The Integrated-Circuit Industry, November 1965 Electronics World

According to the Bureau of Labor Statistics, inflation has increased the cost of goods by a factor of 9.4x since 1965 when this article appeared in Electronics World magazine. Although the number does not apply directly to semiconductors, the products made with them generally follow the trend. If you apply 9.4x to the prices here, the cost of a Fairchild uA914 dual, two-input NOR gate would have risen from 99¢ to about $9.31, which is highly unreasonable. The article does mention the rapidly lowering cost of semiconductors. Figure 2 projects the average price of integrated circuits to decrease from $20 to $1 between 1963 and 1970, whereupon the curve flattens. Of course that was based on a knowledge and limitations of existing technology. A dual, two-input NOR gate will cost you 54¢ today from DigiKey (only 13¢ in quantities of 25,000). The single-copy price works out to about 6% of the inflation-adjusted 1965 price. See also Integrated Circuit Techniques, The What and Why of Integrated Circuits, Evolution in Electronics: Integrated Circuits, Integrated Circuits: What's Available?, and The Integrated-Circuit Industry.

A special EW report on the business outlook and direction that will be taken by this new technology. Effects on the technician, engineer, the discrete-component manufacturer, as well as the electronic parts distributor are surveyed.

(Editor's Note: This article is based on a questionnaire sent to manufacturers in the integrated circuit industry and, in some cases, personal interviews with their top management.)

With nearly a quarter million individual components used in some of our sophisticated space and missile systems, space and military agencies have been concentrating on ways of reducing size and weight while increasing the reliability of electronic equipment. The semiconductor industry had already made a notable contribution with the development of transistors, diodes, and other solid-state devices. Some of the processes of transistor technology were extended to the fabrication of resistors and capacitors. This led the government to subsidize such giants as Texas Instruments for the development of integrated circuits for space and military applications.

Since their appearance in the early 1960's, sales of integrated circuits leaped from $18 million in 1963 to $40 million in 1964. In 1964 Texas Instruments and Fairchild shared 50% of the market. Motorola and Westinghouse accounted for close to 20% of the business while about twenty other firms competed for the remaining 30%.

Initially, the government was the sole customer for integrated circuits. Prices for many components were in excess of $100, thus discouraging their use in industrial and consumer products. Now such circuits as flip-flops for industrial applications can be purchased for a dollar, making the integrated circuit attractive for use in both industrial and consumer products. Based on figures compiled by the industry at large, average sales in 1964 for the military market was about 65%, for industrial use, 33%, and less than 2% for the consumer market. A few companies, such as Varo, listed their sales as 90% military; Stewart-Warner, on the other hand, marketed 90% of its output to industry.

Integrated circuits have made a notable impact on the whole electronics industry and, in the future, sales will be divided 50-50 between military and industrial/consumer uses (Fig. 1).

The volume of integrated circuit sales is on the rise in all areas. The Autonetics Division of North American Aviation has purchased $16 million worth of integrated circuits this year for the Minuteman II control and guidance systems. Integrated circuits will also find greater application in non-military equipment - not necessarily because of their small size and lighter weight, but because of their lower cost and greater reliability when compared to discrete components. Lower cost will result from greater yield and improved manufacturing "know-how." Reliability is already high and this particular characteristic will be considered a little later in this article.

Our estimate is, and this is shared by such people as Alvin B. Phillips, general manager of integrated circuits at Sylvania, that 1965 should bring a gross volume sales of about $60 million. On an even more optimistic note, Herman Fialkov, vice-president of General Instrument Corp., had this to say:

"For the semiconductor industry, microelectronics holds a truly explosive potential. It took industry 10 years to reach a semiconductor volume (in 1964) of $685 million, excluding microcircuits. But microcircuit sales alone, which were approximately $41 million last year, are projected by competent independent authorities, to more than double, to $80 or $90 million this year, and to leap upward to an estimated $400 million by 1968."

