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| Topic: |
Technology
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| Number of pages / Number of words: |
4 / 843 |
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This relationship forms what economists call an economy-of-scale curve, and it applies to a number of capital-intensive businesses, including semiconductor and automobile manufacturing.
Let's examine the concept in detail. Imagine that it costs an average of $200 per chip to produce 2000 identical chips for a networking application...
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Imagine that it costs an average of $200 per chip to produce 2000 identical chips for a networking application. If you then increase the volume to 4000 chips, the average unit cost drops to $120 per chip. Increase it further, say, to 6000 chips and the cost per chip will drop to $100. This is a consequence of many factors, but mostly the rise in operational efficiency and manufacturing yields...
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General points of the essay
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