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Comment by ArchD | Hacker News Reader

What are some of the intricacies in the 45-cent chip that makes it hard to produce by a large number of different fabs?

In the absence of more details, it seems to me that a cheap, 45-cent, chip should not be so complicated that only a small number of companies can produce it on-demand.

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It's not a matter of intricacy. It's a 'low tech' power chip that is made on fully depreciated and outdated equipment. Most likely all Infineon lines were running at capacity at that time and they had no place to put it. Setting up a new line would not make business sense since a new equipment would cost in the realm of $250 Million for a line, and take a year or more to set up. Not to mention, lead times for new equipment was also extending. By that point, the crunch may as well have ended and they'd then have more capacity for that device than they needed, and no ROI on their $250M.

> Setting up a new line would not make business sense since a new equipment would cost in the realm of $250 Million for a line, and take a year or more to set up. Not to mention, lead times for new equipment was also extending.

Here's where this could get ironic: what if they wouldn't be able to set up that line anyway, since the equipment they'd need itself requires the very chip they just stopped producing?

I wonder if such circular dependencies are already a consideration in the semiconductor business.

I feel like the number of such chips required for “production scaling” would be so low that they could find a cache of said chips for said purpose if they wanted/needed to.

I am having trouble wrapping my head around a business that costs 250mm and a year+ to enter not increasing its prices earlier or even more than the current 80 cents. It must be that they are also limited in their ability to increase price by people just paying the cost to redesign to another chip in the medium to long term?

knowing it would cost that much ahead of time would let the purchaser and engineer work together to determine if it would be more cost-effective to swap that part out for a similarly specced but less expensive chip, or rework the circuit to use a slightly different chip, perhaps with two chips instead, or more jellybeans to make up the lost functionality

a ten million dollar machine missing a 45 cent part probably costs a few hundred thousand to redesign around that part. a mass market vehicle that needs multiple of those part per SKU would be cheaper to re-engineer

> knowing it would cost that much ahead of time would let the purchaser and engineer work together to determine if it would be more cost-effective to swap that part out for a similarly specced but less expensive chip, or rework the circuit to use a slightly different chip, perhaps with two chips instead, or more jellybeans to make up the lost functionality

And now you have not one but 2-3 chips that are in demand and price rises for those too.

Also in case of cars and similar equipment there would be a bunch of re-testing required so that drives cost of reengineering hard.

Especially if said part was used as "jellybean" across a lot of modules just because it's cheaper to buy same part in bulk

if a part started off costing 45 cents, it can't be too difficult to reproduce using transistors or similar components from competitors. re-certification for simple subsystems like that (or just using a competitor's chip) would still be less expensive than paying $100 per part on a SKU/car that you are producing 10,000+ units of. TI's 74AHCT595 is probably functionally similar to Nexperia's/NXP/Diodes Incorporated (digikey shows those 4 vendors for that chip)

there is also the option of the buyer just saying 'nope, not worth it', and cancelling the product line the chip was bound for, which would be worse for the chip manufacturer who just sunk millions into producing the part

it's an intricate balance :) regulatory bodies aren't fans of price gouging either, and might step in if the delta is actually that drastic (tangential but relevant https://en.wikipedia.org/wiki/Martin_Shkreli#Daraprim_price-...)

Because prices have zero, or close to that, to do with costs. If your costs are too high for the market to accept, you simply go out business.

Oh, I mean, if it costs enough to enter the market that other people don’t step in during times of high demand and scalping, why don’t the original manufacturers raise their prices to closer to what the scalpers/resellers are getting, at least until some competition arrives. there must be some mechanism making that unattractive / not work is all I mean - maybe the fact that people can redesign to a different chip.

Production is cheap, engineering is expensive.

If you raise your prices too much, people will switch to competitors. This means that nobody is buying your product, so you'll never get to recoup the engineering expenses. Even worse, you'll become known as a manufacturer with unreliable pricing, making your chips very unattractive for new designs.

Having a steady and well-known demand might be a lot more valuable than the short-term profit you can squeeze out of the current shortage.

I guess if those chips were much more expensive for a long time, car manufacturers would find other solutions than using them. A shortage makes them wait rather than redevelop the whole product. So for the chip manufacturer it's better to keep prices low to avoid losing customers altogether.

The problem is that the different fabs are, well, different. While on a high level they are basically doing the same thing, the actual process itself can vary quite a bit.

While you start with a fairly generic design, the final production artifacts are highly specialized to the fab. The fab essentially provides a "library" of components which are used to translate the generic design into something ready for production.

Switching fabs means re-engineering your design, re-running prototypes, re-validating basically every single part of your chip. This is a process which can easily take many months, perhaps even a year. Not to mention significant engineering costs.

Doing all this once is acceptable because you can just keep using that single design for decades. That's why each individual chip can be so cheap: production cost is near-zero, and engineering cost can be amortized over a giant volume.

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