Systems, components and modular design: The case of the US semiconductor industry

Abstract

While the existing research on modular designs and vertical disintegration primarily focuses on a single industry, this paper looks at the interaction between modular design and vertical disintegration in both the electronic systems (e.g., computers, telecommunications, broadcasting) and electronic components (i.e., semiconductors) industries. It uses data on the top-ranked firms in the US semiconductor industry to show how this interaction has evolved over the last 50 years in two ways. First, it shows how the development of 'industry standard' components for use in 'open system' modular designs of electronic systems facilitated the vertical disintegration between electronic systems and component suppliers. Second, it shows how the vertical disintegration in the electronic components industry (between semiconductor design houses and foundries) in the 1980s strengthened modular designs at the electronic systems level and further encouraged the vertical disintegration between system and component suppliers by reducing the entry barriers for design houses and foundries. These results have implications for research on the industry dynamics that result from the interactions between modular designs, design rules and several aspects of the Product Life Cycle (PLC), including dominant designs, increasing returns to scale and firm shakeouts and industry consolidation. Copyright © 2008 Inderscience Enterprises Ltd.