I have been a hardcore user of Arduino soft system (soft system coz other things are just pure AVR).
But due to several reasons and advancement features like speed, bit pipe(32-bit), blah - blah tonnes of features in small money I brought ARM into most of my designs one of the biggest reasons have been the cost!, If I can get 20 features in Rs.X why get 5 features in Rs.X
I have been very disappointed with the prices of AVR's for example all time favourite ATmega328 coming for Rs.219 and one of the nicely priced ARM's like the Freescale Kinetis MKL25Z128 coming from Rs.219 to Rs. 250 (Diff. packages http://in.element14.com/jsp/search/browse.jsp?N=2103+203063&Ntk=gensearch&Ntt=kl25z&Ntx=mode+matchallpartial)
Why this is happening? A very weak chip like the ATmega328 is highly priced along with the ARM? IS this because of:
Arduino is popular and so the demand is too too much? I hardly believe this will be the fact!
ARM toolchains are protected like you have to sign NDA's etc for some deep trodden work! etc and etc
Atmel like always doesn't have a good productive and fast time to market production run.
or what?
Its not only this ARM uC that I'm emphazizing but there are many other out there which are costing/pricing the same around the ATmega328 and neatly are impregnated with 4-5 ATmega328's within them!
Arduino is popular and so the demand is too too much? I hardly believe this will be the fact!
Well, it's not that point, at least. Arduino is a very very small part of Atmel's sales. Even if they were selling a million Arduinos with $5 worth of Atmel chips each on them every year, that is less that one half of 1% of their sales and I don't think they sell that many, not even close. And Arduino boards use just a few models of Atmel's chips. All their 8-bit chips are priced in line with the 328. And Atmel chips are priced competitively with similar 8-bit Microchip offerings, which means they both have no problem selling at those prices. Remember, a big advantage of 8-bit is low power consumption. 32-bit high-speed chips are not always appropriate despite being a better "value" (and they are).
NI$HANT:
2) ARM toolchains are protected like you have to sign NDA's etc for some deep trodden work! etc and etc
If you use Atmel's ARM processors, you get Atmel Studio for free and they don't make you do any of that as far as I know. They have a library that abstracts out all the fancy features and gives you an API so you don't have to deal with registers. I don't know their pricing compared to NXP, it may be a little higher but Atmel has nice chips.
There are local pricing oddities as well. Here in the US (Mouser.com), the arm chip you mention is 50% more expensive than a 328P-PU chip. ($3.67 vs $2.24)
Basically it costs the same to make an AVR chip as it does to make an ARM or any other chip. The process is the same and the cost is the same, the only variable might be the yeald and that is quite good these days.
So you would not expect much price differance. Remember the AVR is a much more rugged chip than the typical ARM chip.
There are different chip vendors for arm chips, so there is competition. I would imagine there is only one maker for AVR chips, so there is less competition.
You sell it for as much as the buyer/market is willing to buy it. It's simple.
If it's not selling, or too much competition, or introducing a new product -- you lower the prices.
If supply is low, or you have a hold or "monopoly" on a niche market, -- you can raise your prices, and they'll still buy it.