Academic journal article Monthly Labor Review

Semiconductor Productivity Gains Linked to Multiple Innovations

Academic journal article Monthly Labor Review

Semiconductor Productivity Gains Linked to Multiple Innovations

Article excerpt

Semiconductor productivity gains linked to multiple innovations

High productivity gains, especially in the 1970's, stemmed mainly from rapid improvements in product design and manufacturing techniques and processes MARK SCOTT SIELING

Output per employee hour in the semiconductor industry rose at an average annual rate of 13.1 percent between 1972 and 1986 -- a much higher rate than for all manufacturing, 2.4 percent.(1) Output increased 21 percent a year and employee hours, 6.9 percent. The long-term trend in productivity masks two distinct periods during which annual rates changed markedly. The rates moved as follows:


  TABLE:                          Output per            Employee
  TABLE:                         employee hour  Output    hours

Between 1972 and 1981, average annual output growth (25.4 percent) was more than three times higher than employee-hour growth. The major factor behind the strong output performance was the continual innovation in integrated circuits combined with the industry's adroitness in rapidly turning such innovations into low-cost, mass-produced devices. In an environment of rapidly evolving products and low unit prices, myriad new uses were found for semiconductor devices and most existing electronic products, such as computers and military hardware, were substantially upgraded.

These factors were also present during the first half of the 1980's, but gains in output per employee hour were less than one-quarter of those registered in the 1970's -- 4.1 as against 16.6 percent per year. During the 1981-86 period, output growth was dampened by increasing Japanese competition and a series of slowdowns in computer manufacturing (a major user of semiconductor devices). Increases in average employee hours also lessened during the early 1980's -- from 7.5 percent a year in 1972-81 to 5.2 percent in 1981-86. The slowdown mainly reflected less robust output growth. Whire circuits became more intricate, they required more employee hours to design and produce; this tendency was partially offset by the increasing use of computers in both design and manufacturing processes and by more automated production techniques.

Out and demand. The semiconductord industry manufactures two major types of productds -- discrete devices, such as transistors and diodes, which perform only one electronic function; and integrated circuits (chips) which are arrays of discrete devices imprinted on small pieces of silicon. Increases in industry output since the late 1960's stem, to a large degree, from rapid growth in the production of integrated circuits. In 1966, integrated circuits accounted for about one-eighth of all semiconductor production, for over one-half in 1972, and for almost four-fifths in 1980. During the same period, their current dollar value leaped from just over $100 million to about $6.5 billion.

The earliest integrated circuits, developed in the late 1950's, contained fewer than 10 discrete devices. By the late 1960's, chip capacity had increased a hundredfold. Since then, chip capacity has doubled about every 2 years; in 1987, a chip the size of a postage stamp might hold up to 16 million separate elements.(2) While this increase in capacity would probably, by itself, have promoted strong output and demand growth, its effects were intensified by the industry's ability to supply large numbers of chips and by declining unit prices.

Prior to the late 1960's, the semiconductor industry focused on manufacturing costomized integrated circuits for computer manufacturers and the military.(3) Limited productions runs meant that development, overhead, and labor costs were spread over a small number of chips designed for one purpose could not be readily adapted for another. With the introduction of the first high-capacity standardized memory chip in the late 1960's, emphasis was increasingly placed on both enlarging chip capacity and quickly attaining mass production status. …

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