A Christmas Gift

The world of disruptive technology is unveiling a new Christmas present.

Not born in Bethlehem, but near it in Israel, is a new technology paradigm.

It’s birthed in a town called Migdal Haemek, “the Silicon Valley of the Galilee.” This is the home of Tower Semiconductor (TSEM), the world’s leading complex of analog wafer fabs that Intel (INTC) attempted to purchase earlier this year. Like many promising ventures in semiconductors, the merger was finally thwarted by “Chip Act” militarization of microchips and resulting vetoes from China.

But the Chip Act and its associated proponents of nationalization of microchips are reaching the end of the line.

The great divide in current technology is between Moore’s Law of miniaturization and Schmidt’s Law of light.

Named after Gordon Moore, co-founder of Intel (INTC) by industry genius Carver Mead of Caltech, Moore’s Law ordains that microchip densities, and thus computer efficiencies, double every two years. Ruling the industry for some 50 years, this law has fostered the rise of the microchip industry into its current role of dominance in the world economy.

Now reaching its climax, Moore’s Law obsesses technology leaders with miniaturizing transistors to ever smaller dimensions. Its ultimate aim now is descent into the gelid zero-Kelvin wastes and enigmas of so-called “quantum computing.” Jensen Huang of Nvidia (NVDA), now the world’s most valuable company, hosted some 14 so-called quantum computing companies on stage at the company’s most recent annual GTC (Graphics Processing Unit Technology) conference in March in San Jose. The vastly costly and near comic futility of so-called “quantum computing” signals the end of Moore’s Law.

The alternative to Moore’s Law is Schmidt’s Law. I named it after Eric Schmidt, then a technical chief at Sun Microsystems, who in the early 1990s prophesied that “bandwidth abundance” would “overthrow Moore’s Law as the driving force of computer progress.” He said, “We started out running the net on top of the phone system, and we’ll end up with telephony running on top of the net.”

Then, over the phone late one night from his laboratory at Sun, Schmidt declared to me what I dubbed his “law”: “When the network becomes faster than the backplane of the computer, the computer hollows out and disperses across the network.” At that point, he said, “the network becomes the computer, and profits in the industry migrate to search and sort.”

“Search and sort,” of course, anticipated Schmidt’s later career as CEO of Google. But search and sort is also another way to describe artificial intelligence (AI).

These two laws—Moore’s and Schmidt’s—cleave the world of technology today into two camps. On the one hand, Moore’s Law companies focus on ever more complex and denser microchips in ever more gothic packages and ever more centralized and power hungry data-centers. Meanwhile, Schmidt’s Law companies focus on the bandwidth abundance of optics and photonics.

Utterly dominant today, Moore’s Law companies comprise such goliaths as Nvidia of Sunnyvale, ASML (the Netherland’s company that dominates wafer fabrication gear), and TSMC (Taiwan Semiconductor Manufacturing Company). Ruling the industry, these firms see it moving to devices of sub nanometer dimensions measured in the angstroms (a tenth of a nanometer) that function at the quantum electronic scale of single atoms.

Sure to be ascendant in the future are Schmidt’s Law companies that deal with the hugely larger dimensions of light, with photonic wavelengths from some 400 to 700 nanometers. Though hugely larger than electronic wavelengths, photonic communications run at the speed of light, vastly faster than electronics, and use comparably infinitesimal power.

A leader of the Schmidt’s Law companies is Tower Semiconductor of Migdal Haemek and the world. This Galilean pioneer commands wafer fabs (microchip factories) in Israel, Japan, San Antonio, Italy, and New Mexico (in partnership with Intel). In alliance with photonics companies such as OpenLight of Goleta, California, TSEM offers on-wafer, optic communications for high performance computing, high bandwidth memory, and low energy AI.

Compared to TSMC, with its market cap of $1.5 trillion, TSEM commands a market cap near $14 billion, so it has a long way to go. TSMC is perhaps the world’s greatest technology company.

But with Schmidt’s Law inexorably triumphing over Moore’s Law, Tower Semiconductor of Galilee and its TSEM stock represents a better Christmas present and a better bet for the future.