Chips and Change Book Review

Chips and Change:  How Crisis Reshapes the Semiconductor Industry

By Clair Brown and Greg Linden

The MIT Press © 2009

The cyclical nature of the semiconductor industry is well known, but too little attention is paid to the underlying factors.  A just published book, Chips and Change, by Clair Brown and Greg Linden, discusses eight recurring, interactive crises that have shaped the semiconductor industry and contributed to its market cycles:  These crises and some examples are:

• Crisis 1:  Loss of Competitive Advantage.  Shift of memory production to Japan in the eighties
• Crisis 2:  Rising Costs of Design.  Design costs for leading edge ASICs exceeding thirty million dollars in the last decade
• Crisis 3:  Consumer Price Squeeze.  The shifting of end-use market demand from business oriented products to consumer products with much lower profit margins, requiring lower semiconductor profit margins
• Crisis 4:  Limits to Moore’s Law.  Manufacturing technology repeatedly going past supposed physical limits to continue decreasing line widths to maintain the prediction of Moore’s Law
• Crisis 5:  Finding Talent.  The need for top-notch design engineers leading to the increased use of offshore design centers
• Crisis 6:  Low Returns, High Risk.  Profit margins for semiconductor memories are low, but the required capital investment is huge.  The rate of return is a gamble
• Crisis 7:  New Global Competition.  Manufacturing shifting from the US to Japan, Korea Taiwan and now China according to the availability of capital and government assistance.

Chips and Change discusses in depth the impacts of these crises from the eighties to the present, where only examples are given above.  The book then presents some conclusions about the lessons learned.

Semico believes, as do the authors of Chips and Change, that these crises are ongoing and will continue to affect the semiconductor industry, facing some very big challenges.  The cost of new fabs is headed toward eight billion dollars, beyond the reach of all but a few companies.  Design costs will continue to increase.  Line widths are approaching the dimensions of atoms, requiring new manufacturing technologies.  China will continue to expand manufacturing capacity and soon have advanced manufacturing technologies.  Other countries are waiting in line to invest in semiconductor manufacturing capacity.  Semico intends to continue providing information to help semiconductor executives better understand these trends and manage their companies.

Chips and Change provides a solid understanding of the challenges that have faced the semiconductor industry over the past several decades and how they have been overcome.  As Shakespeare says, “What’s past is prologue.”  Chips and Change is informative and thought provoking reading for anyone needing to make plans based on the probable future of the semiconductor industry.