Electronic Design

Microelectronic Circuits Pose Business Threat

As completely assembled integrated circuits and molecular building blocks become available in production quantities, the present-day relationship between a component supplier and his customer, the equipment manufacturer, faces a drastic revision.

Since microelectronic devices offer complete circuits in a single structure, much of the equipment maker's "contributed value" is lost, claimed Arthur P. Stern, of General Electric's Electronics Laboratory in Syracuse, N.Y., at the National Electronics Conference in Chicago. Should the equipment builder decide to fabricate his own micro-assemblies, the component maker faces a serious loss of business.

Thus, in perhaps five to ten years time, each will be forced into a major policy decision, according to Mr. Stern. Component suppliers who decide to fabricate and market integrated devices must invest in additional technology and facilities, Mr. Stern stated. Shall "standard" or "custom-made" devices be offered? By fabricating a fixed line of "standard" circuits, the component maker can keep cost at a relatively low level but faces the designer's reluctance to use someone else's ideas, he said. Making "custom-built" devices, at lower production runs, tends to be expensive and, thus, makes the product less attractive, he added.

Equipment manufacturers entering the integrated-circuit field, Mr. Stern concluded, must likewise expand their facilities and must be assured that their equipment needs can pay for the costs involved. Their microelectronics output will be geared to their equipment with little, if any, likelihood of sales to competitive equipment concerns. (Electronic Design, Nov. 9, 1960, p. 18)

These types of question about the relationship between component suppliers and systems houses went on for some time, as the industry absorbed the changes required by the adoption of ICs. And even when it seemed settled for small-scale ICs,similar questions continued to be asked when the technology shifted to MSI, and then to LSI.

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