Being a student of the history of technology I know that the silicon semiconductor industry has been able to scale production according to Moore’s Law. However apart from the advances in how small the transistors can be made (the real basis of Moore’s Law), the other scaling factor has been the size of the wafers. Back in the old days silicon crystals had to be drawn out from a furnace at a very even steady rate which forced them to be thin cylinders 1-2″ in diameter. However as techniques improved (including a neat trick where the crystal was re-melted to purify it) the crystals increase in diameter to a nice 4″ size that helped bring down costs. Then came the big migration to 6″ wafers, 8″ and now the 300mm wafer (roughly 12″). Now Intel is still on its freight train to further bring down costs by moving the wafers up to the next largest size (450mm) and is stilling shrinking the parts (down to an unbelievably skinny 22nm in size). As the wafers continue to grow, the cost of processing equipment goes up and the cost of the whole production facility will too. The last big price point for a new production fab for Intel was always $2Billion. There may be multiple production lines in that Fab, but you needed to always have upfront that required money in order to be competitive. And Intel was more than competitive, it could put 3 lines into production in 3 years (blowing the competition out of the water for a while) and make things very difficult in the industry.
Where things will really shake up is in the Flash memory production lines. The size of the design rulings for current flash memory chips at Intel is right around 22nm. Intel and Samsung both are trying to shrink down the feature sizes of all the circuits on their Single and Multi-Level Flash memory chips. Add to this the stacking of chips into super sandwiches and you find they can glue together 8 of their 8Gbyte chips, making for a single very thin 64Gbyte memory chip. This chip is then mated up to a memory controller and voila, the iPhone suddenly hits 64Gbytes of storage for all your apps and mp4’s from iTunes. Similarly on the hard drive end of the scale things will also wildly improve. Solid State Disk capacities should creep upwards further (beyond the top of the line 512Gbyte SSDs) as will the PCI Express based storage devices (probably doubling in capacity to 2 TeraBytes) after 450mm wafers take hold across the semiconductor industry. So it’s going to be a big deal if Chinese, Japanese and American companies get on the large silicon wafer bandwagon.