Semiconductor productivity gains linked to multiple innovations,(EXCERPT), Monthly Labor Review Online, Apr. 1988

Semiconductor productivity gains linked to multiple innovations

Mark Scott Sieling

Output per employee hour in the semiconductor industry rose at an average annual rate of 13.1 percent between 1972 and 1986—a much higher rate than for all manufacturing, 2.4 percent.¹ Output increased 21 percent a year and employee hours, 6.9 percent. The long-term trend in productivity masks two distinct periods during which annual rates changed markedly.

Between 1972 and 1981, average annual output growth (25.4 percent) was more than three times higher than employee-hour growth. The major factor behind the strong output performance was the continual innovation in integrated circuits combined with the industry's adroitness in rapidly turning such innovations into low-cost, mass-produced devices. In an environment of rapidly evolving products and low unit prices, myriad new uses were found for semiconductor devices and most existing electronic products, such as computers and military hardware, were substantially upgraded.

These factors were also present during the first half of the 1980's, but gains in output per employee hour were less than one-quarter of those registered in the 1970's—4.1 as against 16.6 percent per year. During the 1981–86 period, output growth was dampened by increasing Japanese competition and a series of slowdowns in computer manufacturing (a major user of semiconductor devices). Increases in average employee hours also lessened during the early 1980's—from 7.5 percent a year in 1972–81 to 5.2 percent in 1981–86. The slowdown mainly reflected less robust output growth. While circuits became more intricate, they required more employee hours to design and produce; this tendency was partially offset by the increasing use of computers in both design and manufacturing processes and by more automated production techniques.

This excerpt is from an article published in the April 1988 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes

1 The semiconductor industry is designated as SIC 3674 by the 1982 Standard Industrial Classification Manuel of the office of Management and Budget. This industry consists of establishments primarily engaged in manufacturing semiconductors and related solid state devices, such as semiconductor diodes and stacks, including rectifiers, integrated microcircuits (semiconductor networks), transistors, solar cells, and light sensing and emitting semiconductor (solid state) devices.

Average annual rates of change are based on the linear least squares of the logarithms of the index numbers. Extensions of the indexes will appear in the annual Bureau of Labor Statistics bulletin, Productivity Measures for Selected Industries.

Productivity continues to rise in many industries during 1987.—Mar. 1989.

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