How do Innovations Become Industries?

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We’ve all seen it happen many times, especially during major events such as the post-thanksgiving Black Friday, Cyber Monday and holiday sales: gadgets that were expensively priced for early adopters are suddenly affordable and accessible to the average person, which in turn spur a jump in demand. A 55-inch 3D LED TV, for example, that retailed for more than $3000 USD not too long ago now sells for about $1300 (and it comes with a 3D Blu-ray player and 4 sets of 3D glasses!) Similarly, a respectable laptop PC can cost less than $300 USD these days when they were more than $2000 just a couple years back. My 486 desktop computer used to be two grand! Aside from consumer electronics, we’re seeing similar trends of cost reduction in industries such as solar and LED lighting. A photovoltaic (PV) solar module that used to cost more than $5 per watt five years ago now goes for about $1.50 per watt. LED light bulbs for general lighting sold for more than $40 per bulb in hardware stores two years ago now sell for less than $20, and I am sure they will be comparably priced with today’s CFL bulb in the near future.

So how do these incredibly technologically advanced products become so affordable? The answer is technology and scale.

The semiconductor industry, which makes the critical parts inside most electronic gadgets, has successfully delivered what Moore’s Law predicted: reducing cost per transistors by half every 18 months or so. This is achieved by shrinking transistor devices to the size of atoms and making semiconductor factories the size of aircraft hangers in order to leverage economies of scale. So over the past 20 years, cost per transistor dropped 20 million times. The results: A 2 gigabyte (GB) memory card costs less than a hamburger or more amazingly, you can get 5 Gb of storage in the cloud for free! Imagine this: without technology and scale, an iPod would cost over 3 billion dollars and would be the size of a house. Today it’s less than $150 and fits into your back pocket. In a few more years, don’t be surprised if MP3 players are given away in a cereal box or happy meal.

The flat panel display industry has also been relentless in driving down cost by focusing on technology and increasing scale of manufacturing. The result is more affordable and higher performance flat screen TVs. PV Solar and LEDs are essentially semiconductor devices and these industries are applying the knowhow of chip manufacturing resulting in lower costs and higher yields. Technology and scale made these technology-advanced products very affordable and as a result, millions and billions of units are sold each year, creating new industries and new markets that never existed before. Cloud computing, smart phones, tablets all became high growth industries because the products are not only desirable, but more importantly affordable and accessible to millions and millions of people.

At Applied Materials, we make the machines that manufacturers in the semiconductor, flat panel display, and solar industries use to create more advanced devices in a high volume production environment. Our technology enables Moore’s Law and other cost reduction learning curves and over time, enable these amazing products to become more affordable and accessible. Technologies that are currently expensive, such as energy storage devices, smart appliances, and electric vehicles will one day become cost competitive with today’s alternatives. Everyone at Applied Materials is proud to see how our efforts are turning great innovations into world changing industries.

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