For industrial applications, the integrated circuit has the greatest potential in systems where a number of basic circuits are used repeatedly. Examples are digital computers, desk calculators, counters, and digital voltmeters. Prospects are good that a low-cost integrated-circuit computer will be developed for small firms who can't afford the larger machines. In some cases, companies such as IBM make their own (hybrid) circuits for use in their computers. RCA, on the other hand, purchases about a half-million dollars worth of integrated circuits from outside sources for its Spectra-70 computer.

The minute size of an integrated circuit makes it especially attractive for hearing-aid applications. This industry is currently the most important user of integrated circuits in equipment offered to the consumer. Some limited use of integrated circuits in medical electronics equipment is under way. This is an area which can derive many benefits from these tiny wonders and greater activity along these lines is expected in the future.

For practical reasons, other consumer products such as AM-FM radios and TV sets, have not been affected to any great extent by integrated circuits. After all, it is impractical to use these tiny components when a 5-inch speaker or a 19-inch picture tube will govern, to a large degree, the ultimate size of the product. The situation will change, however, when integrated circuits become competitive with present techniques of printed-circuit boards and discrete components used in many of these products. In some quarters of the TV industry efforts are being directed toward replacing the conventional discrete i.f. strip with an integrated version for greater cost savings.

Fig. 1 - Projected division of sales between the military and industrial consumer markets for integrated circuits.

Fig. 2 - Projected trend of integrated-circuit average cost.

The general trend in recent years has been to go from vacuum tubes to transistors in electronics equipment. This has occurred in home receivers, hi-fi sets, and other products. There is a good chance, however, that transistors will be bypassed by a few manufacturers in the TV field. When TV sets are ready for complete "transistorization," integrated circuits may be used exclusively because they will be less costly than transistors and other discrete components.

There are some novel possibilities for consumer radios of the future. Bob Schultz (Manager of the Monolithic Department) and Jerry Fishel (Manager of the Multi-chip Department) of General Instrument have some engaging thoughts on this matter. Schultz envisions an ear plug-in radio with a remote tuning unit attached to the wrist. The earpiece would contain all the receiver circuitry and a miniature loudspeaker. The wrist unit would be a flea-power transmitter for selecting the desired station in the earpiece unit. No concealed wires connecting the earpiece to the wrist unit would be needed.

Jerry Fishel has a different slant on what the future integrated-circuit radio may look like. He feels that a receiver based on pulse-code modulation (PCM) would be most compatible with integrated circuits. Digital circuits would be used in this type of receiver since it is easy to make integrated circuits for digital functions. When these circuits become inexpensive, such a receiver may become a reality.

Future applications of the integrated circuit in consumer products will be limited only by the manufacturer's imagination and ingenuity. Some designs that may be practical from both an economic and technical standpoint include a car radio that fits into the cigarette lighter socket, an intercom the size of a 3-watt lamp that plugs directly into the wall, a personal paging system, and automatic switching circuits that will eliminate home wall switches.

In broad terms, there are two basic processes used in making integrated circuits, the monolithic and hybrid. Monolithic circuits are fabricated from a single crystal of material, usually silicon. Passive components, such as resistors and capacitors, are formed by the same processes that are used for making transistors and diodes. Typical methods employed are diffusion, epitaxial diffusion, and the metal-oxide semiconductor (MOS) technique.

In the hybrid or multi-chip integrated circuit, the transistors and diodes may be made by the diffusion process, but the passive components are fabricated by other methods, e.g. thin film. There are many variations to be found in the two general technologies. These details are covered fully in other articles in this issue and will not be discussed further here.

The hybrid technology is well suited for special items and small production runs. The monolithic unit lends itself to mass production of circuits and, in terms of cost, will prove to be the most economical. Consequently, there is little doubt that the integrated-circuit industry will probably concentrate on the monolithic circuits for its high-production items.

