These slides describe the process by which many new electronic products become economically feasible and the types of questions that young entrepreneurs should be asking when they are searching for new opportunities. It first shows detailed cost data for nine types of electronic products and that about 95% of the costs involve standard electronic components such as microprocessors, memory, and displays. Second, it focuses on the iPhone and the iPad and how they have been improved, mostly through the availability of better standard components. Third, we work backwards and identify the performance and cost that were needed in these components before the iPhone and iPad offered sufficient levels of performance and price to users. Fourth, we use this analysis to think about the types of new smart phones and tablet computers that will likely emerge in the next few years and the types of questions that young entrepreneurs should be asking about them. Fifth, these examples are used to revise models of learning and invention. These slides are based on one of my courses, MT5009 (Analyzing Hi-Tech Opportunities), and more details (lecture and group presentation slides) can found on one of my slideshare accounts: http://www.slideshare.net/Funk98/presentations

1. When Do New Technologies
Become Economically Feasible?
The Case of Electronic Products
A/Prof Jeffrey Funk
Division of Engineering and Technology
Management
National University of Singapore
For information on other technologies, see http://www.slideshare.net/Funk98/presentations

2. Some Theory: Modeling
Improvements in Products
 Learning curve
 Costs fall as cumulative production rises
 Assumes most improvements occur on factory floor
 Experience curve
 Costs fall and performance rises as cumulative production increases
 Assumes that increasing cumulative production encourages product
and process R&D, thus leading to improvements
 But which improvements are most prevalent?
 Learning in factories, product and process R&D?
 We analyzed technologies that experienced rapid rates of
improvement before commercial production began in order to
eliminate factory floor learning

3. Rapid Improvements with No Commercial
Production: How do the Improvements Occur?
 Analyzed how improvements in cost and performance
occurred for 13 technologies that
 experienced rapid improvements (>10%/year)
 without commercial production
 13 technologies
 Organic transistors, solar cells, LEDs; Quantum dot displays and
solar cells; Superconducting Josephson Junctions, Quantum
computers; Superconducting cables, Carbon nano-tube
transistors; Non-volatile memory: PRAM, MRAM, FeRAM, ReRAM
 Most common methods of improvement
 New materials (and new processes for them)
 Reductions in scale of features
Source: Funk J and Magee C 2015. Rapid Improvements with No Commercial Production: how do the improvements occur? Research Policy

4. Are there other Technologies
that Contradict the Learning
and Experience Curves?
 Rapid improvements occur but…
 Improvements in assembly or
product and process R&D for the
final product cannot be the
explanations for the rapid
improvements

5. What Happens When Cost of Standard
Components are far Higher than Cost
of Assembly Operations?
 Low contribution of assembly to total costs means
that learning in assembly or process R&D for
assembly cannot be key sources of improvements
 Standard components are used
 by multiple suppliers of end products and/or
 in different types of products from the same (or
different) end product supplier
 Large contribution of standard components
 Means that opportunities for product R&D are
limited
 Improvements in the end products come mostly
from improvements in the standard components

6. Nine Electronic Products Were Analyzed
 Smart Phones
 Tablet computers
 Laptop
computers
 eBook
Readers
 Game Consoles
 MP3 Players
 Large screen
TVs
 Internet TVs
Google
Glass

7. Example of Cost Data Collected

8. Type of
Product
Final Assembly Standard Components1
Number of
Data Points
Average
(%)
Number of
Data Points
Lower Estimate for
Average2 (%)
Smart Phones 28 4.2% 26, 28 76%, 79%
Tablet
Computers
33 3.1% 33, 33 81%, 84%
eBook Readers 6 4.9% 6, 9 88%, 88%
Game Consoles 2 2.4% 2, 2 64%, 70%
MP3 Players 2 3.4% 2, 9 78%, 80%
Large Screen
Televisions
2 2.4% 2, 2 82%, 84%
Internet TVs 2 5.7% 2, 2 57%, 61%
Google Glass 1 2.7% 1, 1 62%, 64%
Cost Breakdown for Electronic Products
1 Values as a percent of total and material costs
2 Excludes mechanical components, printed circuit boards, and passive components

9. Preliminary Conclusions
 Cost of assembly is very low
 Improvements in assembly operations or process R&D
for assembly cannot be important sources of cost
reductions
 Contribution of standard components is very high
 Design space and opportunities for product R&D are
limited
 Demand for the standard components are not driven
by a single end product
 What is Driving the Improvements?
 Let’s look in more detail at the standard components
in these products

