Quote from: Puppet on October 31, 2013, 07:15:57 AM

$5M is at the high end of my estimates, keep in mind a bitcoin asic in all likelihood is much simpler than typical soc's/gpu's/etc and requires only a minimum number of layers/masks, but generally I agree and you are in the right ballpark. But so what? We were talking about marginal production cost, NRE by definition isnt part of that. NRE is a sunk cost, and therefore doesnt matter to pricing during the 'end game", when miners margins have dropped so low that vendors will have a choice between not selling anything, or selling something above marginal cost. If there is no longer a reasonable operational profit margin to be had, vendors may call it quits, but as long there is a profit margin to be had, they will sell (or self mine), NRE be damned. IOW NRE will be a key factor determining if vendors end up making a profit or not (and IM pretty sure they all will), but its not a factor in pricing.

you talk of $5m like its nothing. you say its sunk cost like you can forget about it. The important thing is that its cash thats required to be paid, BEFORE, the chip goes into production... thus its cash that must be raised, somehow... which in the bitcoin world is via pre-orders since there is no other way of raising cash... as no investor is going to invest $5m+ in a risky venture like a bitcoin mining venture.

actually, one company did successfully raise the $5m needed to make their own asic without taking pre-orders - 21e6 LLC. http://www.whogotfunded.com/deals/182363-21e6-llc

but no one else that i know of has successfully raised vc funding to make an asic chip, which means they must go through the pain and heartache for all concerned of taking pre-orders, til they hit the $5m level, and then they can tape-out. actually, lets use the number of $4m (nre of $3m and $1m design cost)

And even after they've taped out.... the nre costs are not 'sunk costs' - because they haven't been spent yet. Sunk costs are costs in the past that have been written off - but in the bitcoin world, no company has sunk costs. The cost of the NRE must be raised in order to go into production - and because it is extremely low volume production the entire nre and other up front costs must be amortised or attributed to a very small number of chips manufactured. we're not talking millions of chips like nvidia/intel/amd make... we're not even talking hundreds of thousands of chips. we're just talking of low numbers of thousands of chips... i.e., just a few tens of wafers. And thats why the $4m up front costs will significantly and directly affect the price of each asic.

lets say, for arguments' sake that a 28nm wafer might cost $15,000 (in low volume, remember). A Wafer is approx 70,000 mm² and a hashfast chip is 324mm² thus the max yield is 216 asics... but in practice, the yield will be less so lets say you can reliably get 150 good asics on each wafer. Then that means that although the hard cost of each asic is approx $100 each, plus packaging/substrate costs... so lets round that up to $120-140 for a decent package that can handle a lot of power and is good for heat dissipation. Now, since you may only make, say 10,000 asics in its short lifetime... (that would be approx 5 PH!) you have to divide the NRE and all other up front costs, and attribute them into the cost of each asic that you make - since none of the NRE payment applies to any future asic so its attribution is limited only to the asics you actually make... and $4m divided by 10,000 is another contribution of $400 for each and every asic. YES, that *is* the way it works... you don't ignore your up front costs. They are very real and they have to be amortised into each and every asic you make (since the volumes are so low, it becomes a significant part of the cost of each asic)

If you get to make more.. lets say you make 10 PH.. then you halve the amount, per asic, that your NRE costs will be attributed to each asic.

Thus the actual cost of each 400/500 GH asic is actually just over $500 (assuming 5 PH in total are made) and $300 (assuming 10 PH in total are made).

of course, the numbers get lower, the more asics you make... but at 5-10 PH, per asic company, thats already a lot of PH's and there's a lot of asic companies so i think its unrealistic that any one company is going to sell more than 5-10 PH's on their own, in the lifetime of any one asic.

-- Jez