Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.
Why Are Potato Chip-Makers Smarter Than Silicon Chip-Makers?
Why are the potato chip guys smarter than the silicon chip guys?
Because potato chip vendors can hike prices by adding the word ‘Gourmet’ to their product description, while silicon chip vendors compete so fiercely they are always offering lower prices.
Dr Keh-Ching Huang of Global Unichip, TSMC’s design subsidiary, recalls seeing potato chips being sold under the label ‘Gourmet Potato Chips’ and selling for 20% more than ordinary potato chips.
So why hasn’t the Gourmet ASIC yet been invented?
Instead, the costs of ASICs keep rising while their ASPs keep declining, and the margins keep narrowing.
“People working in the chip industry are too smart. They are so smart that they can’t make money,” says Huang.
The problem for the silicon chip industry, reckons Huang, is that the competition is so fierce that chip companies accept it when customers demand price reductions. Meanwhile, the industry’s challenges get more and more demanding.
“In 2007, we started designing on 65nm,” he said, “it was 2009 before 65nm ICs went into production. So market uncertainty becomes a huge factor when you’re doing a design. It’s a risky business.”
So the IC industry does very difficult, very risky things for very low prices while the potato chip industry does simple, non-risky things for very high prices.
Clearly the IC industry needs a product description which, while not capable of being judged by any testable metric, will be accepted as describing a superior, and therefore higher-priced, product.
‘Freshly fabb ed’ perhaps?
Top Ten Forecasted IC Buyers For 2010Tags: ching, gourmet, risky business, silicon, tsmc