[INVOKING] The Cell Phone and The Shovel

Has anyone wondered how come a cell phone costs almost as much as a shovel today?

If you compare the technology involved to make these items it must be appearant that the science, engineering and investment to make cell phones is several factors over the shovel. So how come all this knowledge has become so devalued?

Do you know that the semiconductor industry as a whole has never turned profit? It always takes more money to invest in the next (smaller, faster) technology than the profit that was made on the previous one. The newest 90nm and smaller process technologies are so expensive that you need to hand over 1.2 to 2.5 million dollars to make a single new chip. This is mostly due to the cost of the photolithography sets (reticles) that are needed to expose features onto dies on wafers.
The insdustry might be able to start money as soon as the push for newer technologies slow down and it starts utilizing the existing ones for longer times.

I wonder what is your take on this? For that all the visitors of The Lab depend on technology.

Tamas

tk@halmi

You make a great point... your saying 1.2, maybe $2.5M for a new chip? Plus design costs (those engineers cost a fair bit... even down south :grin: )

Let's throw in some other costs... A new fabs (where the die is made) value decreases by over 50% in the first few years. And fabs don't go cheap... at all... it's easy to break the billion dollar mark... very very easy.

So, how to semiconductor manufacturers make money???

Firstly, every time you do a process shrink, it means you can fit more on to a Wafer. Then, you make the wafers bigger, moving from a 4"diameter wafer up to almost 10".

Now, you guys should know as well as I do, when you increase the diameter of a pizza by 2inches, you get a LOT more pizza

Finally, imagine this... You make one super chip, but the market also needs lower performance chips. Instead of making 3 or 4 different chips - maybe it would be easier to grade the die, putting the highest performance die in the most expensive range and the lowest performance in the lower range. It means that you get the most of your yield.

Well someone is making money.

the low cost of cell phones and such might be due to cheap labor in other countrys.

Development is expensive but then you just put your product through the cheap labor copying machine. I'm willing to bet most of the people who make the tech products we use can't afford to own them.

Its weird, I tend to be the bleeding heart liberal type...but I rarely notice how much of the things I use in everyday life depends on the oppressive work conditions of others.

:sad:

The low cost of cell phones is in part because they are subsidized by the cell phone industry. The service provider pays for a portion of the cost of the phone to get you to use their profitable service for x number of years. I have a pretty nifty phone that probably cost about $150-$200, but I bought it for $30 because I agreed to 2 years with my carrier.

[quote author="bluebird"]Well someone is making money.

the low cost of cell phones and such might be due to cheap labor in other countrys.

Its weird, I tend to be the bleeding heart liberal type...but I rarely notice how much of the things I use in everyday life depends on the oppressive work conditions of others.

[/quote]

I kind of agree with you... but don't forget that many of the parts used in Sony Ericcson's and Nokia's are build in Sweden, Finland, Poland and Hungary.

I'd hardly call them 3rd world -- they are all roadmapped (if not already in) the EU.

I will however agree that a LOT of production is also going out to China... but i'd rather that it goes there and puts a bowl of rice in everyone's hands than not at all.
Don't worry, as more and more production moves out to the far east, prices for production will rise and eventually I believe that there will be some kind of equilibrium.

Finally, don't forget that for small volume manufacturing, companies are still using local assembly houses - for speed, quality and customer service.


Oh, and whilst I remember... do you know where the largest growth of mobile phones is happening??? -- China. Nokia forcasted a 15% growth in the coming year, taking China's mobile population to over 410Million users...

http://yahooligans.yahoo.com/reference/factbook/ch/popula.html
shows China's population to be around 1.25Billion people... 410Million is almost 1/3rd.

Wow (i'm amazed myself)...

Cheers
R

Rochey,

Yea I know...Its so easy to not have all the facts and form assumptions about things. That's why I stopped being aggressive about my opinions a long time ago.

I guess its well known that there is gigantic differences in the quality of living around the world due to so many things. There are no simple answers to world economics. Its just deep down I know "the haves" could be more conscious about their consumption and aware that their choices inevitable trickle down..

