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Sony Corporation (ADR) (SNE), Intel Corporation (INTC): Two Key Moments in the Rise of Consumer Electronics

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Sony Corporation (ADR) (NYSE:SNE)On this day in economic and business history…

British radar engineer Geoffrey Dummer first made public the concept of integrated circuits on May 7, 1952. This was still years before practical transistor-based electronics would hit the consumer market, but the notion caught on with two very talented engineers: Robert Noyce, founder of Fairchild Semiconductor Intl Inc (NYSE:FCS), and Jack Kilby of Texas Instruments. Working independently, the two men would help build the entire semiconductor industry from the ground up, using Dummer’s concepts as a starting point.

Kilby is credited with the invention of the first working integrated circuit, but it had some major flaws (not least of which was the use of costly germanium as a substrate) that Noyce would solve with his silicon-based chip. Several years later, a man named Gordon E. Moore, working at Fairchild Semiconductor Intl Inc (NYSE:FCS) as director of research, put forth another revolutionary idea about integrated circuits: The number of transistors on an integrated circuit could double every two years. This idea is now known as Moore’s Law, and it helps explain the dramatic progress seen in integrated circuits since Kilby and Noyce first created their working chips.

Noyce and Moore moved on from Fairchild Semiconductor Intl Inc (NYSE:FCS) to found another iconic semiconductor company in 1968: Intel Corporation (NASDAQ:INTC), which developed the first true central processing unit, or CPU, in 1971. This integrated-circuit chip contained 2,300 transistors — a big leap from the four transistors used to control the first commercial transistorized product released nearly two decades earlier. As the integrated circuit has evolved, it has also helped to power a new wave of business and commerce. All you have to do to see the change is to examine the annual growth rate of the Dow Jones Industrial Average (Dow Jones Indices:.DJI), of which Intel is a member (and which counts four other integrated-circuit-dependent companies on its roster as well).

Dow Jones Industrial Average (Dow Jones Indices:.DJI) annual growth from 1896 creation to Dummer’s publication: 3.4%

Dow Jones Industrial Average (Dow Jones Indices:.DJI) annual growth from 1956 to Intel’s first CPU: 6.1%

Dow annual growth from first CPU to Intel’s Dow induction: 9.6%

Now that the integrated circuit has fully, uh, integrated itself into the global economy, will investors enjoy even greater gains in years to come? Or was the dawn of the computer age a time of massive growth that will never be repeated? The technology to surpass integrated circuits might have already been presented at a lightly attended tech conference — much as the integrated circuit was more than six decades ago.

Rise of the East
On May 7, 1946, Tokyo Tsushin Kogyo was founded in Japan in a former department store damaged by bombs near the end of World War II. The company had no machinery and minimal scientific equipment, but it had enough technological foresight to see where new markets might rise in the future. From the early days, the company pieced together advanced electrical equipment, occasionally using material scavenged from the war ruins when nothing else was available. By the early 1950s, the company became known for small consumer products, like the first tape recorder available in Japan. However, it was the founders’ discovery of transistors in the United States that would build it into a modern technological powerhouse — one that soon adopted a simpler name: Sony Corporation (ADR) (NYSE:SNE).

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