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Analog Devices AD9361 – when microchips are more profitable than drugs
- znpy 8y agoSome pictures looks like photos of futuristic cities taken from an airplane or from a drone. I find them fascinating.
- alanbernstein 8y agoIs it accurate to refer to the average wafer price as "manufacturing cost" rather than "materials cost"? Shouldn't the amortized cost of the fab be included as part of "manufacturing cost"? Or is that captured in any part by "R&D"? Either way, the drug comparison is apt. The chip/pill is a tiny thing with negligible marginal cost. The plant costs billions. Pricing seems arbitrary, but these huge expenses do need to be recouped somehow.
- ttul 8y agoThe fab cost is “NRE”
- dgacmu 8y agoNo, NRE is masking and tooling cost. Fab costs would need to be amortized separately. (Because fab costs get spread across many, many products; the 1000 wafers used as a guesstimate in this article is tiny compared to what a fab produces over its life.) If anything, the Fab costs should be included in the cost-per-wafer.
- nickpsecurity 8y agoFab cost is the NRE because that's how a hardware developer is paying the fab costs. Most fabs' cost are spread across its many customers and products. They build it into whatever they charge for the runs. If AD owns the fab, then it's likely a separate organization in the company doing something similar. So, for purposes of AD9361 designers, the NRE includes the fab costs since they probably didn't build a fab as part of AD9361 project. Just paid one the NRE.
- dgacmu 8y agoNot when you're estimating the cost to develop a specific chip. I can avoid the per-project NRE by simply not doing the project. And, again, if a project produces more chips, then more of the fab production costs will be amortized across that project. The definition of Non-Recurring Engineering costs are that they are fixed and don't increase as the unit volume goes up: https://en.m.wikipedia.org/wiki/Non-recurring_engineering https://en.m.wikipedia.org/wiki/Non-recurring_engineering The way the fab could be considered NRE is if the fab were built only for this chip. (Or if a fixed percent of it was). In advance.
- slededit 8y agoAnalogue fabs are highly customized. You could probably make some back of the napkin comparisons but you wouldn't be able to actually manufacture it in another fab without a lot more R&D spend.
- smaddox 8y agoThat's true of any advanced node, though.
- slededit 8y agoThe difference is with analogue everything is a full custom, with digital it's only the trailblazers. Also linear devices require an order of magnitude more control and characterization than digital even when full custom.
- dgacmu 8y agoI think we're mostly in violent agreement. There's a lot for an analog IC - those mid-manufacturing test pads are a great example of pain. Testing costs are going to be higher, there will be extra NRE on custom test harnesses, and all the rest you allude to. But they'll be able to get multiple projects out of the basic investment in litho gear. I think it depends where one draws the line at the (very large) CapEx of "the fab".
- mark-r 8y agoTo eliminate fab cost from the equation you could price out what it would cost to get it built by a 3rd-party fab. It certainly wouldn't be as cheap as shown here, but still cheap enough to make the point of the article.
- merinowool 8y agoIt is worth mentioning that drugs are only so profitable because of their legal status. Drugs themselves are very cheap to make - additional cost is simply the risk of getting caught, security and so on. I think those factors don't exist for microchips, so the title is a bit misleading.
- jsjohnst 8y agoThe title is very misleading. Had the author stuck to legit pill making, it could’ve made a fairly apt comparison, but they mentioned drug cartels which implies a very different set of costs / risks. I’d further argue drug cartels have a wider price differential between raw material and wholesale product too, but don’t have a source to back it up.
- erric 8y agoI’d wager you are correct. Still it is an interesting read and I wanted to share.
- jsjohnst 8y agoTurns out, if BusinessInsider is correct, the raw coca plant leaves needed to make 1kg of cocaine base costs about $650. The same article claims you can get kilos in South America for about $6,500 with purity around 85%. Prices go up the closer you get to the final destination, but as do the risks too of course. If those numbers are accurate, would indicate a gross difference of 10x, not the 172x from source article. I’m surprised the coca leaves go for so much!
- bluedino 8y agoRemember that final prices of drugs are “street prices” in quantities of use. So you might have 25,000 USD of a drug, and it might be 2 kilograms, but when you split it up into 2-4g packets, the individual prices are much higher and you might get “one millions” in street value, which is what the police and media like to report. It makes the amount seem so much bigger.
- linkmotif 8y agoDrugs aren’t profitable if you can make money any other way.
- ebikelaw 8y agoADI is a remarkable company and they seem to be doing very well these days. If you’d told me ten years ago that in 2018 all of the old-line semiconductor companies (ADI, TI, etc) would be trading at all-time-high stock prices I would have thought you were nuts but here we are. Hardware is still quite valuable.
- madengr 8y agoToo bad they destroyed the Hittite and LT web sites. Those were for engineers. The AD web site must be laid out by some marketing goob; totally painful to use.
- ebikelaw 8y agoAt least the AD website usually works on weekends. Many of these companies’ websites apparently need constant manual correction to continue operating, with the result that i often find I can’t download datasheets on Sundays. Bad for the hobbyist for sure.
- gh02t 8y agoI have trouble with slow page loads and can't order samples from Microchip on weekends.
- setquk 8y agoThis is universally the case for hardware companies I’ve found, even suppliers. We get Farnell, CPC and RS outages at the weekend here in the U.K.
