Bruco diminishes dependency on NXP

Over the last four years, Bruco’s dealings with NXP have reduced dramatically. By deploying a strategy focused on turnkey ASICs, the chip design house from Borne has ensured a stable business.

“We’ve entered a bit of a euphoric phase,” is how CEO Tim Tiek describes the atmosphere at Bruco in Borne after a major design win with a multinational. His team is going to make an application-specific chip (ASIC) for localization. “It’s exactly the type of project we’ve been aiming for the past two years,” says Tiek.

By winning the design contract, Bruco is finally graduating from its previous model of hourly billing. Four years ago, the company started focusing on turnkey ASIC projects, assignments in which it takes on the entire responsibility from the design to the delivery of ready-to-use chips. Several projects are now underway, but the latest win has doubled sales in this segment.

The model of hourly billing was a risky business as, five years ago, it mainly depended on one client, NXP. That dependency has since been significantly reduced; NXP is now at the bottom of Bruco’s top-ten client list, “and the top three is a nice mix of stable clients in different end markets,” adds Tiek.

How big is the turnkey ASIC business now at Bruco?

Tiek: “The recent design win, together with the ICs we’ve been steadily supplying for years to a large Dutch equipment builder, ensures a stable cash flow, in addition to our design services, which are of a much more fluctuating character. The two have reached a very nice balance.”

What does investing in turnkey ASIC projects mean?

“Our engineers used to be called in mainly to solve partial problems for customers. We’ve since invested heavily in project management and IC architects. The associated structure and processes have received an enormous boost. We had already developed the necessary ecosystem for some time and are now expanding it. For example, Salland Engineering and Maser Engineering are partners that nicely suit the niches we focus on.”

What niches are these?

“We don’t compete with high-volume multinationals. Many customers ask for specials outside the big markets like automotive and telecom. This involves, for example, fifty thousand chips on an annual basis. They’re looking for a partner providing flexibility and complete sourcing. We can offer that.”

What does it take to bring in such a large multinational?

“In dealing with a small company, your account manager often talks to only one person or maybe a handful. Together, they tie the knot and that’s it. We’re increasingly dealing with large customers, involving a much more complex decision structure. Quality people have to dive into it, you have to convince technicians and stakeholders at different locations. There’s a lot of complex interaction before getting the green light.”

“Also, you really have to add value and your customer has to recognize that. In our most recent ASIC project, all kinds of special RF building blocks are needed: complex filtering, a very good signal-to-noise ratio and more. This all fits Bruco’s DNA like a glove. But you have to convince the customer of that. It’s not a matter of one business developer going out and coming back with a nice assignment.”

It’s not just having coffee and a month later, there’s the order?

“Now, our engineers are also intensively involved in the acquisition and feasibility phase. They can really show our strengths, overwhelming the customer with great solutions so that he has the confidence that we’re the right fit. That’s not easy. Certainly not for a small player and a very complex project. But now, we’ve succeeded several times in a row. Even with very large telecom companies that have excellent engineers of their own.”

So how many people and time are involved in that last sales project?

“It was a long process, taking up to six months of intensive work before the customer formally chose us. Mark Gortemaker’s business development team was in the lead, and everyone was involved, including up to ten engineers. For two or three of them, it was really very intensive. The nice thing is that this is the first project of this magnitude that we won during the Covid period without any physical meetings. Before corona, we would have jumped on a plane. Nevertheless, we received full confidence.”

Engineers don’t always excel at good communication?

“Some are better at it than others. It was very nice to see how quickly that can improve. Three years ago, when sitting with potential customers, we didn’t always leave the best impression. To be honest, I’ve experienced some really embarrassing conversations. By not properly conveying what we’re capable of, we failed to win the business, even though the project was a perfect fit. Now, that has turned almost 180 degrees. Our management team is a well-oiled machine and that reflects on the people. It gives customers the feeling that we’re enthusiastic and highly responsive. That’s paying off.”

“First contact is always a bit uncomfortable. You don’t know the company – maybe you’ve also got some enemies there who don’t want to outsource anything at all. You have to map that out completely, start talking to the right people. But at a certain point, everyone at the client is enthusiastic about you. This approach has enabled us to win all five of the last projects. We see that our people and the technicians at our customers very quickly become one team. Then you also have to get the commercial stuff right, quality, the supply chain and many other things. Our big advantage is that we’re small and decisive. We react very quickly, switch quickly and decide quickly.”

NXP was by far your biggest client for decades. Now, in terms of sales, they barely make it to your top ten.

“This started even before I joined Bruco. There was a downward trend in the business for NXP and that was worrying. It wasn’t related to the quality of our work, but there was no stopping it.”

The proposed takeover of NXP by Qualcomm put a brake on spending. After the acquisition was called off, NXP continued to cut costs.

“I can’t say that this is related, but we had to deal with those forces. NXP is still a very valued customer. But I’m very happy that we’ve found so many other and also large structural customers. That gives us stability.”

Is the turnkey ASIC strategy a step towards proprietary products?

“In the current phase, turnkey is definitely the most attractive model. It allows us to negotiate the pre-investment with customers. It also gives us a steady revenue stream once we start delivering. The downside of a turnkey project is that the chip is customer specific. They own it. We can’t go to market with it, or parts of it. In the longer term, we also want to develop more products of our own, but that doesn’t involve catalog products.”

“Sometimes, when the business case for one customer is a little thin, we propose to make a chip for multiple customers who all demand a relatively small volume. We then ask them, for example, to commit to a small part of the engineering costs and volumes. Once we’ve got a deal with two or three of them, we start development and production. That makes it our product, but we make agreements in advance about the purchase by those parties and they know what the complete picture looks like – we’re very transparent. The great thing about such a construction is that you can issue variants. This isn’t something for the short or medium term, but it’s one of the long-term growth pillars for Bruco.”

Listen to the full interview on the Bits&Chips podcast.