Best Research Ideas
Semiconductors – Moore Stress = Structural Industry Shift
—Mark Lipacis, Senior Equity Research Analyst, Semiconductors
—Sundeep Bajikar, Senior Equity Research Analyst, Semiconductors
—Lee Simpson, Senior Equity Research Analyst, Technology Hardware
—Masahiro Wakasugi, Senior Equity Research Analyst, Japan Computer Hardware
Jefferies Global TMT team was first to identify a structural shift within the semiconductor industry. For the past 40 years,
Moore’s Law has accurately predicted that the number of transistors per chip doubles every two years. Equally as
important as transistor density is that the cost per transistor in those chips has declined by about 30% per year. The
combination of smaller, more powerful and cheaper chips every year has been the fundamental driver of the
semiconductor cycle and the foundation of innovation in electronic devices. This all changed in 2012 as the normal cost
decline was not happening. This watershed moment has three major implications for the industry and its companies:
(1) longer time between leading-edge product refreshes; (2) OEM customers benefiting from mixed-signal/analog
integration capabilities; and (3) increasing capital intensity for leading-edge builders causing near-term pain but longterm
gain for survivors.