⚠ When Re-Engineering Becomes Worth ItModerate threat

Re-engineering risk keeps customers in place only as long as the pain of switching exceeds the reward, and Broadcom's own aggressive pricing can tip that balance. A customer squeezed hard enough, or offered a large enough advantage by a rival, will conclude that the cost of redesigning the product is worth paying to escape — and once a customer has decided to re-engineer, the switching cost that protected Broadcom evaporates. The wall is high, but it is not infinitely high, and Broadcom sometimes tests it deliberately.

The risk concentrates at natural redesign points. When a customer is already rebuilding a product for the next generation, the incremental cost of designing in a different supplier's part falls sharply, and the accumulated resentment of years of price increases can find its outlet exactly then. A supplier that has extracted maximum price during a product's life may discover, at the redesign, that the customer has been quietly qualifying an alternative all along.

Broadcom mitigates this by keeping its parts technically ahead, so the reward for switching stays small even when the customer is motivated, and by managing pricing just short of the point that triggers a defection. That judgment has served it well. But an owner should recognize that switching costs deter change rather than forbid it, that they are lowest exactly when the customer is most open to a change, and that the more Broadcom leans on captive pricing, the more it raises the reward that makes re-engineering worthwhile — the VMware exodus planning is that arithmetic in action¹.