Every so often you notice a story that flashes a hazard light about the prevailing wisdom about the way the world works. Thus it was last week, reading Jack Schofield’s Guardian article about the limits of Moore’s ‘law’, the long-standing projection by Intel co-founder Gordon Moore that the number of transistors that can be placed on an integrated circuit will doubled every two years (effectively doubling performance against price in that time). It’s been suggested before that the microprocessor manufacturing process will reach physical limits. Schofield’s piece was on the increasing investment cost of processor manufacturing plants. One of the consequences is likely to be the end of the exponential growth in computing performance which has underpinned the speed and scale of the information and communications technology revolution.

While not wanting to write a long post, it’s worth making a few points.

• The growing cost of the fabrication plants has always been the ‘dark side’ of Moore’s law – the performance-to-price ratio of chips may double every two years, but the cost of building the production plants keeps on growing (if not quite so quickly). Nonetheless, the numbers are now quite large; Intel is spending $7 billion upgrading its fabrication plants;  Global Foundries, an AMD spinout, is spending $4.2 billion building a new fabrication plant in upstate New York, helped along by a $1.2 billion incentive from the state. As well as production costs, design costs are also increasing.

• The cost grows because the engineering becomes more complex as transistors shrink in size. The scale is staggering, but the current generation of chips is 45 nanometers (nm) across – or 45 billionths of a metre. The next generation will be 32 nm, with 22 nm following along behind it. By way of a yardstick, the Intel 8088 chip, in 1982, was 3,000 nm (or 3 m icrons), while atoms are about a nanometre across. As Charlie Stross said in an interesting discussion of this, “it’s hard to see how we can miniaturize our integrated circuits below the 10nm scale”. Since increasing miniaturisatioon is the basis of current sector competition, there will be a big shake-up in the industry as we reach these limits.

• I’ve written here before on the work of Carlota Perez, who has a model of technological innovation going back to the Industrial Revolution which sees industrial innovation progressing in waves of around 50 years, with each wave (this is a Schumpeterian model, not from Kondratiev, by the way) progressing through a cycle of rapid innovation, leading to irrational investment exuberance (with speculative bubbles thrown in) to a shift to slowing rates of growth and more normal rates of return. her model has the current ICT wave starting in 1971, and the characteristics described above, with cost and complexity reducing the rate of return, fits her model pretty well.

• Of course, this doesn’t mean that there won’t be innovation in the sector. But it does mean that innovation is more process driven, and may require suppliers to think about what customers need and value, rather than simply pushing for ever greater density of transistors.

The final observation here is that maybe the Moore’s law curve wasn’t exponential after all – maybe it was just a sigmoid S-curve with a particularly steep gradient on the way up. Without getting into arguments here about The Singularity (and thereby revealing myself to be a simple-minded type whose brain is not sophisticated enough to understand the implications of exponential growth) it’s worth just mentioning that Theodore Modis has been over this ground in some technical detail. As Modis observes, “Nothing in nature follows a pure exponential. All natural growth follows the logistic [S-curve] function, which indeed can be approximated by an exponential in its early stages”. Equally, systems theorists would observe that in general, in any system, a balancing loop will eventually slow the acceleration created by a reinforcing loop.

And that’s what seems to be happening here. The relationship between reducing the scale (from 45nm to 22nm and beyond), and its cost, isn’t linear; it gets progressively more expensive as scale reduces and density increases. As a result, the cost of the fabrication plants and chip design accelerate to a point where they are no longer viable investment propositions. Two connected balancing loops change the underlying dynamics of the computer business – and change our assumptions about the continuing rate of technological change.

The image at the top of the post – showing processing power performance on a logarithmic scale, is from Computer Measurement Group, and is used with thanks.