The Semiconductor Industry is a paradox. Having worked in this industry for close to 7 years, I should know. Thanks to a dude called Gordon Moore, who, besides confining many of my friends at an institution called Intel, also coined the Moore’s Law. Plainly put, this law states that the average size of chips (semiconductor, though this may apply to the potato variety as well) halves every 18 months. What Jesus is to Christianity, Moore is to the Semiconductor industry. The Semicon Industry takes his word as gospel and spends on an average 20% of it’s revenue trying to reduce the size of chips and prove him right.
And therein lies the paradox. Customers of Semicon Companies expect the Semicon Cos to halve the cost of their chips every 18 months! And if the Semicon Cos don’t do it, their customers always have their competitor’s number on speed dial. So that puts these Semicon Cos in a situation where they actually spend more on research so that they can charge less to their customers and make less money! Talk about shooting yourself in the foot! The only way they can make any profits in this situation is to sell at least twice the number of chips. Unless we all figure how to either double our consumption or our population every 18 months, the Semiconductor Industry will be stuck with a case of a flooding of chips. Perhaps this also explains why this industry sees such a cyclical pattern of growth and downturns with the downturns lasting longer and deeper than the times of growth.
So is the future for anyone in the Semiconductor Industry doomed? Not at all. In my next post, I’ll discuss my thoughts on the business opportunities in the Semiconductor Industry. In fact, I’ll argue that it’s a great time to be in the Semicon space.
And so Mr. Moore, while we will thank you for your famous law, we thank you still for not making any further ones. For sometimes, it’s best to let those foolish entrepreneurs be ignorant about laws that go against what they’re trying to build…. that’s the only way they succeed.
