A colleague recently asked if I knew why semiconductor stocks significantly underperformed the market over the past five years, even though chip sales have seen double-digit growth during the same period. Being a veteran of the industry, I surprised both of us by not knowing the answer. So I decided to find out.
First, the facts. The PHLX semiconductor sector index (SOX) declined at a rate of 2.9 percent per year over the past five years, while Merrill Lynch's semiconductor index exchange-traded fund (SMH) declined 1.0 percent per year.
The Nasdaq, on the other hand, experienced a 4.8 percent compound annual growth rate (CAGR) during the same period. Likewise, the Dow and S&P 500 respectively grew 3.7 percent and 3.9 percent annually.
Indeed, the semiconductor sector has significantly underperformed the broad market.
... Read moreEver wonder how we got along without cell phones, BlackBerrys, notebook computers, and fax machines? How did we manage to have fun without video games, MP3 players, and DVRs?
Come to think of it, how did we ever survive without the Internet?
I don't know how, but we did. And you know what? I don't remember ever thinking I was missing something. I played records, wrote letters, used the phone book, and shopped at stores.
As for work, well, the business of designing chips was a bit archaic back then. Still, at Texas Instruments we did manage to get our designs done and out the door. In fact, TI's venerable TMS320 Digital Signal Processor--the chip inside most of the world's cell phones--was invented back then in the early '80s. How about that? ... Read more
I was working on this when I read this CNET News.com post. Apparently, Bill Gates believes that a strong technology sector will help keep America's economy healthy. I couldn't agree more. But I have a somewhat different take on the role tech has played in the U.S. economy.
Over the past few decades, the U.S. technology industry has had a number of "the sky is falling" moments, and every time we've managed to work through it and come out stronger than before.
For example, when I entered the job market in 1980, my employer--Texas Instruments--was the world's leading semiconductor maker. But in 1986, NEC and Fujitsu took the top two spots. By 1998, Japanese companies held the top 3 and 6 of the top 9 positions and TI had slipped to No. 5. Intel was the only bright spot, climbing the charts from 10th to 7th place.
Fast forward to 2006, when U.S. companies occupied 4 of the top 10 positions, including No. 1 (Intel) and No. 3 (TI). Rounding out the top 10 were two companies each from Japan, Korea, and Europe. That's certainly more balanced. What changed?
(Credit:
Microsoft)
Well, U.S. technology companies and their employees seem to have a knack for innovating. But we don't just invent technology; we also create and dominate markets. We don't just rise to the occasion when our economy is threatened; technology innovation and marketing seem to be innate strengths of our culture.
For example, Intel, Microsoft, and IBM together created the personal computer. Contributions from Apple, Compaq, Dell, Hewlett-Packard, and others helped to make personal computing the most important product category in tech history.
Nokia may be the dominant cell phone company, but U.S. companies like TI dominate the chips inside, and Qualcomm invented CDMA--the competitor of Europe's GSM standard.
U.S. companies invented and dominate networking and the Internet. American companies invented the Palm Pilot, Tivo, and of course the iPod and iPhone. Except for Vizio, we don't make TVs, but TI invented DLP technology--the core of a new generation of HDTVs and video projectors.
It's surprising that we occasionally manage to out-innovate and out-market Asian and European consumer electronics giants like Sony, Samsung, Panasonic, and Philips.
First manufacturing moved offshore, followed by outsourcing of data and call-centers and even software and hardware development. But our unemployment rate has averaged just below 5 percent for the past 10 years, and it's not expected to change anytime soon.
When we're confronted with a challenge, we retool, innovate, create, and market. As an industry and with the occasional help of the government we also protect our intellectual property rights--one of the biggest challenges we've faced, and continue to face, since the early '80s.
At the end of the day, it's imperative that we continue to develop, nurture, and protect our human capital, our intellectual capital, and our venture capital. And not just in traditional electronics, but in biotech, nanotech, green tech, and energy tech.
Just as they say in the stock market, past performance is not a guarantee of future results. Technology is a treadmill that never stops or even slows; we can't either.
Note: a prior version listed Blackberry as an American invention. Research In Motion is a Canadian company. Thanks to Neal and sorry to all you Canadians out there.
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