Capabilities and Vertical Disintegration in Process Technology: The Case of Semiconductor Fabrication Equipment

Richard N. Langlois ()

Industrial Organization from EconWPA

Abstract: This paper presents a detailed case study of the cluster-tool segment of the American semiconductor-equipment industry. That industry has embarked upon a technological trajectory in which cluster-tool components (or modules) conform to a set of common interface standards. Cluster tools are thus becoming a modular system in the manner of an IBM-compatible personal computer or a stereo system. Such standards permit the sharing and reuse of technological capabilities, leading to what one might call external economies of scope. These reduce the need for and the benefits of large size and systemic coordination, permitting firms to concentrate their capabilities narrowly and deeply on a small range of components. The paper outlines the theory of modular systems; discusses the economics of single-wafer processing in general and cluster tools in particular; recounts the history of standard-setting in the industry; and examines ongoing issues of strategy and market structure. One conclusion of this analysis is that standard-setting may in this case blunt the widely touted benefits of the "Japanese model" of manufacturer-supplier relations. The public knowledge contained in common interface standards serves as a partial substitute for the detailed coordination and long-term relationships that model holds to be the hallmark of Japanese firms, thus shifting advantage in the direction of a loose network of small vertically and laterally specialized firms.

JEL-codes: L (search for similar items in EconPapers)
Date: 1994-06-30
Note: 40 pages.
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