Chapter 255: Being Targeted
The pricing of chips in later generations mostly follows the 8:20 rule, the former is the hardware cost and the latter is the pricing.
In other words, the price of a general chip is about 2.5 times the cost of the hardware.
Of course, the cost of a chip includes not only hardware, but also design costs, operating costs, etc. The actual profit will not be more than doubled.
After deducting all costs, the net profit can be 40%, which is already in the first-class profitability tier.
However, in the early 1980s, this rule did not apply.
Today's chip industry can be regarded as a truly profitable industry.
The first integrated circuit chip, the Intel 4004, was released in 1971 and sold for $200.
At that time, the main user of this chip was calculator, but because of the high price of the chip.
At that time, calculators from Sharp and HP cost more than 100,000 yen.
Yes, it is the calculator used for calculations in daily life, not a computer.
Such an expensive price is beyond the reach of ordinary people except for commercial companies.
Although it is a first-generation chip, the 4004 is priced at $200, which is undoubtedly a huge profit.
In that era, all industries related to chips were extremely profitable, and calculators were just a microcosm of this.
Later in 1974, Intel and Motorola launched the next generation 8-bit chips, the Intel 8080 and the MC 6800, respectively.
Their prices remained basically around $375, and just two years later Zilog and MOS also launched their own 8-bit chips, the Z80 and MOS6502.
The prices of Z80 and MOS6502 are roughly in the range of US$25 to US$30. Compared with Intel and Motorola, the prices of the former are about one-fifteenth of the latter.
The same 8-bit chip dropped fifteen times in price two years later.
Will Z80 and MOS6502, which are sold at 20 or 30 US dollars, lose money?
Of course not, they are still profitable at a price of $25, otherwise how can Zilog and MOS continue to operate.
From this, we can imagine how many times the profit was included in the previous $375 from Intel and Motorola.
Therefore, in the early years of chip development, there is no doubt that the profits will at least double or triple.
Thanks to the interference of Zilog and MOS, a price war broke out in the calculator industry.
Its price has dropped all the way from the initial 100,000 yen, and today it has been directly reduced to around 5,000 yen by Casio.
In this way, calculators moved from being business tools to ordinary people's homes.
But today, 16-bit chips are still expensive, with Intel's 8086 costing $360 and the watered-down 8088 costing $125.
Disruptors Zilog and MOS also have their own 16-bit chips, but due to process costs and audience issues, they cannot pose a threat to Intel and others.
Two years later, the price of 8088 dropped slightly and is now around $100.
SIC's 8089 is a counterpart to Intel's 8088, and Shirakawa Kaede priced it at $40.
At this price, SIC is actually still profitable, but the profit is not as huge as Intel's.
The production cost of SIC8089 is about US$30, and at the current price, the profit per piece is about US$10.
This profit margin is almost certainly at the bottom of the list in the chip industry at this moment.
It’s not that Baichuan Feng doesn’t want to make more money, but because SIC has just entered the market, it can only lower the selling price in order to open up the market.
The price is more than half cheaper than other manufacturers, and the theoretical performance is even better. Shirakawa Feng doesn't believe that SIC8089 will be ignored.
He had a very clear positioning for SIC's first chip, which was to open up the market.
As long as the market can be opened up, even if SIC8089 is not profitable, Baichuan Feng will still push it to the market without hesitation.
It doesn’t matter if the first generation of chips is not profitable, just think of it as cultivating the market.
When the second generation of chips is launched, that may be the beginning of SIC's profitability.
However, with the current price of SIC8089 at US$40, Shirakawa Feng believes that it still has certain market competitiveness.
In order to increase its audience, Masayoshi Shima aimed to make it compatible with Intel assembly instructions from the beginning of its design.
In addition, SIC has also developed its own assembly software, and a series of auxiliary chips are under design.
A single main chip cannot conquer the world or occupy the market.
SIC understood this principle from the very beginning, so this part of the work has been planned in advance and is now in the process of gradual improvement.
Moreover, as the yield rate improves and the shipment volume increases, the cost of $30 can continue to be reduced.
The reason why arcade was chosen as the first user group for promotion is because of its semi-independent nature.
For a game or an arcade machine, the chip only needs to serve the game without too many complicated instructions.
If it is used as a computer CPU, it goes without saying that there will be many bugs.
Nowadays, most of the people who buy computers are commercial companies, and there are too many problems, which is not good for SIC's reputation.
As the first commercial platform, arcade machines are perfect for slowly testing out the defects and deficiencies of chips without causing too much loss.
In addition, Namco and Shirakawa Electric have a good relationship, so there is no doubt that it will be the first target.
In addition to Namco, Shirakawa Kaede will also visit Taito.
Although the arcade market is limited in general, the shipment volume is still acceptable throughout the year.
If an arcade game is quite popular, it is not bad to sell 50,000 to 60,000 units a year.
If it is a super popular game, it is easy to ship 100,000 units in the first year.
This is just the Neon market. You should know that both Namco and Taito have branches in North America.
Adding up these parts, the total shipment volume is also quite considerable.
Shirakawa Feng is not greedy. As long as SIC's chips can sell 100,000 pieces in arcade machines, it will be considered a great success.
