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Moore’s Law Keeps Chip Leaders First

China is trying to catch up, but the blazing pace of development makes it an almost impossible task.

“Cram more components onto integrated circuits.” That was the blunt title of Gordon E. Moore’s essay on silicon chips, published in Electronics magazine in April 1965. In just three pages, the director of semiconductor R&D at Fairchild Camera and Instrument Corp. one of the most powerful observations in modern business and science. He wouldn’t have known it at the time, but it also serves as a precept that keeps semiconductor leaders ahead as long as they keep spending.

Later called “Moore’s Law” by noted scientist and engineer Carver Mead, in the early days of electronics, paper claimed that the number of components per integrated circuit would double every two years. Moore, who later became Intel Corp. founded, expected this to be the case in the next 10 years. Nearly six decades later, it’s still true.

Hardly any other industry in history has shown the same level of consistent development for so long. Cars are slightly faster than they were in 1965, although fuel economy nearly doubled from 24.5 miles per gallon to 28.3 mpg. Battery technology, the key to the future of electric vehicles, saw an even more impressive 40-fold improvement in cost per kilowatt hour between 1991 and 2018.

Since Moore’s foresighted remarks, the number of transistors per chip has increased from 100 to nearly 50 billion, while component size has decreased. Simply put, the density degree added a zero every 3.5 years. Moore published his original prediction as a logarithmic graph of base two, but in standard notation it looks more like a hockey stick.

An important implication of this trend is that the cost of computers has fallen sharply. Chips work by feeding binary units (bits) of data in various combinations into logic gates, with the output giving the result of the calculation. More ports means faster computation speed, providing more powerful applications. One of the earliest was the deployment of chips to detect a target and calculate trajectory in missile guidance systems during the Vietnam War. An iPhone today is known to be stronger than a room full of circuitry in 1970, and for a lot less money.

But about a decade ago, that started to change. As semiconductor analyst and writer Doug O’Laughlin noted, the price per port stabilized and then started to rise from the 28 nanometer node. That technology was unveiled in 2011 by Taiwan Semiconductor Manufacturing Co., followed by rivals including United Microelectronics Corp. in the following years.

The reason is simple: it is becoming increasingly difficult to make semiconductors. TSMC’s spending on equipment rose 74% to $30 billion last year, but shipments — measured in 12-inch wafers — were up just 14.8%. While Moore’s Law provides more transistors, the cost increases outweigh the density benefits. This year, TSMC will spend more than $40 billion.

These climbing costs are a major reason manufacturers have stepped out of the competition. In the early years, Motorola and AMD were big names. Not anymore.

But a lot of Chinese companies are coming. Some are seasoned veterans like Semiconductor Manufacturing International Corp., and others are fresher on the scene like Yangtze Memories Technology Co. With Beijing’s support, both politically and financially, the Chinese chip sector has spent untold billions on Taiwan, South Korea and the US. They have largely failed.

While much has been written about Chinese developments lately, the analysis often forgets that the rest of the industry is also making progress. There is good reason to be skeptical about claims that SMIC has recently produced chips at the 7-nanometer node, a quantum leap for the country’s leading chipmaker. How many chips it produced, and at what level of accuracy (known as yield), are key to assessing whether this was a legitimate breakout or a windfall. But even taking this news at face value, we can still conclude that China has not won over leaders like Samsung Electronics Co. and TSMC.

In fact, when SMIC announced its move to 28nm production, it was three years behind TSMC. Now SMIC’s small output of 7nm chips comes four years after TSMC released the technology into mass production.

The rising cost of semiconductor manufacturing ($10 billion per factory), the increasing complexity of modern techniques, and the increased R&D required only to operate new equipment make it easy for a company to fall behind. On the other hand, money alone is not enough to make up for ground. That’s because of Moore’s Law.

Once a leader like TSMC, Samsung or Intel announces their move to the next node, the race is on for everyone else to catch up. Rivals have been known to beg, borrow and steal information to fill that gap. Even then, it takes years to go through the myriad manufacturing steps required to make a chip. And during that time the leaders do not sit still. Another breakthrough only restarts the two-year timer before they are expected to, and usually do, deliver the next production node.

China’s latest tactic is to try to stay ahead of the pack with entirely new chemical engineering processes that scientists hope will give them a revolutionary breakthrough. So far, that great risk has yet to pay off. Intel also hopes to maintain its weak hold on semiconductor leadership by accelerating the pace of development.

Even as Chinese chipmakers are working hard to catch up, Intel, Samsung and TSMC are still ahead. The Taiwanese foundry spent $4.5 billion on R&D last year, seven times more than SMIC. The American giant surpassed them both, spending $15.2 billion. Ultimately, spending only allows leaders to stay in the game. It’s Moore’s Law that keeps them ahead of the curve.

Tim Culpan is a Bloomberg Opinion columnist on technology in Asia. Before that, he was a technology reporter for Bloomberg News.

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