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June - 2001 - issue > Cover Feature

Adapting to the New World Order

Monday, November 17, 2008

In the current downturn in the technology sector, it has become fashionable to doubt the abilities of the Intels and AMDs of the world to survive new winds of change in the industry, including the proliferation of mobile computing, the saturation of key markets, or ever declining margins in PC sales. While these questions are pressing for the future of an industry that hit more than $30 billion in sales last year, it is useful to pause before examining them, and revisit the factors that drove the industry to its present form. The historical backdrop provides a useful context for examining the future of PC semiconductors in the coming years.
Historical Growth
The remarkable growth in semiconductors over the last few decades is the result of two principal factors: the increasing share of electronics in national output (GDP), and the increasing penetration of integrated circuits (ICs) in electronics products. Nowhere are these dynamics more dominant, and perhaps more illustrative, than in the rise of the PC industry during this period.

The ascendance of the personal computer in the ‘80s and ‘90s drove rapid growth in the microprocessor industry. This created strong, sustained demand for PCs through operating system upgrades (successive generations of the Windows OS), and through the proliferation and adoption of software applications. The microprocessor market has grown rapidly over the past 20 years, achieving sustained growth of over 30 percent a year for the decade of the 1990s. This astonishing pace was almost double the growth rate in any other IC category during this period (figure 1).

During this period Microsoft Windows established itself as the dominant platform for personal and business computing. The resulting user “lock-in” to the Windows architecture, coupled with natural economies of scale in engineering and manufacturing chips, created a virtual monopoly in PC microprocessors, securing Intel as the dominant player. Recent Trends

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