cards, and if you have a laptop with a couple of memory sticks in it—you’ve probably got 10 [billion] to 100 billion of those little buggers on your body or in your purse right now. That’s close to the number of cells that you have in your body, not quite the number, but the transistors are multiplying faster,” said Spencer.
The transistor was invented by two scientists at Bell Laboratories in 1947 (Brinkman, 1997), and about a decade later two separate companies, working independently, discovered how to combine many transistors onto a single chip of silicon. This started the semiconductor industry whose growth, according to Spencer, took off in the 1960s when the U.S. government chose to use integrated circuits in military systems, including the Minuteman missile. At that time, the semiconductor industry was small—perhaps just a billion dollars—and the Department of Defense accounted for about half of those sales.
By the mid-1970s, the industry had grown to approximately $5 billion in sales, and integrated circuits were being used much more widely. At that time, the United States owned about two-thirds of the world market in semiconductor chips and almost 100 percent of the market in the complex equipment used to manufacture those chips. However, other countries, particularly Japan, saw an advantage in semiconductor manufacturing and in 1975 started a cooperative effort between industry and government to boost the industry (Sakakibara, 1993).
According to Spencer, by 1985, the United States had lost market leadership in semiconductor manufacturing. At that point, it cost about a billion dollars to build a new factory to make semiconductor chips, and the equipment for a factory might cost several hundred million dollars. If a company made a mistake in building a plant, failure represented a huge cost, but if a company chose not to invest in plants it lost market share and future revenue.
The Department of Defense did not think that buying semiconductor chips from outside the United States was a good idea due to national security concerns about reliable and secure sources of chips, according to Spencer. This concern contributed to the formation of SEMATECH—an acronym for semiconductor manufacturing technology—as a cooperative effort between the federal government and the U.S. semiconductor industry. 1 SEMATECH initially had a budget of about $200 million, representing about 75 percent of the U.S. semiconductor industry, with a little less than 50 percent of that amount coming from the federal government and the rest from private industry (CBO, 1990).