Forget Moore's Law. There's far more at stake in IT than just doubling the number of transistors on a chip every 18-to-24 months.
Belatedly it is dawning on industry leaders that there's a retrograde law at work here in juxtaposition to Moore's technology mania. For the economics of foundation IT products --PCs, telecommunications gear, chips -- are going in the opposite direction almost at an inverse ratio as the technology advances.
Sean Maloney, Intel Corp. executive vice president and general manager of its Communications Group, warned that profits and revenue of the telecom industry "are moving back to the 1997 levels at the same time that communications traffic is soaring."
If the semiconductor price freefall and red ink continue, the chip industry financials may be back to pre-millennium levels as well. Consumer electronics has been in reverse gear for some time.
There may be more at work here than just the ups-and-downs of the industry's periodic business cycle swings.
For one thing, keeping on the Moore's Law track takes Big Bucks. Blitzing technology doesn't come cheap. Factories, fabs, breakthrough R&D, brain power all have their own Moore's Law analog of spiraling growth. And intense competitive pressure dictates that IT enterprises can't renege much on these investments even in slack times as today.
The end result of this technology treadmill is greater capacity at almost all levels of industry. But if there isn't an equal big jump in demand -- and often this is out of sync with the explosive surge in supply -- the initial result in crashing prices and a downward spiral.
A case in point is the chip industry's dilemma on building new 300mm wafer fabs, able to crank out 2.5 times more die than present 200mm lines. The technology is there. The competitive appetite is there to jump ahead with a possible commanding market lead over rivals. And Moore's Law almost dictates the plunge into 300mm to keep the industry on its long traditional cost-performance curve record.
But more than a few chip makers are wrestling over the economic consequences of rushing ahead on 300mm because we're on a technological roll. If the technical achievement just ends up glutting the market, we don't reverse the downward financial curve.
While cascading chip prices appeal to OEM customers, the economic health of their suppliers is also a concern. And many OEMs have their own financial downward spiral as the flip-side to their own Moore's Law growth.
Virtually no one wants to down-shift technology. But it's time to put just as much effort and skill into managing the costs and payoff.