Submitted by agautam on Wed, 11/16/2011 - 11:54am

 It has become an annual ritual. Prices keep getting lower and Black Friday keeps getting pushed up. Walmart has announced that it will open store on Thanksgiving Day at 10 PM.  The big-box and online retailers have dropped prices rock bottom that it has become hard for the ESCs to compete with them based on prices alone (This is not our goal in the first place). Online retailers such as Amazon have built distribution centers outside major cities to make their supply chain more robust and cost effective. But what technical breakthroughs drive the prices lower and what do we foresee happening in the future?

Moore’s law is primarily responsible for driving the prices lower for electronic goods.  Moore’s law named after an Intel co-founder states that number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every 2 years. As the transistors are increased in density and are placed closer together, the processing speed, memory capacity, number of pixels and sensor capabilities of devices are increased. This in turn lowers the prices of the finished goods. Nevertheless, the growth in Moore’s law is slowing and after 2013, transistor count and densities will double every 3 years. By 2020, Moore’s law will have reached fundamental limits of Physics. Quantum tunneling effect will make it hard for transistors to be placed ever closer together. Already scientists have created 20 nanometer manufacturing processes and threshold voltage for turning the transistor on and off has come below 1 volts. So what does this mean for us? Will electronic goods become expensive and have better margins around 2020? Don’t get your hopes up much!

Engineers and scientists are already working on devices that are quantum/nano in scale, think 1 nanometers. They are devising new materials such as carbon nanotubes and graphene transistors instead of the good ole silicon so Moore’s law continues for another decade.  But after 2030, all bets are off. Even Mr. Gordon Moore himself has said “we’re approaching the size of atoms which is a fundamental barrier. We have another 10 to 20 years before we reach a fundamental limit. By then transistor budgets will be in billions.”

In conclusion, prices of electronic goods will continue to get commoditized in the foreseeable future. Technological breakthroughs and supply chain efficiencies are responsible for much of it. An ESC will have to provide exemplary service to clients to compete on today’s non-existent margins on products.