The emergence of a 16GB USB flash drive for $1363 poses an interesting question: will Samsung’s pre-announced 32GB flash drive cost $2600?
Clearly there is some kind of kink in the price curve when a 4GB flash drive costs $19/GB, 8GB costs $32/GB and 16GB version costs $85/GB. Maybe this pricing is designed to skin early adopters recover design costs for the larger packaging. Or maybe they are using the latest and priciest chips, since chip cost is usually about 90% of the device cost.
I’ll be very surprised if the 32GB drive comes in at much more than $20GB. Of course, if Apple is the first customer and its an add-on, they’ll price for big margins. Expect a $1400 price from them.
Yes, they are recovering design costs. There is some confusion about what “design costs” really are and how they are recovered. Here is one view.
Duriing chip Development the Lab may produce in quantities of less than 100, 100, 200, 400, a 1000, maybe 2000 devices for testing. Depends on the chip, the team and the equipment they have to work with. The equipment and people they have to work with are a function of the Marketing/Sales Forecast for the product. This is all guesswork unless it is an “incremental” product or a “custom” product.
When the “yield” in the Lab hits 20% they start moving to Production. They might start sooner if strong demand appears or the “custom” customer changes the timeline.
Initial Production yields can be all over the map. Chips can fail automated testing InLine but be “hand-selected” manually. This raises yields but at a price. I’ve had early chips that out-performed any chip built later. I’ve also had a higher failure rate in those chips. Once the yield stabilizes InLine the price starts to go down to move product. This drives a technology where you are obsolete in six months and totally obsolete in two years.
Oil companies don’t have this problem. For one they are a cartel, like Cargill who control all grain produced in the USA and most of the world, and two, if they don’t like the price they can leave the oil in the ground, or anywhere. Rail oil cars and unused railroad sidings have become very popular with oil companies for storing crude oil. You have to sell those chips or go out of business. There are some stories, though, of creative thinking… like the little plant in the Orient that burned down…
Today in Russia, in May 2007, it is possible to by a 8 Gb USB flash drive for only 40 USD!