[ip26]

The cross-subsidy means that while they have gross margin on the 555, it would not be enough to cover R&D & make net profit without the additional sales of the higher margin 595. In other words, they could not afford to develop & bring the 555 to retail by itself, even if the sale price is higher than the simple cost of manufacturing.

[activitypea]

That wouldn't be cross subsidy, that would be selling at a loss, right? I don't think any item has ever been sold for the sum of its bill of materials. The price is always bill of materials + labor + some profit, and here "labor" includes R&D.