cheesecake
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Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 5:50 pm

I'd like to have an open discussion on the economics and long term availability of Raspberry Pi.

As an engineer here are the things I know:
1) Raspberry pi is a 6 layer board with 256mB ram, ethernet, usb hub and hdmi connector. It has components on both sides. This is an expensive board to produce.

2) I talked to the Jason @ Ti who attends all the beagleboard/beaglebone. He says beagleboard / beaglebone are not for profit. eg they make nothing. However beagleboard is still $149 and beaglebone (without hdmi port) is $89. He estimated if I built 100,000 units of beaglebone it would cost me $50 to build. If I built a dozen boards, the assembly would cost me $15,000 in NRE fees just to set up the board assembly. I asked for a volume quote in case I wanted to make commercial product from Ti's direct supplier and they quoted me $75 if I bought 1000 direct from the manufacturer. Again beaglebone has no HDMI out and the cape costs something like $50. Other mini SOC linux devices which are labelled development boards eg Sheevaplug sells for $99. These are also non profit devices.

3) People do not work for free. If you work at a good company like Google or Apple your average salary as a mid level engineer (Eg someone that knows what they are doing) is around $120,000 USD/ year. However there is overhead like paying for secretaries/managers/sales people/taxes/stock options/health benefits/etc and the real cost per employee is going to be in the neighborhood of $200,000 per engineer per year. Let's assume all the engineers work for free and there is no overhead because they are all volunteers (by the way any of you want to mow my lawn for free while you are at it?) you still need to pay the distributors. It is common knowledge most distributors want to take ~30%. If you sell something at Best Buy or Digikey they want 30% profit to package/ship and handle RMAs.

4) Yes there are other good deals, $50 tablets was mentioned in another thread but these are /blowouts/. These are well below cost. For example examining Amazon.com's Kindle Fire documents show they are losing money on this device at $199. They make millions of Kindle Fires and I am sure have the best pricing but they only hope to make money on the book sales. However there is no reoccurring revenue with raspberry pi.

5) Raspberry pi is not a super high volume product like iPhones or tablets which sell in the tens of millions. This means the component cost is actually much higher. 10k initial run is nothing and the cost to produce these was probably several hundred dollars divided by all the costs. Estimates are they will ship 500k units this year but this is to be seen.

5) My point is how can Raspberry Pi be sold for $35? The conclusion seems to be that it is a marketing ploy. Probably by Broadcom to advertise their chips. A company can spend $500k for a 30 second commercial on an average TV show or several million on a superbowl commerical or they can pay a company like raspberry pi to subsidize the cost. RPi seems to be getting a lot of media attention so it is well worth it.

6) "I don't care I was still able to get the Pi for $35...." Yes but this cannot last forever. If it costs $50 to make the device (reasonable considering my discussions about beaglebone at 100k quantities) and they sell for $35 and probably kick back $5 per device to the distributor this is at least a $20 loss per device. What's the real difference between a $35 device and a $200 device if I only have one of them? Probably none to the average consumer if the $200 device provides a much better experience (eg faster, has a screen, etc). Consider it costs $50 to fill up a tank of gas nowadays in the USA and it doesn't matter much.

So what is the true market for Raspberry pi if they make no money? I think most people get one either for a) novelty and throw it away after a short time b) plan on making some commercial product with it. Raspberry pi is not usable by itself. You need an sd card, power supply, keyboard, a mouse and a screen for it's intended purpose. For teaching kids programming, a cheap netbook at $150 is a better deal.

As a commercial product platform, I would gladly buy 1000 devices but who's going to eat the $20,000 loss? What if I got much bigger and wanted to buy 100,000 or 1m devices? Broadcom still willing to shell out $2m-$20m in losses on my personal for profit project?

Any comments?

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mahjongg
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:00 pm

Any comments
Yes, this is just unfounded speculation by you. :mrgreen:

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alexeames
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:03 pm

Interesting post. It does come across a little bit like you don't believe what we're being told by the founders. I think many here, including me, DO believe what we're being told by the RPi Foundation. The fact that the technical design work has been donated makes ALL the difference I reckon. It's a charity. TI isn't - they have to pay all their workers.
Last edited by alexeames on Sat Jun 23, 2012 6:06 pm, edited 1 time in total.
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ukscone
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:03 pm

As has been said on many occasions the cost to build the Raspberry Pi is not subsidised by anyone, the cost to make the board is $25 - X & $35 - X where X is some value that only members of the foundation (& the two manufacturers) know the actual number. The foundation have actually pulled an ARM & license the design to the currently two manufacturers who are making a small profit on each board so until people stop buying the raspberry pi it'll be continue to be built.

cheesecake
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:14 pm

If you read my quote, TI said the cost to BUILD the beaglebone (eg all the engineering has already been complete) is $50 in 100k quantities.

