Re: [OPE-L] personal computer prices

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Tue Jun 05 2007 - 10:20:32 EDT

> On the role of design automation, this is one factor, but probably a
> secondary one in the fall of PC prices. More important is the role of
> copying technologies, which Babbage long ago identified as a key factor in
> raising productivity.
> PC chips are produced by a variant of printing technology, the printing is
> photographic and on a very small scale, but it, like the printing press
> bebore it, allows standardised flat objects to be replicated with an
> amount of labour that is relatively independent of the detail involved.
> In consequence, more and more of what were once distinct chips - of the
> order of a hundred on original models of PC, are now integrated into just
> a  few large chips. Both todays chips and 1980s chips are produced by
> photographic processes but the improved detail achieved by modern photo
> lithography allows far fewer components to be used. The labour input to
> production is proportional to the number of chips placed on the board
> times the labour input that goes into each chip. The latter - for large
> chips
> processor chips at least, has not fallen drastically and may even have
> marginally risen. On the other hand the design time per transistor of the
> processor chip certainly has fallen thanks to the use of high level design
> tools. This rise in productivity measured in transistors placed per
> working day, has largely been consumed by designing more an more
> complex chips,  since the numbers of transitors per design has grown
> exponentially.
> The final think to take into account is the amortisation of the designs
> across much larger production runs.  This is particularly noticeable in
> the other mass market for processor chips - mobile phones.

Hi Paul:

I agree that  the  wages of skilled workers have been a relatively
insignificant  factor in the  determination of the price of personal
computers.  I also agree with many of the other points you made above,
but if we are to compare prices of  personal computers today with prices
three decades ago,  I think the most remarkable thing is how _little_ the
prices have changed over that period.   Certainly, prices decreased _far_
less rapidly than anticipated by industry experts, computer engineers, et al
in the 1980s and 1990s.  Of course, it's true that there has been product
development throughout and computers today are much faster, more
capable, etc. than those of  earlier generations, but the prices have
remained relatively stable.   So, there has been ongoing product development
and differentiation combined with relatively slow decreases in price. A key
for grasping  this development is understanding the market power of  the
computer-producing  firms and  price determination in oligopolistic markets.

In solidarity, Jerry

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