Monday, September 27, 2010

The $80 ultra-portable - in unexpected form

Jean-Louis Gassée, once CEO of Apple head of Mac development, drops a stunner in mid-column ...
The Carriers’ Rebellion | Monday Note

... Google wants to see smartphones priced at $79, without subsidy, thus taking away the carriers’ opportunity to dictate features. At $79 and no contract, consumers can change handsets and carriers at will. This frees Google to have a direct relationship with the consumer, allowing their money machine—advertising today, entertainment and business services tomorrow—to run unimpeded.
That's quite a precise number. Not "below $100", $79.

Think about that. Take your time. I'll be back.

We're talking about a computer that outclasses the desktop G3 iMac of 2001. There's no reason it couldn't work with an external monitor as well as an external keyboard. Incidentally, it's a phone too.

Yeah, they're thinking big. Forget the "Chromebook" I was so excited about a year ago (though I still hope we see it). This is so much bigger.

Can they do it? Today's smartphones cost about $500-$800 without a (carrier) subsidy. This seems like a big price drop -- unless you're about 50 years old.

If you're old enough, you remember the calculator price drop. In a few years they went from about $500 to cereal box prizes.

That never happened with computers. Instead the capabilities skyrocketed -- but the price never truly fell. A 1988 Commodore 64 and a 2010 bottom-of-the-heap netbook cost about the same. The difference was partly moving parts, calculators were almost pure silicon -- computers had drives and big power supplies and keyboards and so on. A lot of the difference though was IP protection and patent licensing.

I think this would have happened to the original Palm III if it had survived, but they didn't have a business model supporting a $10 PalmOS device. Google has the business model.

I don't doubt that it will be possible in 2012 to produce a somewhat junky version of a 2009 iPhone for a marginal manufacturing cost of less than $80 -- if you can manage the IP costs and if the payor has a separate (subsidizing) revenue stream. To do it Google will have to buy some IP, and cut deals that appeal to IP holders only when you start to talk a billion devices.

In the meanwhile, China will be doing the same thing internally -- and they don't really worry about IP costs.

Interesting times.

4 comments:

Anonymous said...

Jean-Louis was never the CEO of Apple

John Gordon said...

You're right of course. I fixed my post

When Gassee replaced Jobs, Jobs was not CEO, he was head of Mac development and Sculley was CEO.

http://en.wikipedia.org/wiki/Jean-Louis_Gass%C3%A9e

Charlie Stross said...

I reckon you're right. And I reckon it's going to happen as and when we begin to asymptotically approach the end of Moore's law -- as we have lots of chip fabs that are fully amortized cash cows, and the new fabs are becoming exponentially more expensive while delivering smaller and smaller performance benefits (with the result that, demand for the cheaper, older components will remain firm for longer).

At that point, consumer electronic costs will fall off a cliff, share prices will tank, and there will be much wailing and gnashing of teeth -- just as there was in the early 70's, when civil aviation hit the buffers with the Boeing 737 and 747, which in hindsight ushered in the age of cheap air travel.

John Gordon said...

Ah yes, great comment on what happens when the job is done.

With calculators the job was done because the device had nothing left to do (until it became the HP emulator in an iPhone).

With computers the endgame is when the hardware runs out, and the IP is all software ...

Then there's nowhere to run but price, leaving Apple as Mercedes and China as everything else.