10. Type of
Product
# of
Data
Point
Memory Micro-
Proc-
essor
Display Cam-
era
Connect-
ivity,
Sensors
Bat-
tery
Power
Mgmt
Phones 23 15% 22% 22% 8.2% 7.9% 2.3% 3.8%
Tablets 33 17% 6.6% 38% 2.9% 6.3% 7.3% 2.5%
eBook
Readers
9 10% 8.1% 42% 0.30% 8.3% 8.3% Not
available
Game
Console
2 38% 39% none none Not
available
none 5.8%
MP3
Players
9 53% 9% 6% none Not
available
4% 3.5%
TVs 2 7% 4.0% 76% none Not avail. none 3.0%
Internet
TVs
2 16% 31% none none 10.5% none 3.5%
Google
Glass
1 17% 18% 3.8% 7.2% 14% 1.5% 4.5%
Contribution of “Standard Components” to Costs
of Selected Electronic Products

11. Summary of Previous Slide
 Processors and Memory (including DRAM, SRAM, flash, hard
disks, CDs) represent high percentage of costs
 Game consoles (77%), MP3 players (53%)
 Internet TVs (47%), Smart phones (37%)
 For smart phones, multiple processors
 Internal processing of music, video, apps
 Processing of cellular network signals (and WiFi)
 Displays represent largest percentage in
 Large screen televisions (76%)
 Tablet computers (38%)
 eBook Readers (42%)
 All of these components experience rapid improvements
 Processors, memory (Moore’s Law, 40% per year), camera: 30 to
50% per year, displays: 12% per year (see next slide)

12. Camera Chip Price
Examples
of
Rapidly
Falling
Costs
0.0001
0.01
1
100
1950 1970 1990 2010
Dynamic
Random
Access
Memory
Flash
Memory
h. Millions of Memory Bits/Dollar
vs. Time

13. Interpretation
 A small number of standard components play
important role in electronic products and
improvements in them
 Enable improvements
 Determine new types of functions
 This is why many people emphasize Moore’s Law
 Because it is really changing our world
 To investigate the role of these components in
more detail, we now consider two types of
products
 Smart phones
 Tablet computers

14. Measure iPhone iPhone 3G iPhone 4 iPhone 5 iPhone 6
Operating
System
1.0 2.0 4.0 6.0 8.0
Flash Memory 4, 8, 16GB 8 or 16GB 8, 16, 64GB 16, 32, 64GB 16, 64, or 128GB
DRAM 128MB 128MB 512MB 1GB 1GB
Application
Processor
620MHz Samsung 32-bit RISC 1 GHz dual-
core Apple A5
1.3 GHz dual-core
Apple A6
1.4 GHz dual-core
Apple A8
Graphics
Processor
PowerVR MBX Lite 38 (103 MHz) PowerVR
SGX535 (200
MHz)
PowerVR
SGX543MP3 (tri-
core, 266 MHz)
PowerVR GX6450
(quad-core)
Cellular
Processor
GSM/GPRS/
EDGE
Previous plus
UMTS/HSDPA
3.6Mbps
Previous plus
HSUPA
5.76Mbps
Previous plus LTE,
HSPA+, DC-HSDPA,
4.4Mbps
Previous plus LTE-
Advanced, 14.4Mbps
Display
resolution
163 ppi (pixels per inch) 326 ppi 401 ppi
Camera
resolution
Video speed
2 MP (mega-pixels) 5 MP
30 fps, 480p
8 MP
30 fps at 1080p
8 MP
60 fps at 1080p
WiFi 802.11 b/g 802.11 b/g/n 802.11 a/b/g/n 802.11 a/b/g/n/ac
Other Bluetooth 2.0 GPS,
compass,
Bluetooth
2.1,
gyroscope
GPS, compass, Blue-
tooth 4.0, gyroscope,
voice recognition
Previous plus finger-
print scanner, near-
field communication
Evolution of iPhone in Terms of Measures of Performance
Fps: frames per second
480p: progressive scan of 480 vertical lines

15. Summary of Previous Slide
 More memory enables more data to be saved
 Songs, pictures
 Videos, games, apps
 Faster processors means
 More sophisticated apps, games and cellular networks, the
latter enables higher speeds
 Higher resolution audio, displays, video, cameras
 Faster and newer WiFi and Bluetooth chips
 Mean higher data speeds
 Better displays means higher resolution video, pictures
 New functions come from new components
 Compasses, gyroscopes, voice recognition
 Finger-print scanners, near-field communication

16. For the first iPhone
 What Levels of Performance and cost
were needed in each Component
before the iPhone was economically
feasible?
 Touch Screen and Overall Display
 DRAM and Flash Memory
 Microprocessors
 Can we use such an analysis to better
understand the future?
 Let’s look at flash memory

17. The 4GB iPhone could store
 760 songs, 4000 pictures (4 megapixel JPEG),
four hours of video, or 100 apps/games, or
some combination of them
 Equal usage
 190 songs
 1000 pictures
 one hour of video
 25 apps/games
 Was 4GB of flash memory necessary, or would
less have been sufficient?

