Margin

Margin is the difference between the cost of acquiring the product and the price for selling it. Ingenic Semiconductor sells 7 inch tablets for $85 FOB (factory gate) which cost them only $35 for materials. Add a few dollars for assembly and packaging and they get perhaps $40 margin for each unit, a huge percentage of the selling price. They can do that because they use a MIPS processor and Android/Linux 4 so they don’t have to pay taxes to anyone for the technology. At a retail price of $120 shippers and retailers also can make money. Everyone makes money on the transaction except Wintel because no one needs them to produce pretty good technology.

On the other hand, Wintel is trying to sell “ultra”books at close to $1000 and OEMs are thinking they will sell a bunch at a few percent margin with Wintel raking in huge profits. What’s the consumer going to choose, something that can give the whole family and the in-laws a decent computing experience for a similar price or something that works for only one person and sits idling most of the time? Oh yes. There is a market for these low-end gadgets everywhere on the planet. They are not that “low” and end when it comes to performance. They definitely provide acceptable performance for many purposes with all the advantages of portability.

For prices like this an ordinary person gets all the IT they need in a great package:

FLOSS works for IT everywhere. It provides great computing at a great price and everyone wins. I recommend Debian GNU/Linux for IT. It’s a cooperative product of the world and works for you and not some corporation with a monopoly. By spreading the margin out along the supply chain everyone benefits, even the end user.

see Digitimes – China CPU designer offers low-price Android 4.0 tablet PCs

See also, MIPS Technologies and Ingenic Semiconductor Announce Availability of World’s First Android™ ‘Ice Cream Sandwich’ Tablet

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
This entry was posted in technology. Bookmark the permalink.

12 Responses to Margin

  1. Dann says:

    You are dead on with the $1000 tablets, Pogson.
    I purchased a Thinkpad X61 (1.8 GHz core2duo) a few years back for that much. When it’s plugged in, it heats up enough to make my hands sweat, on powersave mode it’s okay.

    The fact is, I use it mostly for artwork; if they came out with a tablet I could root and install Gentoo on with 2 gigs of ram and a wacom screen w/ pen, I’d be more than content with an 800MHz single-core processor. I imagine the cost would be $300 or so, a third of what I paid. Even with KDE installed on the X61, I can’t get the damned thing to use more than ~1.2 GB of ram, and that’s while mounting my /var/log, /var/tmp and /tmp to ramdisks as well.
    It uses Mint Debian btw.

  2. oiaohm says:

    Dr Loser problem is the CPU designs used in adsl modems are just as general purpose as the x86 chip designs.

    Only major difference is speed. Its like scientific vs general calculator. There are getting enough cpus now that have enough processing power to split the PC world in two. So we have Linux on what would be the general calculator hardware version of a PC.

    Then the x86 stuff becomes like the scientific that only a small percent of the population need.

    Heck there are some really fancy ADSL modems with a LCD activity monitoring screen.

    By the way “general purpose” defense was put up by makes of advanced calculators as well when what is the most common calculators appeared.

    That there scientific calculators would still sell to the general public very well because it was more general purpose. We all know how that turned out.

    I see nothing that makes this time any different.

  3. Dr Loser says:

    @oiaohm:

    “People fail to think of there adsl modems as computers.”

    You don’t say?

    Have the words “general purpose” entered your thick skull at any point in recent memory?

  4. oiaohm says:

    http://rhombus-tech.net/faq/

    Yes the next generation after Raspberry PI is already heading in the design stage. 35 to 15 dollars shipped 7 dollars local pickup in china. This thing is 3 times faster than the Raspberry PI with sata harddrive support.

    The margin battle is on. This year we could go through two generation of FOSS hardware. In two generations well could be looking at quite decent main boards for Linux business desktops for 10 dollars a seat.

    This is the problem what is the min theory price to make main-board and make a profit about 5 dollars. So we are getting close to the bottom here.

    Also be aware this board is low power consume.

    Spend 20 dollars case and another 10 interface board. Nice machine that will run for 45 dollars. Most expensive part will be the hard-drive for extra storage.

    Windows 8 ARM for 5 to 10 dollars please MS to obey you 10 percent of device cost rule.

  5. oiaohm says:

    I forgot to mention that the Raspberry PI is coming off a production line that can be reprogrammed at will to make a stack of different other devices as well.

    Raspberry PI is coming off the same production line as broadcom based adsl modems, switches and other items.

