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You are thinking about chip costs as if you were selling bread or cars, where the majority cost in making the product are the marginal costs of manufacture. Thi
by Tuna-Fish 14y ago
You are thinking about chip costs as if you were selling bread or cars, where the majority cost in making the product are the marginal costs of manufacture. This is not true for microchips. The marginal cost to produce any modern Intel cpu is <$40. Most of the cost of making chips is in developing the process they run on, and designing, testing and validating the chips.
When the economics of making chips are $2B down to make the first one, then $25 for each that goes off the line, you cannot measure profitability like that. They need to recover R&D, and providing more expensive chips to the professional market through price discrimination is a good way to do this.
- hmottestad 14y agoMaking the mask is really expensive. I had an external lecturer tell me it cost about 1 million usd to make a set of masks for their silicon, I assume Intel pays way more. Once you have the mask though, pushing out chips is cheap and easy.
- Tuna-Fish 14y agoAnd the masks are just a really, really small part of the total cost. Intel has to pay for their fabs, they have to pay for the research into ever smaller line widths, they have to pay for materials research for new gate materials, and they have to pay for the massive research and development to design new, better chips.