012

Data I/O Matters!


In 2004, our director of marketing at the time made a series of visits to the semiconductor manufacturers that provide the programmable devices we support. During one of the visits, his colleague from the semiconductor firm made the comment, “Is your company still around? We thought that you would have been gone the way of the other dinosaurs. We have been doing our best to make your products unnecessary.” The comment was made with a certain measure of good humor, but our director of marketing didn’t find that comforting. There was good reason.


Starting in the late ‘80’s the semiconductor firms put technology into their devices that made it possible to program them after they were soldered on the circuit board, thus obviating the need for Data I/O’s (and its competitors’) equipment. Today, almost all programmable devices can be programmed without a programmer and the vast majority of them are now programmed after they have been placed on the circuit board, a process that we refer to as “after-placement programming.” Many global companies have adopted after-placement programming as their preferred method. Every product they manufacture is programmed with that method when it is convenient to do so.


Yet, eight years later, Data I/O is still a viable company. It finished 2011 with $26.7M in revenue, $18.1M in cash, and EBITDA of $2.4M. Data I/O is still around because after-placement programming doesn’t satisfy every need particularly as data file sizes (the software content in the product) grow. For example, home appliance manufacturers typically use microcontrollers, those ubiquitous programmable devices, with very small data files that can be programmed in a very few seconds. Almost any after-placement programming solution using commercially available or home-built automatic test equipment can do this job just fine. At the other extreme, there are Smartphones, tablet computers, and navigation devices that incorporate very high density Flash memories with data files of 8 Gigabytes or more. Without something like Data I/O’s FLXHD to duplicate these data files, manufacturers of these devices experience major bottlenecks in their factories.


One thing that people often fail to understand is that any after-placement programming solution adds flow time to the manufacturing process. You can attempt to compensate for the additional flow time by adding more test equipment or by doing more programming at the end-of-the-line in parallel, but you have to do something to compensate for the additional process flow time and that costs money. When you program before-placement either with Data I/O’s off-line equipment such as the PS or FLX, or just-in-time with RoadRunner there is no additional flow time added. These solutions keep the production lines running at full capacity because programmed devices are delivered to the production line as needed. In addition, by pre-programming the devices you gain additional process quality because you know that you are delivering functioning devices to the production line and you can build in further safeguards to provide security and reduce the likelihood of IP theft.


Just this past week, we had an automotive electronics company in Europe come to us with the news that they are in the midst of rethinking their programming strategy. This firm was a major customer many years ago, but it stopped buying from us when they adopted after-placement programming. Their new products incorporate much larger file sizes than the products they replace so that their after-placement programming solution (the standard method for the corporation) has become a bottleneck. Now they are coming back to us. They asked for a quotation for an automated system. I’m not providing this example to suggest that customers will abandon after-placement programming in droves, but to illustrate that growing file sizes are bringing some former customers back to us and that behavior seems to be accelerating.


Global customers today must deal with the growing complexity of a disintegrating supply chain. Products are frequently manufactured by one or more contract manufacturers in multiple locations around the world. Our programming solutions including our Factory Integration Software allow them to ensure that the right data file gets in every product securely regardless where or when it is manufactured. Even when companies outsource their programming to a programming center, our equipment is there to do the job.


But there is another reason that Data I/O is still around and will be for a long time to come and that is the continuing advance in the technology of the devices. In 2004, approximately 3 billion Flash memories were shipped worldwide. In 2010, the number had grown 220% to 9.6 billion with a major shift in the dominate technology from NOR to NAND Flash. None of the semiconductor firms our marketing director visited in 2004 could have predicted the emergence of Smartphones, tablets, and other mobile devices that would consume so much memory and shift the balance between NOR and NAND so markedly.


Now, in the past two years embedded Flash media (most often the eMMC format) has emerged as the technology of choice for high-density (very large file size) applications. But, the march of technology hasn’t stopped. We see several other new device technologies emerging on the horizon that will present entirely new challenges in programming that aren’t easily addressed with existing solutions. Of course that requires reinvestment in new programming technology on our part as well and that was a factor in our increased R&D investment in 2011. We are making improvements to our hardware and software architectures that will allow us to increase productivity and support these new technologies more efficiently.


This year we are celebrating Data I/O’s fortieth anniversary. It’s true that the business has changed in many ways. The company has reinvented its business many times to remain relevant and deliver solutions that customers need. In the first decade of its existence, design engineers were the primary customers. Now, most of our products are used in production applications. Then, the US was by far the largest market. Now it is less than 15% of our revenue and China is emerging as our largest market. Then all of the employees were in the US. Now nearly half of our employees reside outside of the US, primarily in China and Germany. Even today, the company is continuing to reinvent its business.


What hasn’t changed over the past forty years is the company’s ability to deliver innovative solutions to customers’ programming problems that matter. That capability isn’t built on any single individual. Innovation is woven into everything we do. In this collaborative environment, every employee contributes to the effort to ensure that Data I/O still matters and remains relevant for a very long time to come.




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