imagine it like a printing press. it takes hundreds of thousands of dollars and lots of time to build and lay out the press, but the pages it prints - the chips - are cheap and quickly produced from the expensive machine. what happened was they spent the huge amount of investment money that it takes to begin fabricating chips only to discover after receiving the first batch that they run too hot. so hot, in fact, that they basically melt the surrounding materials on the board.

i'm not making this up. there was a wired article posted with an interview of josh from bfl.