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Economics and Sustainability

Explore the cost components of design, from research to marketing, using the 1990 Sun Color Workstation as a case study. Understand the influence of financial factors on sustainability and success in the tech industry.

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Economics and Sustainability

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  1. Economics and Sustainability Financial Factors Influencing Success

  2. What are the Cost Components of a Design? • Research • Engineering Design • Hardware Components (ICs, boards) • Software • Manufacturing

  3. Costs (continued) • Testing • Engineering Support • Service • Sales • Marketing • Business Infrastructure

  4. Component Costs1990 Sun Color WorkstationRef: Computer Architecture: A Quantitative Approach, Patterson & Hennessy, 1990. • CPU Cabinet • CPU Board • I/O Devices

  5. Workstation Component Costs (continued) Rule of Thumb Cost % CPU Cabinet Sheet metal, plastic $50 1% Power supply and fans $.80/watt $55 1% (50¢/watt in 2001) Cables, nuts, bolts $30 1% Shipping box, manuals $10 0% Subtotal $145 3%

  6. Workstation Component Costs (continued) Rule of Thumb Cost % CPU Board IU, FPU, MMU, cache $800 16% DRAM $150/MB $2400 48% (40¢/MB in 2001) Video logic (frame buffer, DAC) $500 10% Printed circuit board 8 layers $1/sq. in. $50 1% (17¢/sq. in. in 2001) Subtotal $3850 76%

  7. Workstation Component Costs (continued) Rule of Thumb Cost % I/O Devices Keyboard, mouse $50 1% Display monitor $1000 20% Hard disk $4/MB $400 (1¢/MB in 2001) Subtotal $1050 21%

  8. Cost Versus Price • Categories that make up list price • Direct Costs - costs directly related to making the product. Includes labor, scrap, warranty (typically adds 25% to 40% to component cost) • Gross Margin - overhead that cannot be billed to one product. Includes R&D, marketing, sales, manufacturing equipment maintenance, building rental, cost of financing, pretax profits, and taxes (typically 45% to 65% of average selling price)

  9. Cost Versus Price(continued) Cost * (1 + Direct costs) (1 - Average discount) * (1 - Gross margin) List price =

  10. Average discount Add 33% to 66% for average discount Gross margin Gross margin Add 82% to 186% for gross margin Direct costs Direct costs Direct costs Add 25% to 40% for direct costs Component costs Component costs Component costs (15%-33%) Cost Versus Price(continued) Component costs

  11. Sustainability • Maintains functionality and user satisfaction over an extended life cycle • Compatible with existing and emerging standards • Tracks positive pricing and availability trends in technology (e.g., design includes new, innovative IC’s that are likely to be produced competitively in volume)

  12. Sustainability (continued) • Position in market evolves by freely encompassing new technology (design is resistant to being outdated by competing, incompatible technology) • Design is low maintenance (service costs are controlled) • Quality control in part supported by design for test features

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