economies of scale

Below is the extended version of an Op-Ed by Applied Materials chairman and CEO Mike Splinter which was published in Dow Jones today:

In 1960 the semiconductor industry was in its infancy. The first integrated circuits contained just a few transistors and the production costs were about $1,000 per circuit in 1960 dollars.  The only viable applications for this early technology were two programs, the Minuteman missile and the Apollo space program. And these programs bought nearly every circuit produced between 1960 and 1963.

The result of this early market creation by these government programs was that the cost per circuit dropped to an astonishing 98 percent to $25 by 1963 -- and an industry was born. This year, the world will produce about a quintillion transistors or one to the 18th power and the semiconductor industry will generate about $300 billion in revenue. As for the cost per transistor – today’s $200 MP3 player produced in 1975 would have cost about $3 billion.

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Applied Materials’ Ken MacWilliams, Jen Shu, Andrea Moretto and Farhan Ahmad contributed to an article in the latest issue of Photovoltaics World magazine, where they focus on lower cost crystalline silicon solar panels and their potential to help us reach grid parity -- where the cost to generate power on rooftops meets the cost to purchase power from the grid.  Below is an excerpt from the article: