Fairchij: They would have some pretty amazing flexibility in pricing to the point where they could kill the competition very quickly in that area.
I've put some numbers together yesterday to play around with them, and they might be of some interest here. POET claims to reduce manufacturing cost for their VCSEL transceiver down to a tenth of a usual one. Now what does that mean for pricing and profits?
Please note that in the following costs, prices etc. are not in $, €, or any other currency, but just in, eh, units.
Let's say a manufacture builds a usual VCSEL transceiver (UVT):
- UVT manufacturing cost: 95
- UVT selling price: 100
- UVT profit: 5
Now POET Technologies comes along and reduces the manufacturing costs by 90 percent. Here are some sample numbers for the POET VCSEL transceiver (PVT):
- PVT manufacturing cost: 9
- PVT selling price: 60
- PVT profit: 51
That is, in this sample scenario POET would make more than ten times the profit compared to the competitor. At the same time, POET could comfortably sell their product at a price that would not even cover the competitors manufacturing costs – by far. A nice prerequisite for market leadership! (Let alone energy consumption and form factor.)
In order to not antagozine competitors that much, POET could alternatively sell their VCSEL transceivers at the same price as competitors, betting only on energy consumption and form factor as competitive advantages:
- PVT manufacturing cost: 9
- PVT selling price: 100
- PVT profit: 91
Not too bad, I would say! Even if POET had very high expenses for wafer epitaxy and production, a very comfortable margin would remain:
- PVT manufacturing cost: 27
- PVT selling price: 100
- PVT profit: 73
