How chip makers can regain control of their value chain

Chanan Greenberg, Model N
EETimes Europe (May 28, 2014)

IDC reports that the average selling price of a smartphone decreased to £205 in 2013, down from £236 in 2012, and it is expected to drop to about £157 by 2017. They may not want to pay for enhancements but consumers expect more powerful devices every year.

As a result, OEMs demand even lower prices for better performance, leading to tension between providing faster chips and the failure of margins or revenues to reflect return on the necessary investment. The problem for semiconductor manufacturers is that the performance gains of Moore's Law are not keeping up with the economics. The cost of materials and R&D continue to rise.

On the other hand nervous chip makers would rather have the revenue with poor margin than risk having nothing at all. The result is that most semiconductor manufacturers leave £29.7 million on the table for every £590 million in sales.

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