benchmarking microelectronics innovation: understanding moores law and semiconductor price trends...
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Benchmarking Microelectronics Innovation: Understanding Moore’s Law and Semiconductor Price Trends
Kenneth Flamm
Technology and Public Policy Program
Lyndon B. Johnson School of Public Affairs
University of Texas at Austin
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Outline
Why Do We Care? Moore’s Law The Economics of Moore’s Law The Economic Impact of Moore’s Law Benchmarking Moore’s Law Tinkering with Moore’s Law Point of Inflection? Official Data on Semiconductor Prices Better Benchmarking
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Key Economic Features of the Semiconductor Industry Extremely rapid technical progress Large R&D Investments Learning Economies Capital Intensity Capacity Constraints, Long
Gestation Lags One Complicated Industry
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Why Do We Care?
Now largest U.S. manufacturing industry Measured by value added
One 4-digit manufacturing industry now almost 1% U.S. GDP
Most important input to other industries we care a lot about Computers, communications Big impact on GDP, productivity growth See Jorgenson AEA 2001 Presidential
Address.
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Changing Size: U.S. semiconductor mfg val added vs. GDP 1958 1965 1975 1985 1995 1997
.04% .09% .13% .26% .70% .77%
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Moore’s Law
In the beginning: the original law 2x devices/chip every 12 months ca. 1965
Moore rev.2 2x devices/chip every 18 months ca. 1975
Self-fulfilling prophecy? “it happened because everyone believed
it was going to happen” The receding brick wall
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Figure 1The Original "Moore's Law" Plot
From Electronics April 1965Lo
g2 of th
e N
um
ber of
Com
ponents
Per In
tegra
ted F
unct ion
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Economics of Translating Moore into $ and ¢
$/device =
$ processing cost area silicon
Area/chip_____________________ Devices/chip
New “technology node” every 3 years
Lithography advance means .5X area perchip feature
Moore’s law 4x devices/chip every 3 years
Would predict Area/chip 2X every 3 years
$ processing cost/wafer area roughly constant
CADR = -21%
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An Economist’s Default Corollary to Moore’s Law:Moore’s Law + constant wafer processing cost + new technology node every 3 years=-21 % CADR
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The Ingenuity (DRAM) Corollary: Instead of doubling chip size, use ingenuity to
increase it only Z (Z < 2) times real recent example (DRAMs), Z=1.37 3-D device structures
Implications of ingenuity for DRAMs recently, CADR = -30% for DRAMs, in 70s and 80s, wafer processing
cost also fell, CADR more like -37% Japan/VLSI project, competition impact?
Another example is ASICs, more rapid leading edge technology adoption transitory impact on CADR
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Benchmarking Moore’s law: Differences in Semiconductor Price Movements Are HUGE
Source: Aizcorbe, Flamm, and Khurshid (2001).
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Implications for Input Prices in Different User Industries Also Great
Source: Aizcorbe, Flamm, and Khurshid (2001).
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Accounting for the economic impact of Moore’s Law
The standard model Estimated cost decline Estimated price elasticity Calculations of benefits
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The Standard Model: Consumer’s Surplus
Figure 5Social Benefit From a Decline in Semiconductor Price
Dollars
a
d
b
c
e
Po
PN
Qo QN
D
Q
Q = Quant ity; D = Demand.
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The Numbers:
Summary of Consumer Welfare Calculations
Benefit in 1995 of
Billion $
Percent ofGDP
Percent of 1995 GDP Growth
1 year’s price decline 20 years’ price declines 30 years’ price declines
1.8 378 1503
0.16 5.2 21
8 260 1039
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Magnitudes
1 year’s tech improvement yields .16% GDP …forever
20 years’ tech improvement would cost you about 5 percent of GDP if rolled back
If you’re feeling really brave, roll the clock back 30 years and you shave off up to 20 percent of GDP!
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More Comparisons
Other well-studied cases-- the railroads in the 19th century
The old guys vs. the new guys: a historical parable
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Tinkering with Moore’s Law: The Technological Acceleration (Sematech Roadmap) Corollary Suppose new technology node every 2
years instead of 3 Industry coordinated push through
Sematech in late 1990s Competitive pressures also pushed
New default (2X chip size) CADR = -29%
New DRAM (1.37X chip size) CADR = -41%
Constant chip size (1X chip size) CADR = -50%
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Decline Rates in Price-Performance
Percent/Year
Microprocessors, 1975-85 -37.5Hedonic Index 1985-94 -26.7
DRAM Memory, 1975-85 -40.4Fisher Matched Model 1985-94 -19.9 DRAMs, Fisher Matched Model, Quarterly Data
91:2-95:4 -11.995:4-98:4 -64.0
Intel Microprocessors, Fisher Matched Model, Quarterly Data
93:1-95:4 -47.095:4-99:4 -61.6
Decline Rates in Price-Performance
Percent/Year
Microprocessors, 1975-85 -37.5Hedonic Index 1985-94 -26.7
DRAM Memory, 1975-85 -40.4Fisher Matched Model 1985-94 -19.9 DRAMs, Fisher Matched Model, Quarterly Data
91:2-95:4 -11.995:4-98:4 -64.0
Intel Microprocessors, Fisher Matched Model, Quarterly Data
93:1-95:4 -47.095:4-99:4 -61.6Sources: Flamm (1997); Aizcorbe, Corrado, and Doms (2000)
Point of Inflection?
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Change of Pace?
0.1
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DRAM
Intel MicroProc
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Implications of This Interpretation of Moore’s Law Ultra-high rate of innovation in late 1990’s
temporary Transitory factors increased innovation
above long-term sustainable rates Shortened product lives Intensified competition More rapid adoption of leading edge
processes in other products Future CADR will look more like –40%
than –60%+ Economic impacts may decline to lower
but more sustainable rates
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Benchmarking Moore’s Law in the U.S.: Official Statistics on Chip Prices BEA got ball rolling, taken over by others BLS-- Much improved for DRAMs and
Microprocessors, not so hot for other products Data sources a concern Documentation a concern
Fed Reserve has stealth program, currently best numbers in town Data sources a concern Weights a concern Possible application in estimating capacity a
big concern Access/availability outside Fed a concern
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Comparison of BLS with Other Price Indexes for Microprocessors
Microprocessor Price Indexes
1
10
100
1000
10000
12/9
8=10
0
f lamm hedonic
BLS PPI
FRB
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Better Benchmarks for Semiconductor Innovation Tracking it better in a time of change
Focus more scarce stat resources on price indexes for IT sectors, reflecting growing relative importance to economy
A real collection program for underlying price data, perhaps coordinated with industry trade organizations
Under the hood at Dataquest (& others) not a pretty story
Decent coverage of products besides memory and microprocessors
New initiatives in communications Better understanding of R&D trends Better coordination of public/private R&D
investments