In the first year of commercial use, profit is secondary, and not making a loss is considered a goal achieved.
In addition, the cost of US$30 is determined based on a shipment volume of 100,000 pieces. If production is further expanded in the future, the cost will continue to drop by half.
In addition to SIC8089, SIC is also developing pure 8-bit chips.
Why did they go back to making 8-bit processors with lower performance? The answer is market demand.
Some industrial equipment and low-end consumer electronics still use 8-bit processors extensively.
Although the profit is relatively thin, the market demand is huge, so it is definitely worth a try.
The architecture at SIC is ready-made, and we can save a lot of time by doing family processing on this basis.
After taking Nakajima Heitaro and Yamazaki Teru to conduct the first test of the chip market, Shirakawa Kaede was not in a hurry to open up a second market.
He will develop slowly in the early stage, and after gaining recognition in the arcade market, he will plan to talk to Fujitsu again.
As the president of SIC, Heitaro Nakajima will also tentatively promote SIC8089 and even the 16-digit 8081 to professional institutions.
In his early years, he worked in national research institutes, so he has his own network of contacts.
Of course he has to make use of the resources, which is one of his responsibilities as the president of SIC.
Oh yes, in addition to this, we also have our own game console.
Yes, Shirakawa Kaede is finally planning to try his hand at the home game console field.
With our own chips, other problems will no longer be obstacles.
However, when Shirakawa Kaede arrived at the HAL Research Institute, Akagi gave him an unexpected news.
"Is Xuyu Seiko going to raise the price?" Baichuan Feng frowned instantly.
"That's right," Akagi said with a grim expression. "The reason they gave was that there was a fire in the factory. The production capacity will be limited next month, so the price of LCD will rise to 600 yen per piece."
"Haha" Hearing this reason, Baichuan Feng almost laughed out of anger.
Could it be that the tradition of factory fires has been passed down to the Koreans from childhood?
If he didn't know where the Suba Seiko factory was, he would have almost believed it.
Just across the river from Shirakawa Kaede's office window, on the other side of the Tama River, he could even see the outline of the other party's factory.
Fire? There's not even a smoke, and you tell me there's a fire?
The Koreans would even light a cigarette to act out their performance, but you don't even try to act.
He didn't know why Xuyu Seiko suddenly raised its prices and used such a blunt reason.
But Shirakawa Electric certainly cannot accept such a price increase.
600 yen per piece, which is double the previous 300 yen per piece, is simply unreasonable.
Shirakawa Electric's handheld game console has previously lowered its price because it improved the display technology and changed the number of games to one.
Profits have already decreased, and now that LCD screens have increased by another 300 yen, the profit left for Shirakawa Electric will be even less.
Small profits but quick turnover, if the profit is too thin, it will affect the revenue of Shirakawa Electric.
"Besides Suba Seiko, have you asked for a quote from Sharp?"
Currently, apart from Suwa Seiko, only Sharp is engaged in LCD business.
After all, it is an emerging industry in recent years and there are not many entrants.
"Have we sent a tentative inquiry to Sharp?" Akagi's face was still grim.
"What do you mean?" Bai Chuanfeng raised his eyebrows.
"It's still 600 yen."
Hmm? Baichuan Feng smelled an unusual smell.
Suwa Seiko and Sharp are raising prices together. Is this a joint effort to monopolize the industry and manipulate market prices ?
Baichuan Feng was a little unsure, so he decided to just call and ask.
Picking up the phone on the table, Baichuan Feng dialed a number he hadn't heard from for a long time.
"Moshimoshi?"
"Yamauchi-san, it's me, Shirakawa."
"It's Mr. Shirakawa. What a rare visitor." Yamauchi Hiroshi leisurely held the cup of coffee and greeted him unhurriedly.
"Your recent game Donkey Kong is really amazing.
After I tried it, I am still fascinated by it. "
"Really? It's an honor for Nintendo to receive praise from Mr. Shirakawa." Yamauchi Hiroshi was still smiling and being polite with him.
"I guess your company will port it to a handheld console soon. It's really stressful just thinking about it." After saying this, Shirakawa Kaede concentrated quietly.
"Mr. Shirakawa, you are kidding. Your company has produced countless good games. Pac-Man and Snake are both classics that have yet to be surpassed.
For Nintendo, Shirakawa is the company we need to learn from.”
"Mr. Yamauchi is too modest. I will not bother you anymore. I will visit you in Kyoto when I have time."
"You are most welcome."
After hanging up the phone, Yamauchi Hiroshi seemed to be thinking about something.
He was not surprised by the call from Baichuan Feng, but what was strange was that the other party only asked some irrelevant questions.
Suddenly Yamauchi Hiroshi was stunned, then gave a bitter smile.
In the end, I underestimated him and fell into his trap without realizing it.
What an amazing guy, he has a very sensitive sense of the market.
In Tokyo, Shirakawa Kaede hung up the phone, but his expression suddenly turned ugly.
"President, how is it?" Akagi looked at him eagerly.
"Baichuan Electric has been targeted." Baichuan Feng's face was uncertain.
