Systems, Components and Technological Discontinuities: The Case of the Semiconductor Industry

Abstract

This paper uses the semiconductor industry to describe a model of technological change that sheds light on the mechanism by which many technological discontinuities occur. The model combines two arguments: (1) incremental improvements in a system's components impact on the performance and design of systems; and (2) these incremental improvements in components can lead to discontinuities in system design through their impact on the design tradeoffs that are inherent in all systems. Components are defined loosely as any subsystem in a nested hierarchy of subsystems where the most important component in the semiconductor industry is semiconductor manufacturing equipment. Improvements in this equipment and the processes they are used in have changed (and continue to change) the tradeoffs that firms make in their choices of semiconductor materials, transistor designs and system designs, and thus led to a number of technological discontinuities. The model is described using the discontinuities that are the most widely emphasized in histories of the semiconductor industry.