Demand structure and technological change: The case of the European semiconductor industry

Abstract

This article proposes that the structure of demand is one of the major factors that affect the rate and direction of technological change and the evolution of high-technology industries, both over time and across countries. This article presents an analysis of the semiconductor industry in Europe, the United States and Japan, although particular emphasis is placed on the European case. The decline of the European industry (1960s) from a position equal to that of the American industry (1950s) can, to a large extent, be explained by the dominance of electronics consumer goods demand (rather than public procurement or computer demand) in the structure of demand in these countries. The later technological convergence of electronics final markets (1970s) played a major role in the commitment of the European semiconductor industry to LSI technology. This commitment, however, came too late to allow the European industry to catch up with its American and Japanese counterparts.