[EAS]High-Tech Monoliths

[pjk]

Subject:   High-Tech Monoliths

(from NewsScan Daily, 6 December 2001)

NEW LOGIC CHANGES CHIPMAKING BUSINESS
With consolidation rapidly overtaking the global chipmaking business,
Financial Times columnist Peter Martin says there soon could be only
three giant memory chipmakers in the world, and that could shrink
further. "If the logic of the semiconductor industry's game of musical
chairs is the same as at a children's party, there will in the end be
only one survivor, only one global producer of the 'commodity' memory
chips on which an electronic-based economy relies. That seems at best
absurd, at worst frightening," says Martin. Forestalling that
scenario, however, are two trends that could transform the industry.
One is the arrival of semiconductor foundries -- third party vendors
of chip-making services, such as Taiwan's TSMC, which breaks the
traditional integrated model of a semiconductor company, where all
chips are both designed and manufactured by a single company. Donald
Hicks, a professor at the University of Texas at Dallas, calls the
impact of the foundry model "a tectonic event in the development of
the industry." The second factor is the receding importance of "time
to market," as the current generation of chips overpowers consumers'
actual needs. As "time to market" becomes less critical, the arms race
of new plants and new production processes will slow down, giving the
industry a little breathing room, and resulting in "a more flexible,
varied and disaggregated industry," says Martin. "If so, this
particular game of musical chairs will end with more than one
survivor." (Financial Times 6 Dec 2001) <http://ft.com>
http://globalarchive.ft.com/globalarchive/article.html?id=011206000139

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This is very much the opposite of what George Gilder predicted in
"Microcosm" (1989), his most famous book, where he explained the
solid-state physics roots of our electronic and communications
technologies, and held that the "law of the microcosm" requires
decentralization of both business and government. So much for that
"law." Foundries may counter the trend toward monoliths, but not
unless their output becomes a major economic component.
This collapse into ownership by a very few companies worldwide is not
unique to high-tech production. E.g. it also describes TV, film, and
publishing. Extrapolations from technology always underestimate other
boundary conditions, such as business strategy, and intellectual
property law. Those same bounds are now restricting the possibilities
of the Internet, turning much of its promise into a latter day form of
cable-TV.  --PJK