How the New Semiconductor Playbook is Shaping Growth

Sundeep Bajikar, Corporate Vice President, Corporate Strategy and Marketing, Applied Materials. getty For decades, Moore’s Law predicted that semiconductors would become cheaper over time by shrinking two-dimensional feature sizes. Transistors per wafer rose, cost per transistor fell, average selling prices (ASPs) drifted down a few percent a year, and the wafer fab equipment (WFE) market cycled without a durable uptrend. Value accrued narrowly to those who had unit scale and yields. That loop has broken. As early as 2012, in my prior role as a Wall Street analyst, I argued that the classic Moore’s Law cadence would slow, while materials engineering (not just 2D shrink) would become the decisive lever for performance per watt. A decade later, the industry has pivoted to a new semiconductor playbook in which growth is driven by higher-value systems, not sheer unit counts. Moore’s Law made chips cheaper; the new playbook makes systems more valuable. I started as a chip designer and later covered semiconductors on Wall Street, where in 2012 I argued that the classic Moore’s Law would slow. Today, my team at Applied Materials develops the materials-first playbook with customers worldwide. That end-to-end vantage point lets me compare firsthand the industry before and after the shift to a materials-first, systems-value playbook. What's Changed? I believe there are three forces behind the shift: 1. Complexity drives 'content per system.' Each new process node on the chipmaking roadmap adds significantly more materials engineering steps. Leading-edge chips bump against the physical limits of lithography equipment and must be stitched together using advanced packaging and chiplets. Memory moves vertically via stacks of high-bandwidth memory (HBM), with 3D dynamic random access memory (DRAM) on the future roadmap. Even with flattish unit volumes, the dollar value of silicon chips in the device keeps rising, whether it's a smartphone, PC or electric vehicle, making devices and systems more valuable. 2. Materials and architecture co-lead. Energy-efficient performance is now driven primarily by new device architectures, including gate-all-around transistors, backside power delivery and wide-bandgap materials like silicon carbide and gallium nitride for power electronics. Heterogeneous integration boosts bandwidth per watt and slashes latency. The biggest performance-per-watt gains now come from Angstrom-level materials engineering of structures, interfaces and 3D topology, as much as, or even more than, from lithography. Materials and architecture innovations enable each system to do more useful work per watt, raising system value. 3. Demand shifts to performance buyers. Performance buyers are cloud and enterprise customers who don’t just pay for how many chips they get, but for what those chips deliver—faster answers and lower energy bills. Because they buy outcomes (e.g., cost in dollars for each TOPS—tera, or trillions, operations per second of performance, joules per operation, uptime), they’re willing to pay more for HBM, advanced packaging and energy efficiency, lifting ASPs, increasing content per system and creating steadier, higher, longer-term growth for the industry. From Disinflation To Value Creation When classic 2D scaling dominated, the industry’s center of gravity was disinflationary: Chip average selling prices (ASPs) trended lower, and wafer fab equipment (WFE) growth was intermittent. In today’s playbook, the economics flip: • Semiconductor ASPs are rising, not only because of pricing power, but because the basket has shifted toward datacenter systems where content (HBM per accelerator, package layers per device, power-conversion per rack) is structurally higher. A state-of-the-art AI GPU can include more than 100 chips in a single package, equating to well over 100X the silicon area of a traditional server processor. The AI mix shift explains a meaningful portion of ASP expansion. • WFE is now a secular growth market. Process complexity, bigger dies, new materials and packaging capacity create sustained demand across both the leading edge and ICAPS (IoT, communications, auto, power, sensors). ICAPS customers increasingly buy new tools rather than used equipment, reinforcing the trend. Demand Mix Shift: AI Pulls The Industry Up The Value Stack The rise of AI has shifted semiconductor demand toward higher-value datacenter chips and systems, and that mix effect explains a meaningful share of the industry’s ASP expansion. Performance buyers in cloud and enterprise are procuring AI accelerators priced to $/TOPS and joules per operation, surrounded by premium HBM stacks, advanced packaging (2.5D/3D, chiplets), high-speed networking and high-efficiency power/cooling. Even with flattish unit volumes, content per system climbs sharply, with more memory per accelerator, more package layers per device and more power conversion per rack, lifting realized ASPs at the device and system level. In other words, ASP growth isn’t only "pricing power;" it’s also what we’re selling. As the buyer shifts from end-device original equipment manufacturers (OEMs) to datacenter operators, willingness to pay tracks outcomes (throughput, latency, energy efficiency, reliability) rather than die size. That demand pivot is pulling revenue toward chips and subsystems where materials engineering and heterogeneous integration deliver measurable gains in total cost of ownership (TCO), exactly the dynamic behind the new playbook’s secular uplift. AI didn’t just add volume; it changed the basket toward datacenter systems, where content, packaging and power efficiency command higher ASPs. Conclusion The industry has crossed a structural threshold. Growth is no longer a function of unit volume and falling ASPs; it’s created by systems that deliver measurable performance-per-watt and lower TCO, enabled by materials engineering. Semiconductors are already priced to outcomes, creating opportunities for the ecosystem to capture value. The winners will master co-innovation at speed and measure what buyers actually pay for and price to the value they create. Forbes Business Development Council is an invitation-only community for sales and biz dev executives. Do I qualify?