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Cheap? 20% increase in cost of BoM equals at least ~100% increase for customer. Would you pay twice for AMD components? What would market do?

aoeusnth1 1y ago
Does a 20% decrease result in a -50% discount? Why would it be nonlinear?
- bloppe 1y ago
  20% decrease would be only 80% price rise for the customer
sneak 1y ago
Presumably they would also accept a lower margin on these, so maybe not 100%.
yard2010 1y ago
What is the alternative?
kelnos 1y ago
Companies charge what the market can bear, not based on their costs. Certainly they will often use some multiplier of their costs as a starting point, and they can't sustainably charge below their costs. But if they double the price of the product and lose more than half of their customers, that's a failure to set pricing properly. Consider the reverse direction: if a company can decrease costs, they will usually pocket the extra profit, not reduce the price they charge. Price cuts usually only happen for one of two reasons: 1) to avoid losing customers to another company that is charging less (or to entice customers of another company that's charging the same), or 2) to capture more profit if they'll earn more customers at a lower price than they'll lose due to the lower per-unit profit. (Yes, there are other reasons, but these seem to be the main ones. For goods that are not essential to life, prices are set based on what people are willing to pay vs. how many units can be sold at that price, with the cost as a floor (absent a policy of using a product as a loss leader).
isthatafact 1y ago
> 20% increase in cost of BoM equals at least ~100% increase for customer. I am no expert in BoM and margins, but that seems like a wild claim to me. Could you explain your math?
frollogaston 1y ago
If people won't pay double for AMD components, that's not what the price will be. Cost increases usually eat into margins partially.

aoeusnth1 1y ago

Does a 20% decrease result in a -50% discount? Why would it be nonlinear?

bloppe 1y ago
20% decrease would be only 80% price rise for the customer

sneak 1y ago

Presumably they would also accept a lower margin on these, so maybe not 100%.

yard2010 1y ago

What is the alternative?

kelnos 1y ago

Companies charge what the market can bear, not based on their costs. Certainly they will often use some multiplier of their costs as a starting point, and they can't sustainably charge below their costs. But if they double the price of the product and lose more than half of their customers, that's a failure to set pricing properly. Consider the reverse direction: if a company can decrease costs, they will usually pocket the extra profit, not reduce the price they charge. Price cuts usually only happen for one of two reasons: 1) to avoid losing customers to another company that is charging less (or to entice customers of another company that's charging the same), or 2) to capture more profit if they'll earn more customers at a lower price than they'll lose due to the lower per-unit profit. (Yes, there are other reasons, but these seem to be the main ones. For goods that are not essential to life, prices are set based on what people are willing to pay vs. how many units can be sold at that price, with the cost as a floor (absent a policy of using a product as a loss leader).

isthatafact 1y ago

> 20% increase in cost of BoM equals at least ~100% increase for customer. I am no expert in BoM and margins, but that seems like a wild claim to me. Could you explain your math?

frollogaston 1y ago

If people won't pay double for AMD components, that's not what the price will be. Cost increases usually eat into margins partially.