BFL - Update 3/4

[repentance]

They'll just make more wafers.  They're not gonna lose any orders for having sacrificed that one wafer (IMO).

They haven't just sacrificed one wafer, though.  The combined impact of various decisions made by BFL since late last year means that instead of Batch 1 plus their bulk order yielding 100,000 chips, Batch 1 plus their bulk order will now yield 74,000 chips. 

You cannot make the same number of units with 74,000 chips as you can make with 100,000 chips unless you use less chips per unit - and the response to Josh mentioning that possibility suggests that BFL will lose orders if they reduce the amount of chips per unit.  It's hard to know how many people would follow through and actually cancel their orders as many customers have previously stated that they'll bail "if X occurs" and then not done so, but it's very clear that a non-trivial amount of customers planned to over-clock the fuck out of their units and are deeply unhappy about that possibility being removed or diminished.

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[MrTeal]

If the QFN to FCBGA conversion goes well and BFL doesn't need to redo the design, they really only need to worry about the quantity of chips they have on the way if they are going to be able to ship and sell all 75k before they can get another set of chips done. With the design being done there's no real reason they couldn't get started on another 100 wafers and have finished chips delivered in June.

[repentance]

If the QFN to FCBGA conversion goes well and BFL doesn't need to redo the design, they really only need to worry about the quantity of chips they have on the way if they are going to be able to ship and sell all 75k before they can get another set of chips done. With the design being done there's no real reason they couldn't get started on another 100 wafers and have finished chips delivered in June.

They can fill less orders with 74,000 chips than with 100,000 chips, so their financial projections and their break-even point are going to be significantly affected by the diminished "first run" revenue.  A 25% reduction is revenue is huge and it needs to be offset as much as possible as it's very likely some of that revenue was earmarked for meeting costs associated with the second mass production run. 

Ordering another 100 wafers requires having the money to pay for them (and the cost of packaging and assembling them).  We simply don't know whether any funds from existing pre-orders have been spent over the last 8 months or the amount of revenue from first run sales which was earmarked for the second production run.

[MrTeal]

If the QFN to FCBGA conversion goes well and BFL doesn't need to redo the design, they really only need to worry about the quantity of chips they have on the way if they are going to be able to ship and sell all 75k before they can get another set of chips done. With the design being done there's no real reason they couldn't get started on another 100 wafers and have finished chips delivered in June.

They can fill less orders with 74,000 chips than with 100,000 chips, so their financial projections and their break-even point are going to be significantly affected by the diminished "first run" revenue.  A 25% reduction is revenue is huge and it needs to be offset as much as possible as it's very likely some of that revenue was earmarked for meeting costs associated with the second mass production run.  

Ordering another 100 wafers requires having the money to pay for them (and the cost of packaging and assembling them).  We simply don't know whether any funds from existing pre-orders have been spent over the last 8 months or the amount of revenue from first run sales which was earmarked for the second production run.

Given how little we know about BFL's process and history, it's hard to say anything with any certainty. We know that BFL is only paying their contract manufacturer on completion of a successful project, so it could be just as likely that BFL is paying a fixed cost per chip as opposed to per wafer. Hell, for all we know there might not even have ever been 100k chips. They didn't know their first batch of wafers off the line was 6 instead of 12 until they were almost in the air.

Regardless the cost of the actual chips in a Single is going to be a pretty small part of the $1300 they charge for it. While having to eat whatever the cost of the wafers was will hurt their bottom line, going from 8 chips to 7 chips is not going to be a big cost savings.

[repentance]

Regardless the cost of the actual chips in a Single is going to be a pretty small part of the $1300 they charge for it. While having to eat whatever the cost of the wafers was will hurt their bottom line, going from 8 chips to 7 chips is not going to be a big cost savings.

While this is undeniably true, things which change your financial projections are a big deal and can have massive implications for the future of your company.  While reducing the number of chips per device doesn't significantly reduce the cost per unit of those devices, it does allow you to build significantly more devices at $1300 each (or to fill more orders which have already been paid for).  If they can scavenge 16,000 chips out of the 74,000 by reducing the number of chips per unit, that's 2,000 more Single orders which can be filled without having to order additional chips - that represents an $2,600,000 in revenue for the first production run, which is significant by anyone's criteria.

While BFL is a bit of a black box in terms of information regarding its funding sources, nothing they have said suggests that they have access to a bottomless well of cost-free money.  One way or another, these delays are costing them significant money and they have to find that money from somewhere - whether it's from pre-orders, selling equity, or loans.  Whatever money they're spending now on unanticipated costs is money which won't be available for something else in the future.

I agree that Josh has appeared not to know a lot of material information until the last moment, but it's been obvious for months that Josh is not directly over-seeing this project and that he gets much of his information second or third hand.  Josh being unaware of something doesn't mean that those actually involved in the step concerned had incomplete or inaccurate information (hell, Josh seemed surprised to learn that piddly little orders aren't going to be given priority when it comes to facilities allocating production time at short notice).

BFL customers have been somewhat over-involved during the last 9 months.  How many chips were being produced/had been ordered is not information which would normally be shared with customers, especially when no information has been given about how many of each unit type are going to be produced from the first 5,000 chips and the following 6,000.  People have reacted to this over-sharing by feeling entitled to have a voice in the business decisions made by BFL.