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Did You Know?
Moore originally never mentioned that the doubling would take place every 18 months. It was his Intel colleague, David House who concluded the same about integrated circuits.
When Electronics journal asked Moore to predict the developments that will take place over the next decade, little did they know that history was in the making. This theory became the new technology law that was in assurance with Newton's laws of motion. Gordon E. Moore observed the trend of doubling of components on a circuit board and roughly predicted that this doubling takes place annually. This law was first published in the Electronics Magazine in 1965 and became a rage. The validity of this law, at the given point of time, was only until the next ten years. However, after many researchers did work on this theory, they became sure about the accuracy of the law. Let us now understand Moore's law.
What is the Moore's Law?
Before discussing the actual law, let us first take a look at the original statement of Moore in the publication of Electronics journal.

"The complexity for minimum component costs has increased at a rate of roughly a factor of two per year... Certainly over the short term this rate can be expected to continue, if not to increase. Over the longer term, the rate of increase is a bit more uncertain, although there is no reason to believe it will not remain nearly constant for at least 10 years. That means by 1975, the number of components per integrated circuit for minimum cost will be 65,000. I believe that such a large circuit can be built on a single wafer."
Having published his prophecy, Moore made alterations to his statement in the year 1975. He said that instead of doubling every year, this phenomenon will take place every two years. Thus, the Moore's law, that is followed today, was born. Here is what the law states:

The number of transistors that can be placed on a single integrated circuit doubles about every two years.
Coining of the Term
The term "Moore's Law" was coined way after the original prediction was made. A VLSI professor, Carver Mead coined the term in accordance to Moore's statement of 1965. As per this law, the increase in the complexity of technology is exponential and not incremental. Moore also went on to state the results of applying this law. He said, "If the auto industry had moved at the same speed as our industry, your car today would cruise comfortably at a million miles an hour and probably get a half a million miles per gallon of gasoline. But it would be cheaper to throw your Rolls Royce away than to park it downtown for an evening." This was the confidence of the man on his prediction.

Having talked about the doubling of transistors every year, many non-techies would wonder how this is possible. Does this doubling take place physically or is it an internal phenomenon? Let us discuss this aspect of the law as well.
How Does It Happen?
Contentions: The arguments regarding the law have existed ever since the article was published. Some people believe that this doubling takes place every 18 months while others think that this doubling takes place every two years. Also, there are interpretations that the doubling is not of the transistor numbers, but of the processing power. However, in reference to the publication, Moore mentioned in 1965 that the number of components (transistors) on the given size of circuit board would be 65,000 by 1975 when the actual number in 1965 was merely 50 transistors. This meant that more number of components will be fitted in the wafer that will increase the circuit's performance every 18/24 months.
Integrated Circuit
The Business Edge: The law said that this doubling will enhance the circuit board's performance, thus increasing customer satisfaction. This made the integrated circuit manufacturers to incorporate this cycle in their manufacturing as well. So, the R&D scientists are looking for creative ways to make smaller components which will boost the performance of the circuit. Here, the component placement is the key. The components shouldn't be too cramped, else they will face heating issues. Keeping these hurdles in mind, manufacturers are designing the circuit boards.
Shrunken Transistor = More Processing Power: A 50% shrunken transistor almost quadruples the processing power of the circuit. This happens because the shrunken size means more space to accommodate additional transistors, and the increase in the number of transistors will add to the processing power. Also, the smaller size means that there is less heat loss and more power is saved. This saved power will also add to the overall processing power.
Technology Progress due to Moore's Law
On paper, any theory or law looks promising. But, when the same is applied practically, the flaws get highlighted. In case of Moore's law, the technological progress says it all. In the earlier computing days, the computer would run at a speed of 33MHz, but no one could ever imagine that the computing speeds would reach 2.5GHz by 2012! A phenomenal increase in speeds have led to competition amongst the manufacturers to develop faster computers. These speeds are possible only due to the influence of the law. Also, if one takes a look at the size of the latest chips, they will not be more than 45nm wide, which is thinner than human hair! This downsizing of the transistors has led to faster processors. Intel's 22nm 3-D Tri-gate Transistor Technology launch has proven that the Moore's law is the key driver of nanotechnology.
Is Moore's Law Still Valid?
Development of new technology or upgrading the current one is subject to the current economic conditions. However, Intel swears by the fact that its downsizing of transistors has only improved the speed and power features of the chips. They also claimed that their latest 22nm 3-D Tri-gate Transistor Technology is a proof of the law being still valid.
AMD's View: In the latest interview, John Gustafson (Chief Graphics Product Architect at AMD) said, "The original statement of Moore's law is the number of transistors that is more economical to produce will double every two years. It has become warped into all these other forms, but that is what he originally said". Also, the current economic conditions may not allow the manufacturers to spend so much time and money on the research and development work. According to AMD, the end of Moore's law is pretty close.
Change in Prediction? From the customer's point of view, each and every time, they have got new and improved technology to use. So, their expectations of seeing the launch of a new technology in every two years is justified. But, the latest industry reports suggest that this doubling of transistors may take place every three years instead of the originally stated two years. The International Technology Roadmap for Semiconductors predicted that by 2015, the standard transistors will shrink to 11nm. This is an indication that Moore's law is here to stay at least for a few years to come.

It's Here to Stay! Dr. Moore had predicted that his theory was only valid for ten years; however, the theory is still going strong even after so many years of its formulation. Whether it is valid or not is a secondary thought, but the initial motivation to create something that is improved from its predecessor, in terms of speed, is what the law has given to young scientists and developers.
Many feel that the law has more to do with economics than with any other factor. On the other hand, few manufacturers believe that the law is good enough to be termed as a technology law, as it drives the manufacturer to create improved technology every two years. However, no one can deny the fact that the semiconductor industry has been greatly influenced by Moore's law for its development.