. "Moore’s Law and the Economics of Semiconductor Price Trends." Productivity and Cyclicality in Semiconductors: Trends, Implications, and Questions -- Report of a Symposium. Washington, DC: The National Academies Press, 2004.
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Productivity and Cyclicality in Semiconductors: Trends, Implications, and Questions - Report of a Symposium
TABLE 1 Changing Size: U.S. Semiconductor Manufacturing Value Added vs. GDP
Percent of GDP
SOURCE: U.S. Census of Manufactures, Bureau of Economic Analysis, U.S. Department of Commerce.
over this historical period. I then link acceleration in the rate of decline in leading-edge semiconductor prices to changes in these underlying parameters in the mid-1990s, and explain why measured historical rates of decline over this period seem unlikely to persist. Finally, I explore the nature of the man-made historical and institutional economic processes that made these technical accomplishments possible, and argue that their consequence has been an unappreciated but radical transformation of the industrial framework in which R&D is undertaken within the global semiconductor industry.
In 1965, when Gordon Moore enunciated the first version of this “law,” semiconductor manufacturing accounted for about 0.09 percent of U.S. GDP. (See Table 1.) Thirty-five years later semiconductor manufacturing’s relative size had increased tenfold, and it accounted for almost 1 percent of U.S. GDP. Semiconductors were the single largest manufacturing industry in the United States (more precisely, they were the four-digit industrial code with the largest value added). Furthermore, while in 1965 the United States accounted for the vast bulk of global output, at the dawn of the twenty-first century it only accounted for roughly a third of total world production. The rapid growth of semiconductor manufacturing within the United States must be part of an even steeper rise relative to the size of the global economy.
Perhaps more importantly, semiconductors are a critical input to the industries at the heart of information technology: computers and communications. These two industries have had a particularly significant role in U.S. economic and productivity growth over the last decade.2 Together with consumer electron-
See Dale Jorgenson, “Information Technology and the U.S. Economy,” American Economic Review, 91(1):1-32, 2001.