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Chips and ChangeHow Crisis Reshapes the Semiconductor Industry$
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Clair Brown and Greg Linden

Print publication date: 2009

Print ISBN-13: 9780262013468

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262013468.001.0001

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Low Returns, High Risk

Low Returns, High Risk

(p.137) Crisis 7 Low Returns, High Risk
Chips and Change

Clair Brown

Greg Linden

The MIT Press

This chapter gives an overview of the semiconductor industry’s return on assets (ROA) from 1984 to 2005, documenting the changes as well as the rising trend in the R&D-to-sales ratio, and the mergers or alliances that have formed up as a response to the crisis on low returns. Analyzing the ROA of a large number of firms and companies, the purpose is to establish whether these firms are able to acquire adequate returns in order to support long-term investments in R&D. The response to the crisis is the stepping-off of the Moore’s Law treadmill and opting to participate in international alliances to help balance the costs of development. IBM’s Common Platform group is an example of such an alliance, or the fact that Japanese chip firms are seeking partnerships outside Japan. In conclusion, it is argued that several responses to improving ROA have been made by chip companies. These low returns with high risk continue to unfold, and a possible seismic shift in global competitive advantage could happen.

Keywords:   semiconductor industry, R&D, return on assets, international alliances, ROA, Moore’s Law, Common Platform group

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