Uncovering hidden chip costs

Rob Hilkes, EE Times
(10/22/2007 9:00 AM EDT)

The proportion of semiconductor content is increasing in almost everything we own. For some large manufacturers of consumer electronics, semiconductors are the single largest contributor to finished-goods costs. A clear understanding of the chip supplier's cost structures can bolster the OEM's negotiating position.

All chips are not created equal, and even devices that look markedly similar can have dramatically different pricing. This statement is perhaps obvious, but the realities of chip pricing are often overlooked during price negotiations.

For example, the device shown in the accompanying images may look like a simple 16-lead SOIC and would therefore intuitively be priced at perhaps a few dimes in high volumes. In reality, it incorporates a rather complex BiCMOS die with a second MEMS accelerometer device and is priced at more than three times that amount. None of this is obvious until a qualified analyst starts to take a good, close look under the hood.

There are several fundamental rules that must be considered when determining the cost of an integrated circuit.