18. The Average User Downloaded 58 Apps or a Significant
Fraction of Memory Available in 4GB Phone

19. Sensitivity Analysis of Flash Memory Price
 Cost of iPhone 5 varied from $207 to $238 depending
on flash memory capacity
 16GB, 32GB, or 64GB
 For iPhone 4s, costs range from $196 to $254 for same
range in flash memory
 For iPhone 3GS, 16GB of flash memory are $24 thus
suggesting costs for same change in capacity would
range from $179 to $251
 In percentage terms, same changes in flash memory
capacity led to increase of 40% in iPhone 3GS and
increase of only 15% in iPhone 5

20. Interpretation of Previous Slides
 Improvements in flash memory were
essential for the iPhone to become
economically feasible
 Similar analyses could be done for
microprocessors and displays
 And would probably show similar results
 Let’s now look at the iPad

21. Measure iPad iPad2 iPad3 iPad4 iPad Air iPad Air 2
Operating System 5.1.1 iOS 8
System on Chip Apple A4 Apple A5 Apple A5X Apple A6X Apple A7 Apple A8X
Application
Processor
1 GHz ARM
Cortex-A8
1 GHz dual-core ARM
Cortex-A9
1.4 GHz dual-
core Apple
Swift
1.4 GHz dual-
core Apple
Cyclone
1.5 GHz tri-
core
Graphics Processor PowerVR
SGX535
Dual-core
PowerVR
SGX543MP2
Quad-core
PowerVR
SGX543MP4
Quad-core
PowerVR
SGX554MP4
Quad-core
PowerVR
G6430
Octa-core
PowerVR
GXA6850
Flash Memory 16, 32, or 64 GB 16, 32, 64, or 128 GB 16, 64, 128 GB
DRAM 256 MB 512 MB 1 GB 2GB
Display 132 ppi 264 ppi
Camera resolution,
video speed, digital
zoom
None .7 MP, 30fps
5 times
5 MP, 30fps,
5 times
8 MP, 30 fps
3 times
Wireless without
cellular
Wi-Fi 802.11a/b/g/n;
Bluetooth 2.1
Wi-Fi 802.11a/b/g/n; Bluetooth 4.0 802.11a/b/g
/n/ac
Bluetooth 4.0
Wireless w/cellular Above plus 2G EDGE, 3G
HSDPA
Above and left plus LTE
Geolocation
without cellular
WiFi, Apple location database Previous plus
iBeacon
Geolocation with
cellular
Assisted GPS, Apple
databases, cellular network
Previous plus GLONASS (Russian-based GPS) Previous plus
iBeacon
Other Accelerometer,
light sensor,
magnetometer
Previous plus gyroscope Previous plus
barometer
Evolution of iPad in Terms of Measures of Performance

22. Summary of Previous Slide for iPad
 More memory enables more data to be saved
 Songs, pictures
 Videos, games, apps
 Faster processors means
 More sophisticated apps, games and cellular networks, the
latter enables higher speeds
 Higher resolution audio, displays, video, cameras
 Faster and newer WiFi and Bluetooth chips
 Mean higher data speeds
 Better displays means higher resolution video, pictures
 New functions come from new components
 Accelerometers, light sensors, magnetometers, compasses,
gyroscopes and barometers

23. For the first iPad
 What Levels of Performance and cost were
needed in each Component before the iPad
was economically feasible?
 Touch Screen and Overall Display
 Memory
 Microprocessors
 Can we use such an analysis to better
understand the future?
 Let’s look at display, memory and
microprocessors

24. For the first iPad (2)
 Touch Screen and Overall Display
 Much larger and thus more expensive than one for
iPhone – probably was a bottleneck
 But falling cost (12%), price 20%) of displays
 Memory and microprocessors
 Cost of iPad Air varies from $274 to $331 depending on
flash memory capacity (16GB, 32GB, 64GB) and
whether cellular processor is included
 For earlier iPads
 From $316 to $406
 From $229 to $346
 Percentages for memory and microprocessors drop
from 50% in first iPad to 21% in iPad Air
 Did the first iPad need a cellular processor?

25. Interpretation of Previous
Slides
 Improvements in displays, memory and
microprocessors were essential for the
iPad to become economically feasible
 Let’s now think about the future – for
smart phones, what will be next?

26. For Smart Phones, What will be Next?
 What components are experiencing rapid
improvements?
 Can they tell us something about the “next big thing”
 Improvements will probably continue in
 Microprocessor, memory and other ICs
 MEMS, bio-electronic ICs
 Displays including flexible ones
 Lasers, LEDs, photo-sensors, and other sensors
 Speeds of cellular networks and WiFi
 New forms of user interfaces (gesture, touch)
 Open source software is becoming more available

27. What will be Next? (1)
 New features, perhaps for high-end phones
 Health care: phones monitors health (heart rate,
brain wave, blood pressure) using sensors
 Home automation: use phones to control homes
 Better navigation, sharing economy
 Engineering assistant: environmental data
(temperature, pressure, air and water quality) and
also data from satellites
 Different phones for different applications?
 One phone does everything?
 Multiple segments each with multiple applications
for phone?
 Specific phones must be defined for specific users

28. What will be Next? (2)
 New forms of computers
Wearable computing?
Smart watches?
Wrist displays?
Google glasses or something
similar?

29. Type of
Product
# of
Data
Point
Memory Micro-
Proc-
essor
Display Cam-
era
Connect-
ivity,
Sensors
Bat-
tery
Power
Mgmt
Phones 23 15% 22% 22% 8.2% 7.9% 2.3% 3.8%
Includes
WiFi
Contribution of “Standard Components” to Costs
of Selected Electronic Products
Can any of these components be eliminated?
Are there improvements in components and/or
technological trends that can help us think
about components to eliminate?

30. What will be Next? (3)
 Can microprocessors and memory be eliminated to
create low-end phones that bypass network
providers (SingTel, StarHub)
 Lower cost phones
 Lower cost services
 Cellular processors are eliminated as WiFi becomes
more available?
 If WiFi is main connection and it works good enough
 Can we reduce memory capacity?
 Can we reduced performance of application processor?
 Lower resolution cameras, displays, and other
components will also reduce costs
 How might open source software enable lower costs?

31. Recent Article in New York Times
Cellphone Start-Ups Use Wi-Fi First to Handle Calls
and Take On Rivals
Two start-ups are trying to lower cellphone costs by
relying on Wi-Fi routers, and now some of the
bigger companies are looking to follow their lead.
http://nyti.ms/1AFMiFW
Great Source on WiFi Diffusion:
Number of world WiFi access points is 56 million
http://www.ipass.com/wifi-growth-map/

32. Can Google’s Project Ara provide Users with Better
Choices about Inexpensive Phones that have less features?
Modular phone
that enables
Users to Choose
Specific Modules

33. Will Apple be
Disrupted?
Apple has
highest prices
Does it Deserve
High Prices?
Will Low-End
WiFi Phones
Impact
Apple or other
phone
suppliers?

34. How About the Other 8 Products?
 How might improvements in electronic components
change the other products that were briefly mentioned?
 Tablet computers, eBook Readers
 Game consoles, MP3 Players
 Televisions, Internet TVs, Google glasses
 All of these products are being improved with new
electronic components
 WiFi may eliminate cellular processors in tablet computers
and reduce memory in game consoles
 What will these products become?
 Will they become more important in our lives?
 Or will they disappear as their functions are absorbed
by other products?

35. How About Still Other Products (2)
 Improvements in computers: logistics, free routing if aircraft,
pre-fab housing, computer assisted-doctors, Big Data, online
universities
 Improvements in ICs, MEMS, GPS, other electronic components:
Smart homes, Internet of Things, Drones, Autonomous Vehicles,
Sharing economy including shared bicycles, GPS for buses
 Improvements in displays and ICs; rolled displays, wrist displays,
wearable devices
 Improvements in microprocessors and power electronics: cheaper
electric vehicle chargers that enable more frequent recharging
and thus reduce the need for high energy storage batteries
 Many of these products can contribute towards sustainability
 These things and more are discussed in MT5009, Analyzing Hi-Tech
Opportunities (for more info, see http://www.slideshare.net/Funk98/presentations)

36. Comments on Learning and Invention
 When standard components contribute much
more to costs than do assembly operations and
they experience rapid improvements
 Factory floor learning and process R&D for assembly
are not important sources of improvements
 Product design opportunities are also limited since
most of the components are standard ones
 Demand for the standard components is driven by
multiple products and thus the volumes for a new
product have little impact on the standard
components
 Instead, learning revolves around the standard
components and how to use them to introduce
better products

37. Comments on Learning and Invention (2)
 Contrast this with automobiles
 Discussions of automobiles emphasize speed,
acceleration, fuel economy, smoothness,
quietness, and interior and exterior aesthetics,
measures
 These depend more on overall product and
process design than any one component
 Even speed, acceleration, and fuel economy
depend on many design factors
 and not just the engine design since they involve
the aerodynamics and weight of the overall
automobile

38. Comments on Learning and Invention (3)
 When standard components contribute much
more to costs than do assembly operations
and they experience rapid improvements
 Monitoring these components is essential for
“inventing” and developing new products
 What components are in the new product?
 What levels of performance and cost are
needed in this product and in its components
before the product will become economically
feasible?

39.  Thank you!