Re: cheap as chips?

From: Jim Fehlinger (
Date: Mon Jan 22 2001 - 21:12:40 MST

Damien Broderick wrote:
> A few years ago, reviewing Michio Kaku's book on the future, I cited the
> view that
> < Immediate prospects include a hugely expanded Internet, driven by
> plummeting computer chip prices--well under a dollar apiece by 2000, around
> 5 cents by 2005, a cent by 2010. >
> How did that work out, so far?

The difficulty in answering this question is due partly to the
fact that what one has in mind to dignify with the term
"computer" is a moving target. In the late 70's, some people were content
to spend a couple of thousand dollars on something like a Kaypro Z-80
based CP/M machine and proudly call it a computer. Good for
serious word processing back then, but no good
at all for surfing the Web today. It's amazing to look in old issues
of _Byte_ magazine (I have a friend with bound sets going back
to the beginning) and see that 8-bit Z-80 class chips cost more than a
hundred dollars when they were new, same as respectable (if less than
state-of-the-art) chips do today. The same Z-80-class functionality today
can be found as embedded microprocessor "cores" -- perhaps with the same
architecture and instruction set as those old stand-alone chips -- which form
part of larger chips found in everything from VCRs and answering machines to
infrared remote controls and automobile ignition systems. We hardly even think of them
as "computers" -- they're just the stuff inside all those gizmos
we use without thinking. The Commodore 64, the Radio Shack TRS-80 and
their brethren are for museum-goers (although the Computer Museum in Boston
is no more, alas) and nostalgia buffs to moon over, not for serious
work or serious fun.

However, let me try to pin down Kaku's statement a little more

The book you're referring to is, I guess, _Visions: How Science Will
Revolutionize the 21st Century_, which was published in hardcover
by Doubleday in 1997. When Kaku is referring to computers vis-a-vis
the Internet, I presume he's talking about the browser end rather
than the server end (or the networking stuff in between) -- anyway,
that's what I'll focus on. I'll take the term "computer" to mean
the minimum hardware that's adequate to run a Web browser of some

Around the time Kaku wrote those words, the biggest bang-for-the-
buck in hardware was probably to be found not in any desktop PC
(or Macintosh!) but in the Web-browsing appliances that first
appeared in 1996 -- I'm thinking specifically of the original WebTV
box. I bought a Sony INT-W100 "Internal terminal" at the end
of '96 -- it cost between $200 and $300 retail, and contained
a 112 MHz IDT/MIPS R4640 64-bit RISC processor (64 bits internally,
thought it almost certainly had a 32-bit data bus), which was
pretty damned impressive at the time. The specs for these devices
can still be found at
That processor chip cost $30 in quantities of 10,000, according to

OK, fast forward to today, and the most bang for the buck is still
found, not on the desktop, but in game consoles such as the Sony
Playstation 2 and the new Microsoft X-box. I'm not sure whether the retail
price for the latter has been fixed yet, but some folks are expecting
it to sell for around $300 (profit margins are razor-thin on this sort of
price-sensitive hardware that kids are expected to spend their
saved-up allowances on, or cadge from their parents). The processor chip
in this box (it also has a sophisticated graphics chip, of course -- as did
the WebTV box for that matter, and as do most desktop PCs these days)
is thought to be a 733 MHz Pentium-class chip. I'd say that
$30 quantity OEM price would be a pretty reasonable guess at the
cost of this chip, too -- it certainly couldn't be much more
in a $300-at-retail box.

Now, taking the original WebTV box from '96 as the minimum chunk
of processing capacity we're deigning to call a "computer", then the
cost of that much processing as a chunk of the price of the X-box
processor can be estimated. Leaving aside any questions of
architectural differences between the 112 MHz MIPS chip and
the 733 MHz Pentium clone and just looking at the ratio of
clock speeds, then the cost of an original WebTV's worth of
processing power has declined to around (112/733 * $30) = $4.60.

So I'd say Kaku's estimate was a tad over-optimistic.

Notice that people probably aren't going to be getting computers
out of gumball machines any time soon. People expect to be
able to get a desktop PC for less than $1,000 these days (though
the sub-$1,000 PC was a much-heralded milestone when it happened
a year and a half or two years ago), and the $1,800 that a "serious"
1982 Kaypro (let alone a really serious -- or maybe just overpriced --
$3,000 Xerox 820 CP/M machine) would have cost is considered a lot to
spend for a consumer PC these days, and would be expected to get you
almost state-of-the-art. The way the market is evolving is
that every time you get a new PC, you expect to get a whole
lot more for the same or moderately less money. So the game
consoles cost about the same as the WebTV boxes did four years ago,
but they do a whole lot more (nobody would look twice at the original
WebTV box for $300 put next to an X-box for $300 or a Sony
Playstation 2 -- both of the latter are in fact Internet-enabled,
I believe).

Estimating the present-day cost (as a chunk of the X-box processor)
of one of those late-70's Z-80 class chips is a bit of an eye
opener, though. Let's see, the clock speed of the original (1976) Z-80
was 2.5 MHz -- see the Web site "Great Microprocessors of the Past
and Present", at
also "Chronology of Personal Computers" at
This time I'll include a factor of four penalty for the 8-bit vs. the
32-bit bus, so, very roughly: (2.5/733*4 * $30) = $0.03. Considering the Z-80
originally cost on the order of a hundred dollars (though I can't seem to find
a reference for the original price on the Web), that's pretty impressive
3,000-fold price reduction in 25 years.

The Zilog Z-80 is still available after 25 years as a stand-alone microprocessor --
I couldn't find any pricing information on Zilog's Web site, but I'm sure
the chip costs more than three cents, even in quantity! I saw a reference
to a $2 price for this chip, but it may well be less in large quantities.

Jim F.

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