It seems you partially misunderstand (on purpose?) or maybe I was unclear.
Of course there will be advantages to efficient integration - I wouldn't underestimate those $5 saved on 100 million devices. You know as well as I do that those $500 are not profit. Another $5 on their margin per device from every iPod/iPhone/iPad is significant. Additionally, there will be advantages in terms of power control = battery life = customer satisfaction. AND they keep control and give themselves options for differentiation in the future. Of course it makes sense for a player of Apples size and ambitions to invest in their own SoC know-how.
Wow... I did misunderstand a few things you said, but you managed to misunderstand even more of what I said
When I say SoC, I mean application processor. Apple has no intention of integrating the baseband. They are following a LOWER integration roadmap than some of their competitors - but they're still saving money in the process because they don't have to pay gross margins to anyone else for the application processor part. And they get to co-develop their hardware and software which improves their time-to-market and software quality at launch. Their cost advantage has NOTHING to do with integration!
You also didn't understand what I said about that $5. Let's say Apple's per-chip cost for the application processor is $8 as I said. They're on 45nm today - by 20nm, they'll be able to fit about 4 times the transistors at the same cost point (simplification because I'm not taking either clocks or wafer costs into consideration, but not a bad one). So they can either increase the transistor count by 4x and keep differentiating on the SoC or save $5 and turn the hardware into a commodity. For a $500 product with up to $250 of gross profit, which do you think they're going to do? Only a complete idiot would save the $5 - especially when you have your own SoC design team! So if Apple keeps being aggressive on SoC specs, do you expect competitors not to bother and simply point out it doesn't make any difference? That would be fun to watch.
So - I gave the mechanisms I see for why hardware specs will diminish in market importance.
Where are your arguments for why they would increase?
I'm not saying they will increase in *importance*. My expectation is that 2011 will be the all-time peak in terms of hardware specs importance (based on the roadmap of various vendors) and it'll reduce slightly over time.
But higher importance would mean a higher share of the bill of materials going to it. I'm saying the share of the bill of materials will remain *constant* to slightly down; this implies, given Moore's Law, a significant boost of hardware specs over the next several years. To claim the contrary would either mean that something else would become relatively much more more important (and I honestly don't see what) or that the average selling prices are going to plummet very rapidly (also quite unlikely).
Btw, there are other reasons I didn't bring up for assuming that additional hardware capabilities won't get increasingly important in the marketplace. Most important that there are no applications that require much more than we already have, and we know that, because there are no such applications in widespread use even on PCs!
Ah, so no games use more than 2 TMUs @ 200MHz (i.e. SGX540 in the Google Nexus S) on the PC? Good to know!
Obviously a key application for superphones versus multimedia webphones would be gaming, and other fairly expensive things like Augmented Reality (e.g. the camera image and GPS position are combined so you can see the street names in real time on your phone's screen).
If you give them an octa A15 processor with SGX565 parallelized to the gills, what do you expect them to do with it except bitch about the battery life?
I'm serious. These are the real questions. Not "what is possible".
Duh. My point is you can't do that with 50mm2 of silicon anyway and there are still plenty of very real improvements you can do on 50mm2 of 20nm silicon versus 50mm2 of 28nm silicon. And that's for phones - with tablets it's even more obvious.
If the SoC is such a small part of the bom for a smartphone, then I wonder why you are looking at process nodes for your estimate of price reduction?
Keep in mind I'm including the 3G baseband in the bill of materials (15 to 80mm2 on 40nm depending on architecture/performance/bitrate) and I'm also using that as a reference point for the timeframe in which you might expect that kind of thing. We'll start seeing 20nm superphones in 2015 iirc, so for low-cost integrated devices that should be 2016. Plenty of other subsystems will contribute to achieving that cost point by then.
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Really should get this discussion back to Nokia, I'm going way too OT here... 4M sales for N8 is fairly encouraging, we'll see if they can keep it up (which would have some implications as to whether word-of-mouth is good or bad).
One point about Nokia's hardware roadmap I am curious about: will the custom Broadcom 40nm SoC include 720p video, or will it just be VGA? I honestly have no idea!