NEW YORK (
TheStreet) -- Since 1982, I have been writing about Moore's Law, the idea that semiconductor chips can get better-and-better, faster-and-faster. (
(INTC - Get Report) now maintains the original 1965 Gordon Moore article
But there has always been a corollary, what I call Moore's Second Law. As chips get more complex the cost of building a plant to make them, called a fabrication plant or "fab," also rises.
Thus in this century Moore's Second Law has caused chip companies to go "fabless." Most of America's new chip leaders, like Qualcomm (QCOM - Get Report) and Nvidia (NVDA - Get Report), are absolutely fabless. (Qualcomm's market cap recently passed that of Intel.) Intel's most dangerous competitor, ARM Holdings (ARMH), does nothing more than license chip designs to others, like the A5 chip in your iPhone. It's essentially a software house.
Moore's Second Law has had another impact: Most production has moved to the Far East. Even Intel and Texas Instruments (TXN - Get Report), the best-known American chipmakers, have plants there. The center of the chip-making world is now Hsinchu, Taiwan, 90 minutes from Taipei by road, the home base of Taiwan Semiconductor.In the age of devices, Intel is being killed at both ends. On the design end, fab-less outfits can deliver custom designs that give phone and tablet companies control of their customers. On the production end, TSMC has cost advantages. So when Apple (AAPL) decided recently it had to diversify away from Samsung for components,
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts