EconPapers    
Economics at your fingertips  
 

How Fast are Semiconductor Prices Falling?

David Byrne, Stephen D. Oliner and Daniel Sichel ()
Additional contact information
Stephen D. Oliner: American Enterprise Institute

No 2017-005, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The Producer Price Index (PPI) for the United States suggests that semiconductor prices have barely been falling in recent years, a dramatic contrast to the rapid declines reported from the mid-1980s to the early 2000s. This slowdown in the rate of decline is puzzling in light of evidence that the performance of microprocessor units (MPUs) has continued to improve at a rapid pace. Over the course of the 2000s, the MPU prices posted by Intel, the dominant producer of MPUs, became much stickier over the chips' life cycle. As a result of this change, we argue that the matched-model methodology used in the PPI for MPUs likely started to be biased after the early 2000s and that hedonic indexes can provide a more accurate measure of price change since then. MPU prices fell rapidly through 2004 on every price measure we present, with the PPI declining at an even quicker pace than the hedonic indexes. However, from 2004 to 2009, our preferred hedonic index fell faster than the PPI, and from 2009 to 2013 the gap widened further, with our preferred index falling at an average annual rate of 42 percent, while the PPI declined at only a 6 percent rate. Given that MPUs currently represent about half of U.S. shipments of semiconductors, this difference has important implications for gauging the rate of innovation in the semiconductor sector.

Keywords: Economic development, technological change, and growth; Industrial production; Prices, business fluctuations, and cycles; Productivity; Measurment; Hedonic price index; Quality adjustment; Microprocessor (search for similar items in EconPapers)
JEL-codes: E1 E31 E66 L16 L63 O33 N72 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
https://www.federalreserve.gov/econresdata/feds/2017/files/2017005pap.pdf (application/pdf)

Related works:
Journal Article: How Fast are Semiconductor Prices Falling? (2018) Downloads
Working Paper: How Fast are Semiconductor Prices Falling? (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2017-05

DOI: 10.17016/FEDS.2017.005

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().

 
Page updated 2020-01-26
Handle: RePEc:fip:fedgfe:2017-05