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Semiconductors economics

There is a really interesting article the IEEE Spectrum by Clayton M. Christensen, Steven King, Matt Verlinden, and Woodward Yang. It basically tells the story of them apply the TPS (Toyota Production System) to semiconductor manufacturing and results of doing this.  Pretty amazing results.  The most amazing change is that this methodology allows smaller runs of chips while still being profitable and producing the chips at competitive prices.  This is a game changer in silicon as it allows silicon to more closely match the trajectory of ever-shorter product life cycles in consumer electronics.

Who wants to guess the company that is the subject of the article (purposely withheld in the article)?

Content goes from king to the new loss leader

By now it’s fairly well-known that selling digital music downloads is a tough business with thin margins.  However, across both online as well as brick-and-mortar retailing, music and video is being used more universally as a loss leader and it’s not clear what this trends means for content in general.  For example:

• for Apple, digital downloads are not something they make a lot of money on, however, it enables their hardware universe (iPhone, iPod, Apple TV).
• for Amazon, many people have suggested that digital downloads is a traditional retailing loss leader.  It drives people to their page, where Amazon hopes to sell them something above and beyond the digital download.
• for wal-mart, CDs and DVDs have been used for a long time as a loss leader.

The New York Times is reporting that Apple’s new deal to sell movie downloads (as opposed to their rental business) is not a great deal for Apple from a dollar perspective.  So, Apple appears to be using the same model here as they did with the iPod.  Effectively they are relegating the movie downloads to a loss leader in the hopes of selling more Apple TVs.

So is content no longer king?