My cost to buy 1000 units direct (by passing the distributors) from the source Ti buys from is $75.

Furthermore Raspberry pi does not release complete BOM and gerbers like TI (or at least I couldn't find it) so if they decide to go under, another company cannot simply go ahead and make the board.

TI's beaglebone is completely opensource and uses a processor which you can get the datasheet for.

Raspberry Pi chose the Broadcom chip for some reason which is unknown. Again you cannot even get the datasheet for the chip without extreme hurdles. Most likely they got the chip for free, were paid to use the chip or Broadcom engineers did a bunch of the development for free.

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alexeames
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:25 pm

cheesecake wrote: Most likely they got the chip for free, were paid to use the chip or Broadcom engineers did a bunch of the development for free.
We've been told they did not get the chip for free.
We've also been told that the Broadcom engineers did a bunch of development work for free - mostly in their own time. :) Several of the foundation members work for Broadcom in their day jobs.
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ukscone
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Re: Economics of the $35 / $25 Raspberry Pi

Sat Jun 23, 2012 6:29 pm

cheesecake wrote:If you read my quote, TI said the cost to BUILD the beaglebone (eg all the engineering has already been complete) is $50 in 100k quantities.
You sir are a troll. as has been said on many occasions the cost to BUILD!!!!!! the Raspberry Pi is $25 & $35 - X
cheesecake wrote: My cost to buy 1000 units direct (by passing the distributors) from the source Ti buys from is $75.
And your cost to buy 1000 units is $25 or $35 * 1000 + s&h
cheesecake wrote: Furthermore Raspberry pi does not release complete BOM and gerbers like TI (or at least I couldn't find it) so if they decide to go under, another company cannot simply go ahead and make the board.
The foundation hopes to be able to release things like that in the fullness of time but things like this need to be negoiated & all the I's dotted and T's crossed and it takes time although unless you are going to be building significant quantities (in the millions) you'll not be able to buy the SoC & you probably don't have the assembly line tools to build it anyway so the point os moot
cheesecake wrote: TI's beaglebone is completely opensource and uses a processor which you can get the datasheet for.

Raspberry Pi chose the Broadcom chip for some reason which is unknown. Again you cannot even get the datasheet for the chip without extreme hurdles. Most likely they got the chip for free, were paid to use the chip or Broadcom engineers did a bunch of the development for free.
The foundation choose the chip as it gave them the best bang for their buck and several of the chips designers are working with or for the foundation and thus were able to pursuade broadcom to sell them the chip in quantities they wouldn't normally even cross the road for. [the price the foundation pays is the price that everyone else pays so no subsidy]

As i said you are a troll of the highest order so i'm going to lock this thread

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Re: Economics of the $35 / $25 Raspberry Pi

Sun Jun 24, 2012 7:33 am

cheesecake wrote:If you read my quote, TI said the cost to BUILD the beaglebone (eg all the engineering has already been complete) is $50 in 100k quantities.

My cost to buy 1000 units direct (by passing the distributors) from the source Ti buys from is $75.

Furthermore Raspberry pi does not release complete BOM and gerbers like TI (or at least I couldn't find it) so if they decide to go under, another company cannot simply go ahead and make the board.

TI's beaglebone is completely opensource and uses a processor which you can get the datasheet for.

Raspberry Pi chose the Broadcom chip for some reason which is unknown. Again you cannot even get the datasheet for the chip without extreme hurdles. Most likely they got the chip for free, were paid to use the chip or Broadcom engineers did a bunch of the development for free.
Although this thread is locked, I will make a couple of points that have been missed by some of the other posters. Note, I am a Broadcom employee and a Foundation volunteer (but not a founder member or anything like that).

The current board was designed by a Foundation member, NOT Broadcom. So the design is permanently available to the Foundation.

The Foundation DO pay for the SoC - but they do get a good price (one normally reserved for large purchasers, although in fact current sales levels are so high that price is looking more and more sensible) .

The chip was chosen because 1) It's the right price and perfrormance 2) We have good support from Broadcom 3) Eben knows a lot about it.

Yes, some Broadcom engineers (me included) have put time in for free. But mostly not Broadcom's time - their own time. Broadcom have supplied some time, but that time is worth something because its has fixed issues seen elsewhere as well.
Principal Software Engineer at Raspberry Pi (Trading) Ltd.
Working in the Applications Team.

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