- Animats 8y agoAt least the AD website usually works on weekends. Many of these companies’ websites apparently need constant manual correction to continue operating. So that's where "devops" takes us.
- setquk 8y ago
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- madengr 8y agoWhat the process? The tear down says mostly FET based, so I assume a BiCMOS? The AD9361 require front end filtering, as the 5th harmonic of the 2m ham band falls in a national LTE band; horrible interfence from that wide open front end.
- setquk 8y agoSurely 5th is down enough dB for that not to be an issue?
- 55873445216111 8y ago65nm process can be either 200mm or 300mm wafers. At 21mm2 on a mature process, yield should be much higher than 50%. More like 90% is reasonable.
- barbegal 8y agoThe assumption the author has made is that each chip has an R&D spend proportional to the revenue that it generates (~20%). This is clearly false. Some chips are relatively simple but sell in huge numbers so the R&D per revenue is extremely low. An SDR is one of the most complex chips you can make with a wide range of expertise going into the design. I can easily imagine $20+ million being spent on R&D for this chip and the market for it is pretty limited (not for consumer products). Even at 100,000 sales the R&D costs alone would be $200 per chip. Pricing for these sort of niche low volume products is guided much more by what the market tolerates paying rather than the production and development costs. A large number of these types of chip never recover their R&D spends.
- vvanders 8y agoYeah, this is even more true when you get into the realm of RF black magic like an SDR chip.
- sleavey 8y agoTo add to this, I imagine chip companies don't look at it as plainly as whether a chip recovers its development costs. If the development costs lead to techniques or designs that can be reused, the next chips will be not only better (due to incremental improvements) but also cheaper.
- derefr 8y agoYou can calculate a sort of "time-independent cost" of R&D by taking any "innovative elements" that were discovered during the project, and retrospectively amortizing their costs across all the future projects one expects to use them in (maybe with NPV applied to the weightings of the amortization to represent lost opportunity-cost of having that money sit in an investment.)
- civilitty 8y agoIn my experience designing electronics, EEs and the people handling logistics/manufacturing are extremely risk averse actors who make many decisions based on trust and personal relationships. As a contractor, my deadlines would often only allow for at most two or three prototypes before I had to deliver a working design and that did not leave much room for error. If my client or I had an existing relationship with a vendor that always supplied parts on time, fast samples/dev kits, or if I knew their reference designs to be more reliable than most, then that vendor would be the preferred source for parts even if their other offerings weren't the best or the most cost efficient. You can also often get great pricing for low/medium volume orders if you have built up a history so I've had situations where I had to design a significantly more complex board with a microprocessor that normally cost 10-20 times more than the CPU I would have chosen (from another vendor). The client's supplier for the other most expensive part on the board had too much inventory of a soon to be discontinued processor (that was pin compatible with a newer one, also very expensive) and the account manager's boss was willing to sell us everything we needed at an 80% discount off high volume pricing with pricing guarantees on the newer parts for several years, all to meet some regional sales quota. As another example, microprocessors often have arduous power up requirements where different voltages have to be supplied in a specific sequence within annoyingly specific timing tolerances. In a project using Marvell microprocessors, it was much faster to just use Marvell's power chips and existing reference design than to waste precious time on modifying designs for cheaper chips from other vendors. The power parts cost five times as much as they would had I chosen my favorite vendor but because the board was a mixed signal design it was extremely expensive to make changes and test prototypes. A vast catalog of parts is an especially powerful market force if you are a company like TI that has a well developed software tool like WEBENCH which can spit out dynamic reference designs for most of their power chips. Unless I have an existing reference design from a vendor of a major part (like the CPU above), I usually go straight to TI's tool to design any power supplies I need so I can focus on the meat of the PCB. If TI also has parts that do something else I need on the board I will often just choose them instead of researching other vendors (unless it's a really expensive component) and that compounds as I make more and more PCBs, each time becoming more comfortable with TI parts at the expense of others.
- jiveturkey 8y agoclickbait title. not even a good analysis. i do like that the author wasn’t in any way complaining about the price or arguing that it wasn’t reasonable. in electronics (compared to drugs) there isn’t unfair pressure in the marketplace. so double phoo on the title.
- jiveturkey 8y agoi wonder if the new sds100 is built around this chip. timing is right.
- oliv__ 8y agoI didn't understand anything but man those pictures were beautiful. Would be pretty cool to print them out and hang them on a wall.
- Erwin 8y agoYou might like these shots of the classic 6502: http://visual6502.org/images/6502/index.html http://visual6502.org/images/6502/index.html
- oliv__ 8y agoA-maze-ing. Sorry couldn't help it. Jokes aside, these are great!
- PebblesRox 8y agoI want one as a jigsaw puzzle!
- ksec 8y agoNow I finally understand why Apple is making more and more of chips and tech in house.
- deleted 8y ago[deleted]
- ChuckMcM 8y agoThis chip has been a boon to SDRs. It moves the challenge of building an SDR to the filter banks and power amplifiers (the input and output conditioning circuits). Although these days most of the new transceivers have a low end in the 300Mhz range. It is somewhat easier to mix up the low frequencies into the 300+ Mhz range to cover them.