Productivity and Cyclicality in Semiconductors Trends, Implications, and Questions: Report of a Symposium (2004) / Chapter Skim
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Moore’s Law and the Economics of Semiconductor Price Trends
Moore’s Law and the Economics of Semiconductor Price Trends
Pages 151-170
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From page 151... ...
I then show how a Moore's Law prediction must be coupled with other assumptions in order to produce an economically meaningful link to what is the key economic variable of the information age: the cost or price of electronic functionality, as implemented in a semiconductor integrated circuit. I then relate the historical evolution of semiconductor prices through the mid-1990s to developments in several key parameters 1I am grateful for useful conversations about some of the ideas in this paper with Alan Allen, Denis Fandel, Dale Jorgenson, Paul Landler, Bill Spencer, and Phillip Webre.
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From page 152... ...
BACKGROUND In 1965, when Gordon Moore enunciated the first version of this "law," semiconductor manufacturing accounted for about 0.09 percent of U.S.
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From page 153... ...
Communications," in Robert C Crandall and Kenneth Flamm, eds., Changing the Rules: Technological Change, International Competition, and Regulation in Communications, Washington, D.C.: The Brookings Institution, 1989; Ana Aizcorbe, Kenneth Flamm, and Anjum Khurshid, "The Role of Semiconductor Inputs in IT Hardware Price Declines: Computers vs.
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From page 154... ...
To the contrary, Moore went to great pains to point out that the ICs he was predicting could be manufactured using existing feature sizes and manufacturing technology. Indeed, after Moore notes that his graph implies a single IC with 65,000 components on it by 1975, he states: "I believe that such a large circuit can be built on a single wafer."6 The integrated circuits projected for the out-years of Figure 1 were visualized as being about the same size as snack-type mini-pizzas.
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7Gordon E Moore, "Progress in Digital Integrated Circuits," Proceedings of the 1975 International Electron Devices Meeting, pp.
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Young, eds., Price Measurements and Their Uses, Chicago: University of Chicago Press, 1993; Kenneth Flamm, Mismanaged Trade? Strategic Policy and the Semiconductor Industry, Washington, D.C.: The Brookings Institution, 1996, chapter 6.
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From page 157... ...
Finally I note that, historically, every generation of lithographic equipment has typically shrunk minimum feature size by about 30 percent relative to the minimum feature size produced by the prior generation of equipment. As a result, area per chip feature, or area per component, has declined by 50 percent with each new technology node.
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From page 158... ...
To summarize, if we further assume a new technology node shrinking area per component by 50 percent every three years, constant wafer-processing costs per area of good silicon, and prices roughly tracking unit costs in the long run, an economist's corollary to Moore's Law would be a 21 percent annual decline in price-performance for leading-edge semiconductors.
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From page 159... ...
In fact, chip size seems to have increased by substantially less than a factor of two from one technology node to the next. In the case of the DRAM, over this period average chip size seems to have increased by a factor of about 1.4 from one node to the next.13 13 One calculates a factor of 1.37 based on chip area for first versions of six generations of DRAMs.
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From page 160... ...
In particular, after roughly a decade in which further generations of DRAMs in essence scaled down the basic DRAM design of the mid-1970s to smaller dimensions, a period of vigorous innovation began in the late 1980s during which three-dimensional memory cells were developed.14 In addition to 3-D features in memory cells, use of additional interconnect levels allowed tighter packing of components on a chip, and other types of products moved closer to the leading edge in their use of advanced manufacturing process technology.15 The net result was an average chip size that increased significantly less than that associated with reduced feature size due to introduction of a new technology node alone. In the case of DRAMs, the increase in chip size was about 30 percent less than that predicted on the basis of lithography improvement alone.16 We can incorporate this ingenuity factor as an additional variable, K, in Equation (2)
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From page 161... ...
as having greatly advanced the technological and manufacturing competence of Japanese semiconductor producers.18 A 1987 Defense Science Board report pointing to deterioration in the relative position of American semiconductor manufacturers as a possible national security issue played an important role in a U.S.-government decision to have the Defense Department pay half of the cost of a joint industry consortium, dubbed SEMATECH (for semiconductor manufacturing technology) and budgeted at $200 million annually.
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From page 162... ...
The first such "national technology roadmap" was published in 1992, and the next one, issued in 1994, still had new technology nodes being introduced at the historical three-year intervals.22 But the so-called 250-nanometer technology node was introduced a year earlier than called for in the 1994 Roadmap, and the 1997 National Technology Roadmap called for the next technology node (at 180 20Good resources on the history of SEMATECH are SEMATECH's own web pages (at |
From page 163... ...
The share of world semiconductor sales accounted for by the consortium's membership is now substantially greater than was the case in 1987.25 SEMATECH was also certainly perceived as a major force in Japan, where the SEMATECH model greatly influenced the formation of a new generation of semiconductor industry R&D consortia in the mid-1990s.26 The Japanese semiconductor industry's R&D consortium, known as SELETE, was joined by Korean producer Samsung, and there are in effect two rival international R&D orga 23See Semiconductor Industry Association, The National Technology Roadmap for Semiconductors, Technology Needs, 1997 Edition, San Jose, CA: Semiconductor Industry Association, 1997. 24The existence of the National Cooperative Research Act of 1984, which granted partial antitrust exemption to registered U.S.
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From page 164... ...
Later roadmaps are "International Technology Roadmaps" sponsored and coordinated through the two global R&D consortia and through national semiconductor industry associations headquartered in the United States, Europe, Japan, Korea, and Taiwan.27 A two-year cycle for the introduction of new technology nodes remains a feature of recent roadmaps, though they also call for a reversion to the slower-paced three-year cycle after 2005.28 An earlier call for reversion to a longer cycle (in the 1999 international roadmap) , incidentally, was ignored when the 130-nm technology node was introduced in 2001, just two years after the 180nm node had come online.
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From page 165... ...
. CAUSES AND CONSEQUENCES OF DECLINING COSTS This acceleration in the decline of semiconductor prices has been noted by economists and credited with playing a significant role in the macroeconomic productivity growth acceleration of the late 1990s, as well as an important role in more rapidly declining prices for the underlying computer and communications capabilities which fueled the technology contribution to resurgent productivity.29 It is also tempting to speculate that this decline in the cost of computing and communications capabilities played a significant role in the boom in Internetrelated activities that occurred over this same period.
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From page 166... ...
Leading-edge semiconductors may well drop in price at much faster rates than in the past as the result of faster introduction of new technology nodes over the long term, but the increase will be from 30 percent annually to a number in the 40 percent-plus range, not in a range exceeding 60 percent annual declines. One would also expect productivity improvement flowing directly and indirectly from the sharp price declines for information technology of the late 1990s to fall to more moderate -- but sustainable -- levels in future years.
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From page 167... ...
Interestingly, there are two competing multinational R&D consortia -- International SEMATECH, with no Japanese members, and SELETE, with just one, very large non-Japanese member -- that manage to balance nationalist dynamics and international coalitions within a single, overarching international R&D roadmap coordination process. Economists are largely accustomed to thinking of the speed of technological change as something that is exogenous, dropping in gracefully from outside their models.
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From page 168... ...
Moore's Law governs one of the three key technical and economic variables that drive the calculation. Moreover, the same framework suggests that an acceleration in the introduction of new technology nodes in the late 1990s had a significant and predictable impact in further increasing the rate of decline in leading edge chip prices that took place at that time.
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The National Technology Roadmap for Semiconductors, 1994. San Jose, CA: Semiconductor Industry Association.
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From page 170... ...
World Semiconductor Trade Statistics.
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