CompuServe Messages

Peter, I was obviously oversimplifying the situation, merely to offer a relatively concise response. Of course, all the elements you mention contribute to the cost of manufacturing a device. There is also any labor-intensive work, such as wire bonding (that isn't automated), as well as the cost for testing (which for complex devices such as CPU chips is a HUGE expense, especially in terms of the manpower required to write the test programs). The labor costs probably greatly outweigh the costs of the materials, I'd guess. Then, there is the depreciation of the capital equipment needed for manufacture, which is nontrivial in anyone's book. The result is that if one delves deeply into trying to specify a cost for manufacture of a given device, it becomes a terribly complex issue. My main point was that, in general, manufacturing cost is relatively constant (in the long view) and that manufacturers tend to get most of their profits from a new device up-front, when it is in great demand and they can charge a premium for it. The mitigating factors (yield, etc.) have already been covered. Let's not get too involved in trying to enumerate all of the factors which influence manufacturing cost. I'm sure that the cost accountants of the semiconductor industry are making a good living doing just that. 🙂 -rich-