Austin Lesea <[email protected]> wrote in message news:<c00e21$[email protected]>...
> Steve,
>
> Quite frankly, I am amazed at how folks think about this. You have
> obviously never thought about that computer on your desk, and how it can
> be sold for $499!


I don't know about the US PC prices, but in the UK you can make your
own PC for not that much more than you buy a new ready-built PC from a
shop. Compare that to Xilinx where small quantities are a few hundred
percent more expensive than in large quantities.


> Or even your car, just go price the parts
> individually some time.


It's called mass production. I thought someone who works at Xilinx
would have heard of mass production?



> Steve wrote:
>
> > Austin Lesea <[email protected]> wrote in message news:<bvu1ml$[email protected]>...
> >
> >>Steve,
> >>
> >>As for older parts, they do not get any less expensive to make. So the
> >>price drops until the yields are stable, and then stops dropping.
> >>Happens to everyone. At some point, they get more expensive to make as
> >>their quantities go down, and the fab line equipment gets more expensive
> >>to run (obsolete processes).
> >
> >
> >
> > So why are the prices *identical* to the cent, at different suppliers,
> > in different countries, 4 years apart?
>
> They use the "manufacturer's suggested retail price." As mentioned,
> these were very old parts, and the pricing was now stable.


You use the example of car prices above, and it's interesting to note
that in the UK some of the big car companies were found guilty of
price-fixing because they were applying pressure to their dealerships
to sell at the price the car manufacturer wanted them to sell at, and
if the dealership disobeyed the manufacturer then they faced losing
the ability to sell their cars.

This sounds awfully similar to the Xilinx pricing policy...


> > When we did accounts at uni we were taught that the larger the batch
> > size the cheaper the product is because you spread the manufacturing
> > setup charges across more units, but Xilinx aren't going to do a batch
> > size of 100 for an order or 100 units.
>
> You learned the right stuff. Still applies. If a disti orders 100
> parts (and they do) we have to process just that many parts for that one
> order. Disti's don't want to stock anything anymore, so that makes
> costs go.


Take the other end of the scale; what about your highest volume chips?
Unless your production managers are extremely bad at planning then
you're never going to do make 100 parts when that part sells X million
per annum. But all your, say, Spartan IIE chips seem to follow a nice
monotonically increasing price vs size graph for a single package
type. Why? Because there seems to be very few distributors, so there's
little competition, and no true competition if Xilinx order the
distributors to sell the products at set prices.


> Imagine Xilinx' dilemma: what do we build? and when do we build it?
> If we have an order for 100K parts spread out over a year, everything is
> trivial, and less costly. But if we have seemingly random orders
> popping in all of the time, we have to build ahead (risk) and sometimes
> scrap parts that are not moving.


Yes, but the fastest selling chips are still expensive in small
quantities.


> If you have any optimism about your business at all, it would be best to
> enter into a agreement and let the disti (and us) know where you think
> you are going, and how many you will need.


What about companies that are starting off? It just seems that if
you're a big company that can place vast orders then you're alright;
if you're small then you're not interested.


> Distribution costs can't be
> > much either because it only costs ~$9 to get a book sent to teh UK
> > from amazon.com. The cost of wages for sales people is a fixed cost
> > anyway, and the cost of the silicon itself is a variable cost which is
> > independent of the batch size if you take the manufacturing setup
> > costs separately.
>
> We can't seem to convince disti's to work for free, however, so they
> charge what they feel they need to in order to make a profit.


Do they though? Or do Xilinx have a say in the prices?


> Disti's
> also have 200+ FAEs of their own on their payrolls to support their
> products, as well as order entry systems, stocking(?), unsold inventory,
> stocking losses, uncollectable accounts (deadbeats), etc.
>
> As for the book business, I was an author, and if an author gets 1 cent
> on their book, they are lucky. Ruthless business, with all of the money
> going to the publisher and retailers. Like perfume, or music CDs, cost
> of book: $3, price of book $75...... the $9 shipping is a complete
> rip-off, they already made their profit, now they are icing their cake.


Books are a good example of mass production though because bestsellers
sell at £5 or less, whereas slow selling books like niche engineering
books sell at very high prices. You don't see this kind of thing with
Xilinx's prices though because despite some of your fastest selling
chips selling hundreds or thousands of times faster than your slower
selling chips the price vs size curve of the chips is monotonic.


> > So why are your small quantity prices so inflated?
> >
>
> Because they are a fair representation of the costs associated with
> small numbers of parts ordered through distribution to allow for a
> profitable business by the distis and reps.


Compare that with bestselling books, which are cheap wherever you go,
from the biggest to the smallest booksellers. This seems to be the
biggest problem, because there seems to be so few places that you can
buy Xilinx parts from in small quantities that they can effectively
charge whatever they want. And from some of the posts to this and the
other thread it seems that the distributors aren't interested at all
in small quantities, so they price them at levels that discourage
people to buy in small quantities.

You have to wonder whether Xilinx limits the number of suppliers in
order to keep prices artificially high?


> They also represent the
> unwillingness of a customer to enter into a contract which would allow a
> scheduled delivery of parts over the long term, which is where the real
> savings start to kick in.


When do the "real savings start to kick in"? When you order 50,000 per
annum? How can start-up companies do this?


--
Steve