1. ©Michael Borrus, 2003 Electronics Value Chain Source: IC Insights

2. ©Michael Borrus, 2003 Chips = Miniature Cities Low-angle scanning electron micrograph of a portion of a partially completed SRAM array containing six- device memory cells. The insulating oxide films have been removed, revealing the lower levels of the interconnection structure of the array. Source: Intel and IBM

3. ©Michael Borrus, 2003 Technical Progress I Source: Gordon Moore presentation, SIA 2002

4. ©Michael Borrus, 2003 Technical Progress II Source: Gordon Moore presentation, SIA 2002

5. ©Michael Borrus, 2003 Worldwide Semiconductor Sales 1975-2005 $Billions WW CAGR = 13.3% Source: SIA, WSTS * Forecast

6. ©Michael Borrus, 2003 Top 10 Suppliers Selected Years 197819861993 1TINECIntel 2MotorolaHitachiNEC 3 ToshibaMotorola 4PhilipsMotorolaToshiba 5NationalTIHitachi 6FairchildPhilipsTI 7HitachiFujitsu 8ToshibaMatsushitaSamsung 9IntelMitsubishi 10SiemensIntelMatsushita Source: Electronic News, various years

7. ©Michael Borrus, 2003 Evolution of Chip Competition I 1960s-late 1970s Policy: Military/Space R&D, Procurement; Antitrust, Tax Launch Market: Military, then Computing Demand: High Performance at any Cost Structure: Vertically Fragmented, Start-up Merchants Development Trajectory: Product Innovation Policy: Credit allocation, technology controls, trade and investment protection Launch Market: Consumer Electronics Demand: High Reliability at lowest Cost Structure: Vertically Integrated; Keiretsu Development Trajectory: Manufacturing Innovation U.S.Japan Result: US seizes global market leadership

8. ©Michael Borrus, 2003 Evolution of Chip Competition II Late 1970s - late 1980s Lead Market: Emergence of PCs/desktop systems Demand: Performance AND Reliability at Lowest Cost Structure: Merchants vs. Vert. Integr/Keiretsu Strategic Advantage: Capital spending to add capacity with manufacturing innovation to deliver quality at low cost (i.e., lean production) Policy: VLSI Project in Japan; US Trade Policy culminating in US-Japan STA Result: Japanese firms become global leaders, dominating memory; US firms retain key position in logic

9. ©Michael Borrus, 2003 Sales, Market Shares, Capital Spend 1982-1990 Market Shares Sources: SIA; Leachman and Leachman in Macher, Mowery, Simcoe Capacity Shares

10. ©Michael Borrus, 2003 Strategic Market Game Fragmented Open Potential Competitive Dependence Industry Coordination Difficult Assets Accessible Integrated Closed Potential to Marginalize Competitors Strategic Coordination Scale/Price Discrimination Inaccessible Assets USJapan Consequences: