Design Rules, Volume 2: Chapter 13—The Slowly Changing Structure of the Semiconductor Industry

Spurred by the success of the IBM PC, in the early 1980s, a new form of organization—the digital platform ecosystem—became common in all industries that used digital technology. Digital platform ecosystems were vertically distintegrated organizations, characterized by distributed governance, modularity, and openness. In contrast, semiconductor firms, which were subject to the same rate of technical change as platform ecosystems, remained vertically integrated to a large degree. The purpose of this chapter is to explain this difference in organizational evolution and outcomes. I argue that the technology of the planar process, which made possible high rates of technical change for downstream users, simultaneously rewarded the creation of large-scale flow production processes that became more integrated over time.