Eventually short-term returns are not possible without sustained R&D.
Eventually the second tier reaches 28 nm. If no one demands post-28 nm technology, because it's too expensive, certainly the habit of lowering costs will lead to the end of semiconductor technology leadership.
@resistion: I agree... in the longer run this trend will kill the Golden Goose that is giving the short term gains in the first place! The Semi industry is in a quandary -no one seems to have a clear strategy that nourishes a healthy R&D in the long term while keeping the short term-minded shareholders happy! And I don't see how the companies can do this while the industry is deeply entrenched in a suicidal pricing model.
@Rick: seems to me that the next generation technologies like Compound Semi, Graphene(?), etc., will have a difficult time attracting investors who are in for the long term. Many of these newer technologies are where Silicon used to be three decades ago. I do know that the US Government has been funding some of these but there needs to be investments with a long term vision for these from the commercial sector.
It's perfect timing for our rivals to catch up upon us. But so be it. The US should always focus on the top profit margin stuffs. As for the semi, whose profit margins are dropping year by year, let the Asians do it.
This behavior is typical when Management considers the business to be in the "cash cow" stage, meaning that it is a mature company with chances for innovation and differentiation largely behind it. This fits with an industry where generational improvements are increasingly expensive and the return on them are smaller.
From a business point of view the logic of this is defendable. The chip industry has defined innovation as smaller geometries and faster operation. Lately this has been modified to include lower power, but it is still a pretty narrow range of innovation. When is the last time that there was a fundamental breakthrough in semiconductors? What are the chances of that happening in the future?
Interesting thought @lidation but I don't agree, silicon is strategic...I am sure Asia wil happily take over semi business and start selling us chips in increasing quantities...and we should move on to what? social networking? financial services? artificial intelligence?
@krisi, I was being a bit sarcastic. I am truly aware of the strategic aspect of the silicon industry to our national security. However, sadly, what is happening is happening. I am with one of the major semiconductor manufacturing equipment companies. Most of our business are in Asia since nearly a decade ago because the manufacturing happens there.
We like it or not, the Wall Street folks don't care. Money talks - unless the government steps in.
I see your point @lidation...all manufacturing even for highly complex silicon chips is moving to Asia...and apparently many people in US are fine with this, I read this article in Bloomberg that this is a natural evolution like agriculture going away many years back...but I just have difficulty imaging this service society where you don't produce anything...your suppliers can squizze you anytime they want in such a situation but not seliing you chips or increasing prices 10 times...what are we going to do then? Kris