There's nothing actually wrong with the business model. The model is to make chips and sell them for more than it costs to make them. It's better to say it's a brutal business than it is to say the model is broken.
@highlander - yes lowering barriers does decrease growth in prices. But it still increases innovation. Meaningfull innovation can open new application areas and markets , making more people/businesses buy more electronic stuff, meaning growth, even with jellybeans.
Another growth option is a shift to online-only commerce - which seriously decrease the share retailers take from products , leaving more to be shared between manufacturers and consumers and/or seriously decreasing prices of electronics(sometimes even around 30-40%) and general products. All those can easily lead to growth.
The big problem is that it's hard to increase the perceived value of a semiconductor. Any part that meets the spec is OK. It's not like a handbag where the intangibles can set the price anywhere between $5 and $50k.
You are right that only unique capabilities that are valued by customers will be able to command a respectable price. The problem is that most capabilities can quickly be copied by competent engineers. Patents don't amount to much when there are many ways to skin a cat. Only the execution of an idea is patentable, so that only matters when there's one possible execution.
Most electronic gadgets could be considered miraculous when judged on their own merits but in a brutally competitive market economy they become commodity junk, soon to be obsolete very quickly.
Even with low cost of invention, somewhere between invention and product, the value of the development should be high. Here "value" should be how well it enables the product to be priced higher, e.g., unique or unsurpassed functions or capabilities.
What are the engineering and design challenges in creating successful IoT devices? These devices are usually small, resource-constrained electronics designed to sense, collect, send, and/or interpret data. Some of the devices need to be smart enough to act upon data in real time, 24/7. Are the design challenges the same as with embedded systems, but with a little developer- and IT-skills added in? What do engineers need to know? Rick Merritt talks with two experts about the tools and best options for designing IoT devices in 2016. Specifically the guests will discuss sensors, security, and lessons from IoT deployments.