I think this highlights how important adoption curves, cost curves and volume are to the overall context.
Going from $1000 to $100 can put something into the hands of experimental, hobby or light-commercial projects. It can enable new applications. These can be fundamental to setting an overall direction. Going from $10 to $1 is neither here nor there in those contexts. Cost, as you say, is virtually irrelevant unless/until volume is very substantial.
Volume is not usually part of the early adopter game, and price, below a certain threshold is only relevant at high volume. Price (below some threshold) may never be a meaningful factor for a microcontroller built to control commercial lighting systems or whatnot.
The old habit is that price really matters. As prices dropped, this opened up entirely new uses for microcontrollers. Applications that would have been unreasonable at $100 became possible @ $10. That's not the dynamic anymore.
There are things I would build many of if they cost $2 instead of $20. Say a medium-resolution 3D volumetric mapping of temperature and humidity in my house becomes reasonable at $2/node, but not at $20/node. I think scale still applies at this level, but fewer hackers are thinking in terms of swarms. There are transformative applications at scale that could be interesting even to individual hackers, but scale is its own niche, just as IoT in general is a niche.
True, and I think that sitting back and thinking... we will come up with such applications. These aren't hard rules.
It's a matter of extent though, not absolutes. Hobby, experimental & light-commercial applications do not often need millions of units. If they don't, the difference between a $1 & $10 controller doesn't matter in the way the difference between $10 & $100 matters... in more cases than not. Other considerations (eg the dev already knows the more expensive platform, maturity, etc.) can easily override
High-volume swarm applications could change the reality. You need a nexus between low end and high volume. Swarms might be that. These aren't that common though, and "high volume and cheap" is usually a large company thing.
IE, if you browse around kickstarter, most microcontroller applications fit into OP's scenario. The cost of the microcontroller is not that operative. There are undoubtedly some exceptions.
I don't know how to build an $2 device. Especially given that in any small device I've designed, power management always took 30-60% of board space and device cost. You reach the upper bounds if it uses a Li-Po battery.
There is a big gap between powering a hobby device from a bench power supply and building an actual end-user solution.
EDIT: I'm reading the answers here and it's clear I did not clearly communicate what I meant. Taping a board to a bunch of AA batteries is not an actual end-user solution. Neither is hanging a couple of boards off a bunch of wires. I was talking about products, something you might expect to pull out of a retail box and use.
Those mentioning PoE clearly haven't designed a device that is powered with IEEE 802.3af-2003 :-) (I have, and I have the battle scars to prove it). PoE doesn't mean you can just connect the wires and call it a day.
In a way designing a $2 device is simpler, as the low price means a low component count.
Having built a Dash Button clone with an ESP8266:
1. Choose a microcontroller that will run on <3 volts, and power it directly from two AA batteries in series. You have neither the power budget nor the financial budget for anything more complicated than that.
2. Your microcontroller should spend 99.99% of its time in its lowest power sleep mode. When sleeping, the microcontroller should consume <10μA and the other, non-microcontroller circuitry should consume the same amount.
These are rock-bottom power levels, expect to remove any status LEDs, USB-serial converter/in-circuit debugger chips, and even linear regulators compared to a development kit.
You don't have to use an ESP8266 like I did - a more experienced guy might have chosen an MSP430 or something similar.
3. Given you can only leave sleep mode 0.01% of the time, i.e. 8 seconds per day, if it takes 1 second to connect to wifi, send a message and get an acknowledgement back, you can only do that 8 times per day. If you want to update more often, you'll need something faster to connect and send a message. This is why many smart home systems use 433MHz to a base station, rather than using wifi directly.
4. A $2 budget won't include a case until you're making fairly serious volumes. Repurpose something you were throwing out, or wrap it the circuit in electrical tape, or go over budget but declare victory as you could hit the target in larger volumes.
You can use ESP-NOW instead of WiFi, although I'm not sure how quickly that connects and how much power it uses. I think it's much less than WiFi, but do double-check.
