Shifting Trends in Semiconductor Prices and the Pace of Technological Progress

Abstract

This paper examines three questions motivated by previous research on semiconductors and productivity growth: Why did semiconductor prices fall so rapidly in the second half of the 1990s, why has the rate of price decline slowed since 2001, and to what extent are these price swings associated with changes in the rate of advance in semiconductor technology? We show that the price swings are statistically significant and that they reflect changes in both price-cost markups and cost trends. Further analysis indicates that the shift to faster cost declines in the mid-1990s likely corresponded to a speed-up in the pace of advance in semiconductor technology; however, the slower cost declines since 2001 appear not to have been mirrored by a deceleration in technology. Consequently, researchers should be cautious about associating price or cost movements for semiconductors with changes in the pace of underlying technology even over moderately long periods. *Aizcorbe is affiliated with the Bureau of Economic Analysis; Oliner and Sichel are affiliated with the Federal Reserve Board.

A Model of Technological Progress in the Microprocessor Industry

“…9 Song [2007] and Gordon [2009] are two other papers that use microprocessor performance. 10 The changes in the growth rate of performance is broadly consistent with the changes in the growth rate in price per quality unit mentioned in Grimm [1998], Aizcorbe [2006] and Aizcorbe, Oliner and Sichel [2008]. See Table II. The model in this paper implies that in steady state, the mean growth rate of performance is determined by two parameters.…”

“…An increase in the innovation rate in the semiconductor equipment industry leads to a decrease in the technology cycle, as shown in Section V of this paper. Aizcorbe, Oliner and Sichel [2008] also find support for an increase in the innovation rate in the semiconductor equipment industry. The decrease in efficiency, which led to the slowdown, occurred because after the early 2000's, microprocessor firms were not able to pursue the same approach as before to developing new microprocessor designs.…”

“…The detailed modeling of technology helps to separate out the contribution of the semiconductor equipment firms from that of microprocessor firms towards technological progress in the microprocessor industry. There have been many previous studies of the acceleration and slowdown, including Jorgenson [2001], Aizcorbe [2005], Aizcorbe, Oliner and Sichel [2008] and Flamm [2004]. The studies above characterize the rate of technological progress in terms of the rate at which price per quality unit has declined for microprocessors.…”

“…The studies above characterize the rate of technological progress in terms of the rate at which price per quality unit has declined for microprocessors. 7 This approach however has the limitation, as noted in Aizcorbe, Oliner and Sichel [2008], that changes in prices brought about by changes in demand and competitive conditions can be mistakenly attributed to changes in the rate of technological progress. To overcome this problem, I use the notion of technological progress as the growth of microprocessor performance.…”

Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity

“…The distinction between discrete and complex technologies is widely accepted in the literature ( [Cohen et al [2000], Kusonaki et al [1998], Hall [2005a]). Discrete technologies are characterized by a relatively strong product-patent link (pharmaceuticals or 19 In fact, the time-series graph of non-patent references in semiconductors closely mirrors, but anticipates, the time series graph of various measures of the speed of technological advance in semiconductors that are provided by Aizcorbe et al [2008]. This indicates that non-patent references are a reliable indicator of technological opportunity for this very important technology.…”