TABLE 1 Rates of Decline in Quality-Adjusted Price for Semiconductors, 1991-1999

 

Compound Annual Decline Rates (%)

CAGR 91-95

CAGR 95-99

CAGR 91-99

MOS MPU

−40.36

−61.89

−52.3

MOS Memory

−8.02

−47.87

−30.8

of which, DRAM

−7.76

−53.46

−34.5

MOS MPR

−3.89

−23.01

−14.0

Other MOS Logic

−6.76

−19.13

−13.2

Thyristors & Rectifiers

−0.84

−12.94

−7.1

MOS MCU

0.36

−13.87

−7.0

Power Transistors

−0.78

−10.27

−5.6

Small Signal Transistors

0.26

−10.50

−5.3

Optoelectronics

3.25

−10.04

−3.6

Diode & All Other Discrete

4.28

−9.03

−2.6

Digital Bipolar

5.37

−4.01

0.6

SOURCE: Author’s calculation based on data in Aizcorbe, Flamm, and Khurshid (2004).

Second, microprocessors are the largest single semiconductor input, in terms of value, in personal computers1 and are the technological core of all computers, big and small. Technological improvements in the semiconductors alone have been estimated to account for 40 percent to 60 percent of price-performance improvement in personal computers (PCs) in the late 1990s.2 Quality-adjusted improvement in computer prices, in turn, is credited with a major role in the rapid improvement in U.S. productivity growth in the late 1990s.3

Finally, microprocessors have increasingly become the dominant product in semiconductor production facilities located in the United States, as semiconductor manufacturing, in turn, became the largest U.S. manufacturing industry (measured

1

J. L. Hennessy and D. A. Patterson, Computer Architecture: A Quantitative Approach, 3rd Edition, San Francisco, CA: Morgan Kaufmann Publishers, Inc., 2002, p. 21, estimate that the microprocessor accounted for 22 percent of the component costs of a thousand dollar PC in 2001. The next most significant semiconductor input was the memory (DRAM), which accounted for 5 percent of component costs.

2

See A. Aizcorbe, K. Flamm, and A. Kurshid, “The Role of Semiconductor Inputs in IT Hardware Price Decline: Computers vs. Communications,” Federal Reserve Finance and Economics Discussion Paper 2002-37, Washington, D.C.: The Federal Reserve Board of Governors, Washington, August 2002; revised 2004, forthcoming in E. Berndt, ed., Hard to Measure Goods and Services—Essays in Honor of Zvi Griliches, Chicago, IL: National Bureau of Economic Research.

3

See D. Jorgenson and K. Stiroh, “Raising the Speed Limit: U.S. Economic Growth in the Information Age,” Brookings Papers on Economic Activity, G. Perry and W. C. Brainard, eds., Washington, D.C.: Brookings Institution Press, 2000; D. Jorgenson, “Information Technology and the U.S. Economy,” American Economic Review 91(1), March 2001.



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