Nearly every manufacturer has off-the-shelf integrated circuits that meet military and industrial (commercial) specifications. Prices are declining steadily (Fig. 2) so that what may have cost $4 a year ago can often be purchased today for a dollar. Delivery can be anywhere from "immediate" to a few months. A large variety of digital circuits and some analog circuits are available off-the-shelf. In the future, one will find more video, audio, and power amplifiers and other analog circuits available in integrated form.

Component for component, integrated circuits often cost less than their discrete cousins. One specific example is the Fairchild μL914 dual two-input gate which sells to manufacturers for 99 cents (Fig. 3). The circuit contains 4 transistors and 6 resistors. Assuming you can buy reasonably good transistors at 30 cents and resistors at 5 cents each, the cost of discrete components alone comes to $1.50. Add to this the expense of wiring and packaging the individual components, the actual price of the finished item will be more like $6. Fairchild believe that generally a 5 to 1 reduction in manufacturer's cost is possible when going over to integrated circuits.

The cost of converting from an original discrete circuit function to an integrated one can be quite high. The many skills required, such as mask making, photography, and etching can often bring the "tooling" cost to $10,000 or more. If a large production run is scheduled, however, the initial investment is rapidly amortized and the cost per unit item will generally be less than for the discrete circuit.

When a manufacturer switches his product over to the integrated circuit he will find himself restricted when it comes to modifying his product. He has lost the previous flexibility of replacing a resistor here or a capacitor there in order to improve performance. With integrated circuits, new masks, etching, and a host of other steps are required to alter a circuit. This becomes a very costly process and will discourage the OEM from making changes.

To gain the flexibility he once enjoyed with discrete technology, the future OEM may decide to make his own integrated circuits. One approach would be to purchase wafers containing a number of unconnected active and passive components. The OEM would then proceed to do his own masking and etching thus fabricating the desired circuit and making the necessary modifications on the circuit as required for his particular application.

Fig. 3 - The Fairchild μL914 dual two-input gate sells for 99¢. An equivalent number of discrete components at 30¢ a transistor and 5¢ per resistor, add up to $1.50. The expense of labor in wiring and packaging the finished discrete-component circuit may result in a total circuit cost of $6.00.

Fig. 4 - Projected growth of the integrated-circuit industry which by 1970 may reach sales of a half-billion dollars.

Besides influencing the form electronic products will assume in the future, the integrated circuit will also affect the people who earn their livings in the electronics industry. The technician, engineer, discrete-component manufacturer, and the parts distributor may have to discard some old practices and adapt to new conditions in order to remain in the running.

The technician working with discrete circuits spends a good deal of his time troubleshooting for a defective component. In the course of hunting for the culprit, the technician usually refers to schematics for key voltage -and resistance values at the pins of a vacuum tube or leads of a transistor. Once the defective part is isolated it is replaced and the job is considered complete. The major cost to the consumer is troubleshooting time; the cost of replacement parts is generally negligible.

With the widespread use of integrated circuits, this concept of servicing will vanish. The future technician will not be able to measure voltages at the pins of a vacuum tube or the leads of a transistor. Further, in most cases he will be unable to replace resistors, capacitors, or other discrete components. Instead of replacing individual parts, he will find himself replacing particular circuit functions. If the trouble is in the mixer circuit, the entire integrated mixer will be removed and replaced. Troubleshooting time will be reduced, thus cutting the service charge. This should enhance the image of the technician and also make it pay for the consumer to have his set repaired rather than discarding it and purchasing new equipment.

The future technician will have to become "system oriented." His training must emphasize functional relationships among the various building blocks that make up a system. His test equipment will be essentially the same; however, he will need fixtures or jigs for checking out a suspected integrated circuit. These jigs are similar to the ones used on the production line for testing integrated circuits.

Based on past experience with vacuum tubes and transistors, it is doubtful whether the integrated-circuit industry will standardize on a limited number of types, sizes, and shapes of integrated circuits. This will mean that the fixtures required for servicing will be numerous. The technician may make them himself or be supplied by the vendor who once produced transistor sockets and has now switched over to making fixtures to hold integrated circuits.

