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To: Daniel Schuh who wrote (21387)	11/11/1998 5:53:00 PM
From: XiaoYao	Read Replies (1) \| Respond to of 24154

Then you got to build one of those $2billion fab lines to produce the thing. OK, I am really not an economics knowledgeable people. From my understanding, for software from version 1.0 to version 2.0, the base cost are similar and added more people, so it is easy to understand the price for version 1.0 is compatible to price of version 2.0. Now for the hardware, to build first chip, you need to spend a hack lot of money to build fab, so it is easy to understand their initial chip price was high to cover as much cost as possible. But you don't build new fab for each new chip, do you? So the cost of producing chips would go down as the production achieved certain size. Also the cycle for software in general is about 2 years, the cost renews every two years. How long those fab could be used? How often you build new fab? For software, the cost base for each new release is similar and a little increase, so the price tends to steady. For hardware, once you built the factories, each new production costs less than their previous one. Like the memory chip. I think actually every Intel's new top-line chip costs as much as their old top-line, only the old chips' price falls fast.