Let’s apply this model to the cost of optic transceivers. There are only so many transceiver companies with the manufacturing, engineering, and quality control to make the world go round: Avago, Finisar, and Lumentum (formerly JDSU). So when a networking company is trying to sell you an optic, it’s typically one of these three

Let’s dissect the Cisco SFP-10G-SR transceiver module, which lists for $1000 (I’m sorry, $995)

Cisco doesn’t make cables or optics, so they go to the people who do. Instead of relying on one ODM, they use two, and another two for their telco line, for price guarantees and supply assurances. So how much does a 10GB SFP+ SR optic cost? It turns out around $85 + some margin, bringing the cost to $95

However, Cisco doesn’t want some ODM’s name on the part. They want the Cisco logo on the part, along with the Cisco logo on the finish cap, some branding on the ESD wrapper, tissue paper, stickers, etc….(ok, ok, no tissue paper or stickers, but you get my point)

This re-branding now brings the part to over $600. Bring in the distributors: $800. And now, the resellers: $1000. Meaning, if Cisco sells this part at MSRP, it makes $500 in profit on a $100 part

What if we bought this product directly without the OEM rebranding? $95 plus distributor + reseller yields $150 with 2-day free shipping on OEMfibers.com