The circuit engineer will also have to become more systems oriented. His design philosophy will be radically different from what it is today. The engineer will be designing with integrated-circuit functions to fit into some over-all system. His approach will be governed by the "black box" concept.

In some cases it may be cheaper to use digital functions rather than analog circuits. This will necessitate a redesign from an analog configuration to one that uses switching circuits. For example, an FM discriminator may become a counter using many integrated digital circuits.

Another reason why digital circuits may be more attractive than the analog type is component tolerance. In a digital or switching circuit, the active device is either "on" or "off." Tolerances on the passive components can be as wide as ±25% and reliable circuit operation is still obtained. In many amplifiers, because of biasing and other considerations, resistance tolerances have to be held much closer than ±25%. The yield of integrated analog circuits with good tolerance usually decreases appreciably, thus upping the cost.

Another possible chore for the design engineer will be the laying out of integrated circuits. Even today, companies like General Instrument have some of their customers layout the masking design for special integrated circuits. Coupled with this, a greater understanding of the physical processes of integrated-circuit operation will become essential. In terms of the engineering curriculum, all these factors should accelerate new course offerings in system design, solid-state physics, integrated-circuit fabrication, and digital switching circuits.

The discrete-component manufacturer will be faced with some serious problems. The increased use of integrated circuits will generally reduce the demand for many low-power passive and active devices. This view is echoed by Westinghouse, Fairchild, and many others who foresee a decline in growth rate for most discrete-component manufacturers and the obsolescence of many discrete components. A shift in emphasis will probably occur and discrete-device manufacturers will concentrate on high-power and special discrete components. Some may enter the integrated-circuit field while others may switch over to supplying parts which are compatible in size with the integrated circuit.

All is not bleak, however. The foresighted component manufacturer may see his sales keep step with the increasing use of integrated circuits. These tiny devices are going to open up many new markets and generate new products. In addition to integrated circuits, many discrete components will be required for the complete product. The discrete-component manufacturer who has adapted to new conditions will be in an excellent position to get a sizable chunk of the market.

Integrated circuits should simplify parts stocking and purchasing procedures for the parts distributor. In some in-stances, distributors may specialize and handle either integrated circuits or discrete components. There is also a possibility that the distributor will have to carry the products of fewer companies in order to offer a complete line.

One company, Philco, asserts that percent of component sales through distributors will decrease substantially. In our opinion, this can only occur if there is a radical change in the concept of the position the distributor holds in the electronics community. This is an unlikely occurrence.

The transistor has been established as a more reliable component than the vacuum tube. Because the techniques used in making integrated circuits are similar to those used for transistors, the integrated circuit is at least equal to the transistor in reliability. However, the picture is even brighter than this. One sore spot in reliability is the interconnection of components. Because many interconnections are eliminated, the integrated circuit is probably the most reliable device which uses both active and passive components in production today.

As an example of how reliability studies are conducted, the test setup used bv Philco will be examined. One-hundred and fifty-three modules are connected in a series string and tied back to provide a ring oscillator containing 459 elements. The circuits operate for one million element-hours at 25°C and an additional one million element-hours at 75°C. A failure of any element would stop the ring oscillator from functioning.

Philco found that no failures occurred during two million element-hours of life testing (one million hours each at 25°C and 75°C). Other firms making integrated circuits have had similar experiences. Fairchild reports that MIT's Instrumentation Laboratory, working on the Apollo program, has conducted operational life tests on their line of integrated circuits totaling over 50 million hours without any failures.

To summarize, integrated circuits will be used more and more in military, industrial, and consumer products of the future. Many novel devices will be made possible by the use of these ultra-tiny components. Because of their reliability, small size, and decreasing cost, the integrated circuit will become competitive with most discrete circuits that are in use today.

The technician, engineer, discrete component manufacturer, and parts distributor will all be affected.

The sales of integrated circuits will probably hit a half-billion dollars in 1970 (Fig. 4).

The Integrated-Circuit IndustryNovember 1965 Electronics World

The Integrated-Circuit Industry
November 1965 Electronics World