Moore’s Law: Does it Affect Marketing Spending in the Semiconductor Industry?
The semiconductor industry began to rapidly develop during the 1960’s and has exploded since then. During its infancy Gordon Moore, a co-founder of Intel, hypothesized that the number of transistors able to be placed on an integrated circuit board would double every year (Moore, 1965). Moore’s Law, as it has come to be known, has had a profound impact on the semiconductor industry. Competitors have been forced to sink significant amounts of capital into research and development in an attempt to have their products keep up with, or exceed, Moore’s Law. This research paper will attempt to see if Moore’s Law has an effect on the marketing efforts of semiconductor companies.
Richard Koch believes “80 percent of a market will tend to be supplied by 20 percent or fewer of the suppliers, who will normally also be more profitable” (Koch, 1998). The semiconductor industry seems to bear this out. There are 818 semiconductor manufacturers in the world (Digchip, 2008). These manufactures in 2007 had over $270 million in revenue (Wikipedia, 2008). The top 20 semiconductor companies comprised over 64 percent of these revenues. In essence, 2.4 percent of the semiconductor companies contributed over 64 percent of the total industry revenue. Intel, the industry leader, accounted for 12.5 percent of all revenue.
In 1965, Gordon Moore, proposed the now famous Moore’s Law (Moore, 1965). In essence he predicted the doubling of computer processing power every two years. The semiconductor industry has invested heavily in research and development spending in an attempt to continually meet the demands dictated by Moore’s Law. In 2006, both Samsung and Intel invested close to $6 billion each in research and development; ranking them 11th and 12th, respectively, in R&D spending of all companies (IEEE Spectrum, 2007).
While companies have maintained their focus on R&D spending, how much have these same companies spent on marketing. Does Moore’s Law create a type of “arms race” in the semiconductor industry in which companies are forced to increase consumer awareness of their progress?
Hypothesis of the Research
Marketing Spending = Moore’s Law: There will be no correlation between investment in marketing and a company’s attempt to meet Moore’s Law.Get help with your essay from our expert essay writers...
Previous Work on the Affects of Moore’s Law on the Semiconductor Industry – Literature Review
There have been numerous articles written on the effects Moore’s Law has had on the computing industry. However, the vast majority of these articles are scholarly publications on how to speed hardware, make transistors smaller, etc., very few of them have focused on how Moore’s Law has affected the industry along financial or cultural lines. Business and trade journals will be searched utilizing JSTOR, EBSCO, ProQuest, and other similar products.
Research will be gathered from both primary and secondary sources for this project. The companies’ yearly 10-K reports will constitute the majority of the primary sources. Secondary sources will include such sources as The Economist, The Wall Street Journal, Hoovers business information, and other similar sources. The research will be conducted by BusSearch.
BusSearch is located in Fayetteville, AR and is owned by Ben Byford. Mr. Byford has over 17 years of market research and consulting experience. The contract stipulates a delivery date no later than October 10th, 2008. The charge for this research will be $8,000 with the possibility of an $800 bonus if the project is delivered by September 10th, 2008. The final report will be delivered by BusSearch during the upcoming corporate retreat scheduled for October 22nd, 2008 at Mount Magazine.
A multistage sampling technique will be used for the collection of this data. Data obtained from Hoovers business information will allow the industry to be broken into segments based on revenue generation. The first segment will contain companies with annual semiconductor revenue of over $1 billion. The second segment will contain companies with annual semiconductor revenue of $500 million to $999 million. The third will contain companies with annual revenue of $1 million to $500 million. The last segment will contain companies with annual revenue of under $1 million.
The multistage sampling technique will be used because it will allow analyses of companies within similar segments. Each segment can then be compared across other segments. This will allow a greater understanding of any patterns which may occur within the data.
Twenty-five random corporations will then be chosen from within each segment. Researchers will then collect data on revenue, R&D spending, and marketing spending for each company. The data will then be analyzed in accordance with the hypothesis. Researchers will also focus on highlighting trends within the data which may relate to the 80/20 principle (Koch, 1998).
The researchers anticipate finding no correlation between Moore’s law and corporate marketing expenditures. The vast majority of a semiconductor industry’s resources are taken up on R&D spending (Investopedia, 2008). This R&D spending drives companies to meet Moore’s Law. The researchers believe a link will not be found between increased R&D expenditures and marketing expenditures. Therefore, no link will exist between a company’s efforts to meet Moore’s Law and its marketing expenditures.
Even though the data may prove the null hypothesis, the results should provide very interesting associations with the 80/20 principle. As mentioned earlier 2.4 percent of the semiconductor industry accounts for over 64 percent of the industry’s total revenues. What affect does this have on the marketing efforts of smaller companies? How does this affect the marketing efforts of the industry titans? Does it affect the competitive landscape?
If the semiconductor industry is spending, on average, 20 percent of its total budget on revenue, what affect does this have on the marketing budget? Is there a correlation? Is a company’s R&D spending and its adherence to Moore’s Law dependant? If so, does this mean that as long as companies’ spend 20 percent of their budget on R&D that processing speed will continue to adhere to Moore’s Law?
The 80/20 principle is a powerful tool, when used correctly, in identifying opportunities within an organization. This research will provide useful insight into where this principle may be applied within the semiconductor industry. Only a few examples have been illustrated so far. Only after reviewing the data can any long term determinations be made.
- Digchip. (2008). Semiconductors manufacturers list. Retrieved on June 28th, 2008 from http://www.digchip.com/datasheets/manufactures.php.
- IEEE Spectrum. (2007). Spectrum’s top R&D spenders. Retrieved on June 28th, 2008 from http://www.spectrum.ieee.org/images/dec07/images/12.RDchart.pdf.
- Intel Corporation. (2005). Excerpts from a conversation with Gordon Moore: Moore’s Law. Retrieved on June 28th, 2008, from ftp://download.intel.com/museum/Moores_Law/Video-Transcripts/Excepts_A_Conversation_with_Gordon_Moore.pdf.
- Investopedia. (2008). The industry handbook: The semiconductor industry. Retrieved on June 30th, 2008, from http://www.investopedia.com/features/industryhandbook/semiconductor.asp.
- Koch, Richard. (1998). The 80/20 Principle: The secret to success by achieving more with less. Doubleday, New York, NY.
- Moore, Gordon. (1965). Cramming more components onto integrated circuits. Electronics. Volume 38, Number 8, April 19th, 1965.
- Wikipedia. (2008). Semiconductor sales leaders by year. Retrieved on June 28th, 2008 from http://en.wikipedia.org/wiki/Semiconductor_sales_leaders_by_year.
- Worldbank. (2008). Total GDP 2006. Retrieved on June 28th, 2008, from http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf.
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