What’s the true price of an ASIC? Unveiling the benefits and costs of custom chips

An ASIC is a custom-designed chip tailored to a specific application, providing several benefits:

• Increased integration: by combining multiple functions into a single chip, ASICs reduce size, complexity, and power consumption.
• Lower power consumption: optimized design minimizes energy use, enhancing portability and battery life for mobile devices.
• Enhanced features and performance: ASICs can be fine-tuned to deliver specific features and performance requirements unattainable with standard components.
• Confidentiality: by controlling the design and manufacturing of the ASIC, companies protect their intellectual property and prevent unauthorized copying.
• Supply chain control: ASICs reduce reliance on multiple vendors, simplifying the supply chain and potentially mitigating risks.

Figuring out the ASIC price tag

An ASIC can be a cost-effective solution, even when considering the non-recurring engineering (NRE) costs of development.

• Let’s take an example of a system provider purchasing over 1 million units per year of an off-the-shelf microcontroller unit (MCU) with a target unit price of $2.50. An ASIC would cost $3 million in NRE (for a 65nm process), the unit price could reach $0.60.
• With a purchase volume of 1 million units per year, the return on investment for the ASIC could be achieved in less than two years (after production), with a potential for twice the return on investment within four years and almost triple within eight years.

While the initial development cost of an ASIC can be higher, the long-term benefits in terms of cost reduction, performance increase, and enhanced control often outweigh the initial investment for high-volume production.

Is an ASIC worth it?

Here are some additional points to consider:

• The decision to use an ASIC depends on various factors, including production volume, cost sensitivity, and performance requirements.
• Different types of ASICs offer varying levels of customization and flexibility.
• Partnering with an experienced ASIC design and manufacturing company is crucial for successful implementation.

Ready to start your ASIC journey? Or do you need more advice?

Contact our experts