During the last thirty years, the European semiconductor industry evolved from a position of leadership and commercial success in the 1950's to a position of reduced competitiveness and technological dependence on the United States in the 1960's and 1970's; only in the most recent past has this industry attempted to regain international competitiveness.

This study examines the reasons behind the success and the decline of the European semiconductor industry in a comparative perspective. The analysis is carried on at the firm and at the industry level. Constant reference is also made to the evolution of the American semiconductor industry.

Four major factors explain the evolution of the European semiconductor industry compared to the American semiconductor industry: the organizational structure and strategies of the firms (vertically integrated vs. merchant producers), the structure of the industry (the interaction of strategic groups within the industry and the conditions under which firms enter and exit the industry), the structure of demand (in-house vs. external, public procurements vs. civilian) and the type and size of government policy.

Vertically integrated receiving tube producers were the early leaders in the European semiconductor industry. These producers were innovative in established technologies. However, they were unable to shift rapidly enough into radically new technologies. As a result, these European producers were increasingly outpaced in the European market by American specialized semiconductor producers, who were favored by a specific demand structure and by a very active government policy. Recently, however, these European producers have attempted to re-enter large scale production of state-of-the-art semiconductor devices.