What makes a DAC so expensive?

@jjss49  I started out with Schitt Vidar monoblocks and a Schitt Freya+ preamps with a Node 2I functioning as my DAC and streamer.  Speakers are Magnepan 1.7i’s.  I added the Audio Mirror DAC and continued to use the Node 2i with an coax cable as a streamer only.  The difference was substantial and obvious.  Way less harsh, bigger sound stage and things just seemed to open up.  A lot more space to the music.  I then added the LUMIN streamer and completely removed the Node from the chain.  A difference but not as big as switching to an outboard DAC. 

@mvrooman1526 

i am only asking specifically about the perceived sq difference from the streamer swap from node 2i to lumin - both feeding the same audio mirror dac

you are saying there WAS a difference, but very small, correct?  what was the difference?

There are so many issues here. 

1)  measurement of x variables defines quality

2) exponentially increasing cost for marginally increasing perceived quality (the $200 version gives you 80% of the quality of the $2000 version" argument)

3) parts count and quality should represent some "fair" proportion of the final price of the product.

I think issue #2 might explain a lot, as it's a basic feature of economics and of life. If you think like a measuring device for a moment, just about any cheap DAC will represent the sound in a "transparent" way. We all recognize what comes out of it as music that conforms to the basic amplitude and frequency response we might expect from the original recording, i.e., the 80%, the 95% even. Along several narrow axes, it might be 100%, perfect sound forever. And on many recordings of music, you might not hear any difference. On many styles of music, you might not notice the difference. Even on a particular recording of a particular style of music, you might not notice the difference _most_ of the time. The thing is, at this stage in my journey, what matters to me is the quality of sound I can get from the musical moments that matter. As it happens, those musical moments are a big part of what draws me to music, of what sounds and feels most like the sound of an acoustic instrument in a room, or the sound of the echo of voices in a church. I don't know what the variables are that help to reproduce those sounds. I know for sure that a $30 or even $300 can't get me there. In other words, that last marginal bit of quality, measured in moments of music, not S/N ratios or other measurements that are in some cases just hangovers from the testing of tape recorders and crappy amps from the 60s,  are what matter to a lot of audiophiles. 

I hope that helps to resolve the first issue, although it's easy enough to challenge me to define a metric that will measure the quality of the DAC, if not distortion measurements.  That's easy to concede; I don't have one. I know what a guitar and a voice sound like in a room. I know what they sound like in a studio. I know how much an engineer can and does manipulate the recording to sound a certain way. I still think, to get to the music that matters most to me, I need a better DAC. And I know that it will cost more and more to get that diminishing marginal improvement. 

On issue 3 I don't have much to say. Of course there are markups, marketing, labor, and distribution expenses that are many multiples the parts cost. That's just everyday business. Of course there is luxury branding for the ultra-high-end. As a consumer, do your homework, proceed incrementally and carefully, keep your ears on the music, and you'll be fine.

In my particular case, there is an added sense of urgency. I know that hereditary hearing loss will claim a big chunk of my hearing within the next ten years.  The willingness-to-pay variable has shot up for me, as I try to burn in memories of musical ecstasy before the lights go out, so to speak. So there we have it. Music is a meaning-making endeavour, from actually making it, to recording it, to hearing it back on your system alone and weeping, or cuddling with your significant other, or rabbit, or whatever. A device might measure clean for next to nothing, but does it help you to make meaning with music? If it does, then God bless.     

To me, in order to get guitars that sound like guitars then the DAC does not add or change anything when it reconstructs the waveform. DACs that are capable of doing this can be bought for a few hundred dollars. Some like DACs that deviate from this by playing with filters or adding and changing things that do not adhere to the sampling theorem and that's fine but don't claim they are transparent DACs or better because they can create a "sound". 

To me, in order to get guitars that sound like guitars then the DAC does not add or change anything when it reconstructs the waveform. DACs that are capable of doing this can be bought for a few hundred dollars. Some like DACs that deviate from this by playing with filters or adding and changing things that do not adhere to the sampling theorem and that's fine but don't claim they are transparent DACs or better because they can create a "sound.                                                                    

All dacs use filters of some sort, so your $200 dac has a filter. What your $200 dac doesn't have is a good power supply or a very good output stage. Most cheap dacs use an opamp output stage, which in my opinion compresses the sound.