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Politics : Formerly About Applied Materials
AMAT 221.52-3.1%11:01 AM EST
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To: w0z who wrote (19411)5/13/1998 6:29:00 PM
From: Katherine Derbyshire  Read Replies (1) of 70976
 
I'm well aware of Moore's Law: The number of transistors on a chip doubles every 18 months at no additional cost to the consumer. And the cost per function *has* been deflating.

However, the industry-wide chip average selling price has gone up an average 12% per year (data from WSTS and IC Insights). Reason being that the *next* generation chip, say a 300 MHz MPU, costs more than the 200 MHz chip on the market at the same time. The chipmaker, who has a lower cost to manufacture the 300 MHz chip (thanks to Moore's Law and economies of scale) is able to realize a higher margin on it because the consumer is willing to pay a performance premium.

Problem is, for the last two years, the industry-wide ASP has been declining, while fab costs have been going up. That's never happened before, and that's the fundamental reason why even non-DRAM companies like Intel are getting their earnings squeezed.

Katherine
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