Military Embedded Systems - Fall 2005 - Volume 1 Number 2

Industry Analysis
What has happened to
product warranties?
By Jerry Gipper
Most embedded electronic
hardware components come
with a standard product
warranty. If a board fails,
you contact the supplier, arrange a repair
or exchange, ship it to the repair center,
and await the repaired or replaced product.
This is a rather routine process amongst
all suppliers worldwide. In the case of
most VME, CompactPCI, and embedded
motherboards, today’s warranties
range from one to three years in duration.
There used to be a time when warranties
from many suppliers were five years
or in some cases, “lifetime” (Figure 1).
What ever happened to those warranties?
Why are they not as common? In the early
1990s there was a lot of noise in the industry
about long or lifetime warranties. Press
releases were distributed touting the warranty
terms, and warranties were highlighted
in advertisements. Suppliers were very
proud of their product reliability and were
willing to stand behind their products.
Years
5
4
3
2
1
0
A quick check today of the same product
types shows typical warranty periods
of only two years, with a few as long as
three years. Certainly these are shorter
than “lifetime.” Has something happened
to the reliability? Has the cost of quality
risen too high to absorb in competitive
pricing strategies?
This change in warranty periods started
quietly happening as companies were
recovering from the dot-com bust in 2001.
No embedded technology suppliers publicly
“announced” their shorter warranty
periods. In fact, the reduced warranty
periods did not hit home until a problem
occurred and a product needed repair. Did
suppliers reduce prices to reflect the shortened
warranty periods? I would venture to
guess prices were not reduced since suppliers
were already under extreme margin
pressures during those times.
Some possible explanations exist as to
why warranties greater than two years are
no longer typical. Any one or more of the
Warranty Length
What
happens
here?
1980 1985 1990 1995 2000 2005 2010
Figure 1
following are key factors in determining
warranty terms and pricing:
n
n
n
Increased cost of quality: By
definition, the Cost Of Poor
Quality (COPQ) consists of costs
generated as a result of producing
defective material. Additional cost
includes all the labor cost, rework
cost, disposition cost, utilities cost,
manufacturing cost, and material
cost that has been added to the unit
up to the point of rejection. It also
includes the cost of lost opportunity
due to the loss of resources used in
rectifying the defect. The cost of lost
opportunity means lower revenue
and profit, potential loss of market
share, and a lower service level to
customers. All areas of cost in COPQ
have increased in past years.
Speed of technology: In general,
the technologies used in embedded
computing systems are still relatively
new. New technologies evolve rapidly,
and rapidly evolving technologies
have a shorter product life cycle.
Getting the quality to an acceptable
level can be a challenge at best with
many of the newer technologies. Do
designers and manufacturers always
fully understand the quality issues of
one technology before moving on to
the next?
Pursuit of quality: With products’
shorter life cycles, perhaps the race
to have the best and most optimized
set of features at a competitive price
has pushed quality into the backseat.
Products today have manufacturing
lives less than three years in duration.
In most cases, the quality is not
fully optimized in that short of a life
cycle. Suppliers move on to the next
generation before they really get the
kinks out of the existing products.
Sometimes designers may take
shortcuts or use unproven design
elements to meet time-to-market
pressures. With the low quantities
and high mix of the embedded space,
/ October 2005
Military EMBEDDED SYSTEMS