FCDEV3B price justification

[Mychaela Falconia]

Hello FC community,

It has been brought to my attention that I need to provide a better
explanation as to why my current asking price for FCDEV3B boards
($500 USD for one board) is set as high as it is.

In my last post I mentioned that the assembly labor cost (what
Technotronix people charge me to assemble a batch of boards, with me
providing the bare PCBs and all of the parts) is about $100 per board,
for batches of 4 or 8 boards (1 or 2 PCB panels), thus some people may
have got the wrong impression that $100 is the total production cost
for one board and that the rest of my $500 per board asking price must
be me trying to get rich.

But the reality is much more complicated than that.  First of all, the
assembly charge of about $100 per board is just for the assembly
labor, and does not include the PCBs or the parts.  The PCBs can only
be economically ordered in batches of 20-30 or so, and work out to be
about $100 per board, so that's $200 per board already, and we haven't
even counted the parts that go onto the board.  The total cost of
parts per board is difficult to estimate because some of the critical
parts have been bought years ago in batches of 50 or 100, but my rough
estimate is another $100 per board.  Thus we come to a total of $300
per board just in simple per-board costs of parts, PCBs and assembly.

But counting the costs strictly on a per-unit basis is misleading
because the PCBs and many of the critical parts can only be economically
ordered in large batches.  Thus my main concern is that I need to set
the price for complete boards such that if I were to sell all of my
current stock of boards, the funds from those sales need to be
sufficient to produce another batch to replace them.  Right now I am
using PCBs from my initial fab run, but once they run out, getting a
new batch of PCBs will cost somewhere around $2800.

Another concern is the yield uncertainty.  So far we have made two
batches of FCDEV3B boards, 8 boards in each batch, and on the second
batch we were lucky in that all 8 boards came out good.  But I cannot
depend on every future batch being as lucky - for comparison, in our
first batch 3 out of the 8 boards were defective, each in a different
way, hence there is no common cause of failure to go after.

The bottom line is that if I were to sell the boards for some $100-200
USD apiece like some people apparently think I should, what would
happen is that my available stock of boards would quickly get sold
out, but the extremely small (compared to the costs) revenue from
those sales would be nowhere near enough to replace this depleted
stock.  Such an eventually would be very unfair not only to me, but
also to the FreeCalypso project and its future goals for which we need
these development boards.

My asking price of $500 USD per board may seem very high, but it is
the only price at which I can feel safe about the long-term viability
of the project: with the price set as it is, I feel very confident
that we have no upper limit on how many boards we can make and sell,
i.e., at this price whenever the current stock at any moment gets
exhausted, we can always order more parts and make more boards.  But I
would not have such confidence with a lower selling price: we would
then be in danger of selling our stock out and then not having enough
money to make more.

Look what happened to Openmoko: they produced enough devices to fill
warehouses to the brim, then saw that those warehouses were full and
stopped production.  The stock was then sold off over the years long
after the cessation of production, but any stock must run out
eventually, and when that stock of Openmoko devices finally did run
out, the ability to restart production was long gone and Openmoko got
reduced to a page in the history books.

As the Mother of FreeCalypso, it is my duty to ensure that our project
does not suffer the same fate as Openmoko, and one of the measures I
need to take in this regard is to set the selling price for our
hardware at a point at which the long-term sustainability of our
project is protected.

Finally, for those who still feel that my asking price is too high,
please note that I don't believe in the concept of "intellectual
property", and that all of the design files for the FCDEV3B are freely
downloadable from our FTP site.  Thus if you feel that I am trying to
extort some fat profit margin on these boards, there is nothing to
stop you from trying to produce them yourself for less.  There is
nothing to stop you from downloading our Gerber files for the PCB,
shopping around for a PCB fab of your choice whose prices you like,
downloading our BOM (part of the netlist+BOM package) and procuring
all of the parts yourself, and then finding your own SMT assembly shop
whose prices you like.  Nothing to stop you except the simple reality
that if you were to do all of those steps, you would end up spending
far, far more than my asking price for a ready, tested and known-good
board.

There is, however, one practical way to get FCDEV3B boards for less
than $500 apiece, and that way is to order a batch of 10 or more
boards.  If someone is interested in buying 10 or more boards and
would be willing to (1) engage in a dialogue with me to produce a
custom quote and (2) prepay the quoted price for that batch upfront,
then I should be able to bring the per-unit price down significantly.
The $500 price is for a single board *off the stock shelf*, already
produced, already tested and known good.  But if someone asks to buy X
boards (X >= 10), I check to see exactly how much it would cost to get
X PCBs, to get X part sets and to assemble X boards (the higher the X,
the lower the per-unit cost), then the customer prepays that price and
I do the special production run for them, the resulting per-unit cost
can certainly be brought much lower than retail.

I also need to remind everyone that the primary purpose for which the
FCDEV3B has been created is to serve the internal needs of FreeCalypso
development, rather than to put a product out for sale.  I could have
built these boards solely for my own use in FC development and never
offered them to the public at all, but I firmly believe in sharing, in
letting others have the same things I have.  I share the FCDEV3B which
I created for my own internal use first and foremost with the wider
community in two ways: (1) by making all of the design files freely
available, and (2) by making physical hardware available for sale at a
price that works fairly for me.  If the price that works fairly for me
does not work fairly for others, it is an unfortunate circumstance,
but not any of my fault.

If all of my arguments notwithstanding, people still find my asking
price for FCDEV3B boards to be too high and no one buys them, then I
will just keep using them for their originally intended purpose of
facilitating FreeCalypso firmware development and Calypso DSP reverse
engineering in the areas like digital voice over MCSI, Acoustic Echo
Cancellation and Melody E1 ringtone generation.  Once I get past the
next few months in which my personal funds are already committed
toward family obligations (a member of my family is scheduled for very
expensive breast reconstruction surgery in December, hence all of my
personal funds are currently committed toward that) and I reach the
point of having personal money to spend on FreeCalypso once again some
time in the spring of 2018, I'll use my own money then to do the
series of experiments in pursuit of fixing the sleep mode bug.  In the
meantime I'll continue my loudspeaker and mic experiments which
currently don't require any significant monetary cost, and I hope to
get back to working on the deblobbed Magnetite hybrid firmware some
time soon as well.

Once we get the sleep mode bug fixed and we have our own loudspeaker
and microphone parts instead of TI's test handset from their historical
D-Sample kit - it will probably be another several months before we
have both of these targets reached - we can then explore the idea of
approaching someone with some capital and with a setup to act as a
reseller or distributor, and asking them to order and prepay for a
batch of 100 or more boards, and then make them available to the
public on a retail basis at a price that can probably be brought much
lower than the current $500 USD per board.  But we need to have both
the sleep mode bug fixed and the loudspeaker/mic uncertainty resolved
before it will make sense to go for such a large production batch,
thus it is currently premature to pursue that idea.  The current
boards are available for $500 USD apiece for those who desire a board
badly enough, and if you consider that price to be too high, then you
clearly don't need it badly enough.

I hope that my explanation clarifies the hardware cost situation for
everyone.

Hasta la Victoria, Siempre,
Mychaela aka The Mother