Investing Caffeine

Technology Does Not Sleep in a Recession

August 24, 2009 at 4:00 am 4 comments

 

Our economy may be coming out of a long economic hibernation; however technology does not sleep through a recession. Gordon Moore, co-founder of Intel Corporation, has proven this trend true through his groundbreaking piece written in the April 1965 issue of Electronics Magazine. In the article Mr. Moore predicted transistor densities would double about every two years (“Moore’s Law”).  Transistors can be thought of as the brains of electronics devices, and the industry (Intel and other semiconductor manufacturers) has been boosting the brain power of electronics for decades. How far has the industry come? The number of transistors contained on a chip has gone from 16 in 1960s to over 600 million today – now that’s what I call progress!

These achievements have been nothing short of revolutionary, and many people consider the introduction of the transistor as the greatest invention of the 20^th century.  According to many industry experts, Mr. Moore’s forecasts have been shockingly accurate and many believe “Moore’s Law” will hold true for years to come – despite challenging technological limitations.

Source: The Financial Times

We may curse at our computers (I absolutely despise Vista), but there is no arguing with the huge productivity and standard of living improvements we have experienced over the last forty years – since the introduction of the transistor. Many take their GPS, Tivo, WiFi laptop, iPhone, and HiDef TVs for granted, however I for one thank Gordon Moore and those diligent engineers for making my geeky tech dreams come true.

However the cost of further advancements is becoming pricier. As line widths (the ability to add more transistors) narrow, the costs of building fabrication plants (“fabs”) with the necessary equipment are running in the multi-billion range. The Financial Times (FT) article talking about semiconductor trends mentions a $4.2 billion state-of-the-art factory in upstate New York that is just beginning construction. The FT notes that only two players (Intel and Samsung) have firm plans to build 20 nanometer fabs. For comparison purposes, one nanometer is equal to one-billionth of a meter and a human hair is 100,000 nanometers wide. In other words, a nanometer is pretty darn tiny. To further illustrate the point, Intel has managed to fit up to 11 Intel Atom processors – each packed with 47 million transistors – on the face of an American penny.

Source: The Financial Times

As the chip making industry become more costly, fewer semiconductor manufacturers will be playing in the sandbox:

“Intel argues that only companies with about $9bn in annual revenues can afford to be in the business of building new fabs, given the costs of building and operating the factories and earning a decent 50 per cent margin. That leaves just Intel, Samsung, Toshiba, Texas Instruments and STMicroelectronics.”

The economy may still be in the doldrums, but the $60 trillion global economy (as measured by Gross Domestic Product) never sleeps – technologies created by Gordon Moore and others continue to propel amazing advancements.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

Entry filed under: Financial Markets, Stocks. Tags: Atom, fabs, Financial Times, Gordon Moore, GPS, INTC, Intel, iPhone, Samsung, technology, Tivo, transistor.