    People fail to think of there adsl modems as computers.

    Basically Raspberry PI is a demo of the hell that is coming. One day you will be able to ring up and order a custom device of whatever. Think POD print but now its electronic devices. Only possible as robot production lines advance.

  6. oiaohm says:

    Clarence Moon you are missing the picture and its a bad one.

    What unfortunates boss will not even see them. You are missing what is happening.

    Humans in factories to make these devices is going by by. Humans in shipping will be next on the chopping block. In the end from factory to consumer only human to possible touch the product will be the person working in the retail store and the consumer.

    If you order on-line you might be the first human ever to touch even the outside of the box.

    Unfortunates who lose there job over this process will not have any way of increasing productivity to keep a income. We are going threw the industrial revolution all over again. Except this time it robots.

    Raspberry PI the $35 USD computer coming fully robot assembly line is what its coming off of. What they will be able to build for 35 dollars in 12 months time will be more powerful for the same amount of resources.

    Many of the future devices will be produced this way human labor will not be a factor. Material and power costs to make the devices will be.

    Really next year I wonder if MS will release Windows 8 for the Raspberry PI successor. If so will it be 5 dollars.

    Problem with online sales Clarence Moon is that the hardware maker and the retailer is the same person cutting out the middle man in some cases.

  7. Clarence Moon wrote, “So what is the point of all this, Mr. Pogson?”

    The point is that the world needs IT and does not need it rationed by M$ with high costs. Now more people can produce, distribute, service and use IT and everyone shares the wealth. Businesses can figure out how to make money from IT at any price. They can even give it away and sell services. The end user benefits fully from the combination of Moore’s Law, FLOSS, networking, education and cooperation. It’s just the right way to do IT.

    IT is the modern equivalent of the printing press, something that made knowledge available to all at a reasonable price. It also breaks down barriers to any and all to distribute knowledge and services to the world. M$ wanted a monopoly on that so that it could profit immensely for very little effort. Now, M$ will have to work for a living like everyone else. It’s a good thing.

  8. Clarence Moon says:

    So what is the point of all this, Mr. Pogson? There is no doubt that there is not much of a market value for a tablet OS in the face of such manufacturing economies and such low product pricing. For that matter, there is not much market value for the hardware either. Certainly there is not much value for the retailer.

    There is not much in it for the world economy either if you are replacing a $500 PC with a $120 unit. Discounting the value of the sand that goes into the silicon and the oil that goes into the plastic, all that happens here is that the same manufacturing and distribution chain that was fed a total of $500 in the past is now cut down to $119. Perhaps these unfortunates could get as much money as they used to if they worked harder and quadrupled their output, but that seems like a dismal prospect for the future.

    You are not going to be able to punish Bill Gates or Steve Ballmer financially. Their money is already in banks throughout the world and they can afford to buy anything they want, even a 777 airliner and crew to fly it for them.

    Right now the economy of the world is improving with these tablets because they are all in addition to the PCs that have come before them and continue to be used by just about everyone. I think that will continue, else the price for the tablets will have to rise to keep the machinery running.

  9. oiaohm says:

    Phenom correct up to windows NT 4.0.

    Year 2000 MS bound us down to x86 only. Android and other competitors is forcing MS hand to open up the CPU game again.

    NT 4.0 support PPC Alpha and MIPS on top of x86
    NT 3.51 was the interesting one that support the Sun Sparc chip.

    x86 you have to be licensed to make and there are a limited number of Licenses in existence.

    MIPS anyone can choose to make a MIPS chip no License required. ARM you require a license but you can go to ARM and just buy a license.

    Basically MS nicely bound everyone into hardware that we could not have true free and open competition between hardware makers. Even arm does not allow full freedom in hardware makers.

    This is part of my hate of MS. I can see exactly how they have caused the market to become over priced for results.

  10. Phenom says:

    MIPS… Wasn’t that a platform with Windows NT supported fully in its early days?

  11. oiaohm says:

    Dr Loser MIPS and ARM are the two most common mobile phone chips.

    MS currently only supports one. Android supports both.

    So yes android and Linux has a very broad playing fielded Mind you some of those mips chips have extra instructions to help qemu run x86 binaries.

  12. Dr Loser says:

    We’re suddenly off ARM and onto MIPS?

    My< Robert, what a gadfly you are.

Leave a Reply