Computing Costs Are Plummeting

WHY IS THIS IMPORTANT? Information technology-everything from faxes and phones to computers and the Internet-is transforming businesses and industries. Information technology is increasing efficiencies, cutting costs, driving customization of products and services, and increasing the speed of commerce. The trend is also enabling the emergence of whole new industries and products, as witnessed by the hundreds of thousands of new jobs created by the Internet.

THE TREND: Moore's Law (named after Gordon Moore, a founder of Intel), which says that the processing power of microchips doubles every 18 months, has a corollary: the cost of computing is dropping by nearly 25 percent per year. In 1978, Intel Corporation introduced its 8086 chip, which defined the base architecture for the later x86 series (including the 386, 486, and Pentium chips). It contained 29,000 transistors. Four years later came the 286, with 134,000 transistors. Three years after that, the 386 had 275,000 transistors. And on the trend goes: the Pentium Pro, introduced in 1995, had 5.5 million transistors in its core central processing unit. Meanwhile, the cost of all that computing power has been dropping precipitously. In 1978, the price of Intel's 8086 was 1.2 cents per transistor, and $480 per million instructions per second (MIPS). By 1985, the 386 cost 0.11 cents per transistor and $50 per MIPS. Ten years later, the Pentium Pro's introductory price amounted to 0.02 cents per transistor, and $4 per MIPS. And the prices are expected to continue to fall.

THE DATA:

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Index Home | Introduction
SECTION I | SECTION II | SECTION III
Productivity Paradox | Knowledge Economy
Nine Myths | Data Sources | Endnotes | The Authors

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