[geeks] Wireless Routers

[velociraptor]

On 7/6/06, Phil Stracchino <phil.stracchino at speakeasy.net> wrote:
> Sridhar Ayengar wrote:
> > Geoffrey S. Mendelson wrote:
> >>I could do the same thing with access points, but the cheap ones here go
> >>for almost $300, while "routers" go for $75.
> >
> > That's completely ridiculous.  If you look at the hardware of a Linksys
> > WAP54G, it's just a thoroughly stripped-down WRT54G.  Like half the RAM,
> > half (or maybe quarter) the flash, and only one port.
>
> Indeed.  And if Linksys sold the WAP54G for even the same price as the
> WRT54G, let alone appropriately less, I'd have bought a WAP54G instead
> of a WRT54G.
>
> But basically only businesses buy them.  So the PHB factor of "If it
> costs three times as much, it must be three times as good" applies.  And
> so they're priced accordingly.

It's the law of volume.  More WRT54G* sells more units therefore is
cheaper to make and therefore the mark-up (profit above cost) can be
lower.  The break even point for all the overhead costs--hardware dev,
software dev, qa, tooling, etc--is forecast based the number of units
sold.  Selling more means that the total "slice" of these costs per
unit is also lower.

WAP54G sells smaller quanitity, therefor the mark-up has to be higher
to cover all the overhead plus actual per unit manufacturing costs.

And, yes, I realize this is an over-simplification.  The fact that
these devices share many of the same components and as a result some
of the capital type (HW dev, SW dev, QA, tooling, etc) overhead is
going to be spread over many models doesn't change the fact that the
cost per unit based on volume changes the mark-up per unit.

Pricing things to maximize profits (a key tenet of capitalism iirc
:-), is part science and part art.  Look at all the pundritry around
gaming consoles and games for some really good examples (Wii vs. PS3
vs. Xbox 360 is the most current).

=Nadine=