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What does the Ford Mustang and Intel’s Gordon Moore Have in Common with Local Motors?

What does the Ford Mustang and Intel’s Gordon Moore Have in Common with Local Motors?
by Charles DiLisio on 11-06-2014 at 11:00 pm

1964 Vision, Volume and Moore’s Law

The 1964 New York World’s Fair saw Lee Iacocca, then a young 40 year old General Manager, introduce a car that inspired “total performance” and was for a “young America out to have a good time.” This young America would become the baby boomer generation. The Mustang was revolutionary in its affordability, which was obvious in its sales. Ford estimated it would sell 100,000 Mustangs during that first year; in fact, it would sell more than 400,000. In 1964 big corporations (Ford, GM, US Steel), had big factories and drove down costs through greater volume. The mantra that greater volume spurs lower costs that creates greater demand was observed in 1936 by Theodore Paul Wright describing the effect of learning on production costs in the aircraft industry.

1964 was also when a young engineer, Gordon Moore, then at Fairchild wrote in his journal what would become Moore’s Law to be published in Electronics on April 19, 1965. Dr. Moore observed that in an integrated circuit (IC) that transistors doubles approximately every two years. As a result we have seen an explosion of electronics, computing and communication growth as a result of larger wafers —> smaller geometries —> greater integration —>lower prices —> greater electronic product volumes.

Enter the Experience Curve

In 1966, Bruce Henderson of the Boston Consulting Group (BCG) introduced the “experience curve,” which resulted from work done for Texas Instruments. It holds that unit costs go down as a company gains production experience. The experience curve concept allowed Texas Instruments to underbid rivals by postulating falling unit costs. Ultimately, the concept was to drive costs down while becoming the dominant market player.

The “experience curve” observation (mega manufacturing —> volume — > lower cost —> leading market share) has led companies not only in the semiconductor industry, but also manufacturing companies and even countries to seek volumes and lower prices to gain market prowess and success.

Today, the “experience curve” and its corollary Moore’s Law are being challenged based on the very things they created. Miniaturization, computing power and ubiquitous communication allows a disruptive business model to emerge even in traditional automobile industries where scale and volume have been barriers to entry.

The effects on the automobile industry will reverberate into the semiconductor industry and we need to be aware of this disruption. I suggest you read my previous article on SemiWiKi titled: Viva The New Industrial Revolution! What Etsy, 3D Printing, and Kickstarter Means to Semiconductor Companies?

Local Motors — Maker Revolution leads to an Open Sourced Car

Today, manufacturing does not necessarily need to be based on large volumes, driving down costs. Crowd sourcing, 3D printing, low-cost collaborative design tools, and cloud factories, complex manufactured products can go from idea to production quickly and at reasonable costs. It’s the Maker Revolution combined with Internet physics.

Local Motors is changing the way automobiles are designed, build and sold. Its using, crowd sourcing design, combining this with community tools like Siemens Solid Edge Design 1, and utilizing micro-factories to build interesting, niche vehicles that are C.O.O.L (Community, Open-source, Ownership Experience, and Local). As a result, Local Motors is able to go from idea, design and build in a period of five months, at a lower cost. The implication is very similar to what happened in the steel industry where big steel (US Steel) was challenged by mini-mills (Nucor) resulting in a new, profitable business model for steel production (see “The Rise of Mini-Mills”, New York Times, 1981)

As the semiconductor industry moves from the smartphone platform to the Internet of Things (IoT), it may be good to reevaluate the premise of Moore’s Law and the experience curve.

Look at the XC2V FlypMode Military Assault Vehicle. This DARPA project designed to see how a military vehicle idea could move from idea to production. In a matter of five months the vehicle went from military input to design, manufacturing and vehicle delivery to the military.

Semiconductor Companies — Systems Thinking vs. Moore’s Law

What can semiconductor companies learn from Local Motors? Four observations:

  • Co-creation or crowd sourcing or 3[SUP]rd[/SUP] party collaboration for IC design— necessary to meet time to market (TTM) issues in the future. Can semiconductor designers be open to crowd sourcing design with customers and non-customers?

  • More than Moore’s Law — focusing religiously on smaller geometries, greater levels of IC integration that require expensive, large capital expenditures may not be necessary to be successful in the future. Can you rethink integration using programmability (FPGAs, MCUs, MPUs) or utilizing 2.5D or 3D packing?

  • Think Systems vs. Devices — transitioning to the IoT world, you will need to think systems and be able to develop intelligent sensors which incorporate MEMS sensors, MPU/MCU, memory and some RF.

  • Value, not Volume — most sensor systems will have to be done faster, designed for very specific applications and at moderate volumes.

This New Industrial Revolution is a revolution of Makers, custom products and regionalization. It isn’t about volume or the learning curve as we know it. We are moving from the homogenous (baby boomer), one size fits all market, to the heterogeneous (millennial), highly fragmented one. Passionate design, rapid time to market, and uniqueness will be paramount as technology is becoming ubiquitous.

If you haven’t watched the videos below on Local Motors, you should. Not just for what they are doing but the message behind the company. This message will drive significant change in products and business models of all categories.


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