I don't know how it turned out, but a friend of mine was talking about running a DC power loop round his house alongside the AC one. The idea was that he could pull 5-12v lines off that for powering things like motion sensors, or even tablets being used as control panels, rather than having the house scattered with USB wall warts.
I'm not sure. Though I see a whole lot of chatter from chip makers trying to sell solutions into that market. Sounds like they have figured out you can run lighting and and other IoT stuff off it.
If you think about it most current IoT stuff blows. You need power for the device. And then you're using shit like WiFi for data. And even worse shit like Bluetooth for configuration. Security is a big big problem because it's brittle and conflicts with consumers need for stuff to just work. PoE solves all of those issues.
The single pair ethernet web pages gave me the impression that it is aimed at industrial applications - the connectors alone look like they would cost $2
A lot of businesses need to demonstrate that a product is margin-positive...
That means if you are making a new gadget to send out to users, and hoping to make money on data collection, a subscription service, ad revenue, etc., the unit cost of the hardware is critical to the business case, even if it isn't much money overall.
Try telling investors "we made this weather station, and we will make money by selling data to NOAA".
The very first question will be "how much does each station cost", and "how much will NOAA pay". Nobody asks how many engineering hours you spent writing the code to fit on the microcontroller, because the assumption is that in any successful business that becomes irrelevant.
Perhaps investors should accept "Each weather station costs $1000, but we think we can get it down to $10". But most investors won't believe you if you say that...
But to be operative in this way, you must be talking about a very high volume. Millions of units, or close.
My point was not that cost never matters, just that $1000->$100 is not the same as $10->$1. If your weather station startup is using $10 microcontrollers, getting that down to $1 is probably not important. If you are building 10 million weather stations, it is important, but this is a pretty specific scenario that doesn't apply often.
We say something similar with PC pricing. The cost of a functional PC never stopped falling, but that stopped being as important once a certain threshold was reached. Projects like RasberryPi do take advantage of continued cost reductions, but Pi is marginal relative to earlier cost reductions cause an explosion of PC use cases.
This is a good point. I actually always sort by price when selecting components — not just to be cheap, but also because less expensive components are generally more popular and widely used, which means they are better support, better availability and better longevity.
But — to all those who worry about price — I would suggest looking back and checking how many devices you actually built in the past? Was it singles, tens, perhaps hundreds? At these price points, how much would you save using a $1 uC instead of a $5 uC? Is it tens of dollars? Perhaps hundreds?
Now compare that to the cost of your time spent developing and maintaining the software. At any reasonable hourly rate you pick for yourself, you're probably better off going with the uC that has good software out of the box.
If you decide to build your devices in commercial quantities, that's when price optimization begins to matter, and somebody will care about fractions of a penny. But that somebody won't be you: going beyond single thousands involves a different set of skills.
Even in the 10s of thousands, these price differences should probably be a secondary issue for many commercial contexts... at least at the startup end of the game.
If you are producing a $40 microwave, smart bulb or somesuch... shaving dollars off component costs is operative. I think this supports your original point rather than detracts from it. This is the mass production game, a mostly big company game.
Microcontrollers have reached a cost point where the dynamic has inverted. The people who need to care about a new, cheaper-than-ever mc are large companies, not startups, hobbyists and niche product designers. There will be lots of exceptions, especially hobbyist use case... but generally.
I think this highlights how important adoption curves, cost curves and volume are to the overall context.
Going from $1000 to $100 can put something into the hands of experimental, hobby or light-commercial projects. It can enable new applications. These can be fundamental to setting an overall direction. Going from $10 to $1 is neither here nor there in those contexts. Cost, as you say, is virtually irrelevant unless/until volume is very substantial.
Volume is not usually part of the early adopter game, and price, below a certain threshold is only relevant at high volume. Price (below some threshold) may never be a meaningful factor for a microcontroller built to control commercial lighting systems or whatnot.
The old habit is that price really matters. As prices dropped, this opened up entirely new uses for microcontrollers. Applications that would have been unreasonable at $100 became possible @ $10. That's not the dynamic anymore.