I really hope things will reach an equilibrium in the future.

That said, I was kind of taking a dig at myself for not always making the right choices.

right now, in a galaxy far far away, there is a guy paying people to work in the carbon dioxide emissions factory which they need to survive on the planet they are on. That guy is having a feverish argument with the dude next door who dropped some technology on a bunch of apes on the Earth colony and is harvesting the valuable carbon dioxide emissions just outside the atmosphere which as a result of his streamlined operation, he is able to harvest and bring back to his home planet for fractions of what the real angry dude is having to pay his workers by the hour to drive combustion engines around in a circle all day. We of course, are none the wiser and have brain implants which prohibit any kind of alternative clean energy use, so we just continue to pollute and make a mess all for the benefit of some other much bigger dude's puppet show.

Perspective is everything. For however fucked up we view the third world, my bet is that the third world is glad to have the manufacturing. There's no point in feeling to sad about it, soon enough, they'll get smart and come and destroy us with all the technology we had them fabricate, so enjoy it while it lasts.

dave

Oh yea, I aready knew about all that Dave. I read the hitch hikers guied to the galaxy. I'm just sayin'... :green:

A good shovel will last a life time, but cell phones start to self-destruct after two years.

Let's DIY a cell phone.

I'm serious. I'd cary around a big old phone full of tubes and junk if I knew it would be more reliable than the crap Qualcon makes.

We could even slap on an old Pentax SLR and call it a camera phone!

Just cant give up the rotary dial :green:

Ah, rotaries.

My Mom used to yell at me for SLAMMING the dial whenever I made a call. It was a habit I picked up from my Dad... as if the relays at the central office wouldn't pay attention unless you smacked 'em real good! :wink:

My girlfriend's parents still have an old (>30 years) Western Electric rotary in their kitchen. Their rationale is, it still works, so why get rid of it?

I dissected my own W.E. wallphone a little while ago when it quit working after who-knows-how-many years. I'm pretty sure the earphone transducer shit the bed. The guts of the phone were solidly built, with a lot of handwiring, made right here in the USA. It made me kind of sad to replace it with a cheap import from Target, but I just don't have the free time I used to. I held on to the carcass in the hopes that maybe someday I'll come across a similar phone with a working handset.

A whole generation is growing up never having used a rotary phone... or a phonebooth, for that matter! They'll never know the satisfaction of terminating an annoying call by slamming a heavy, solid handset down on a heavy, solid cradle. :wink:

> a cell phone costs almost as much as a shovel today?

No, it costs $50-200.

It is the old disposable razor blade trick: give away the handle (or sell it cheap), and recover the cost in all the blades you have to buy.

If you used a shovel every day, but had to buy dirt for it, the dirt company would give you a shovel to get your dirt-buying business.

Inkjet printers are almost give-away, because they nail you on the ink.

In a broader sense: the shovel company knows what it costs to make a shovel, and that racket hasn't changed much in years. I suspect the chip racket doesn't really understand their economics. They have to sell stuff as fast as possible even at a loss just to have cash to cover the monthly payment on the mask-steppers, wafer-cookers, and salary for Rochey and thousands of other chip people needed to turn sand into cash. They are running as fast as they can to stay in one place. They are really fueled by investors who don't understand that in general, electronics has never been profitable. For every iPod, there are a million failed products or good products under-cut by copy-cats. You'd have to have foresight and surgical timing to catch the peak of a profit-wave.

[quote author="PRR"]> They have to sell stuff as fast as possible even at a loss just to have cash to cover the monthly payment on the mask-steppers, wafer-cookers, and salary for Rochey and thousands of other chip people needed to turn sand into cash. [/quote]

Thanks man... I feel.... understood :grin:

Please pay my salary soon, it's gonna be a cold winter otherwise :wink:

do you guys remember that you couldnt *own* a phone... the phones were distributed by the phone company and owned by them...

I seem to recall something like this when I was a kid... (remember mom and dad "taking" a phone from their old house with them and then being afraid to plug it into the new home in fear of being caught...