On this day in economic and business history...

British radar engineer Geoffrey Dummer first made public the concept of integrated circuits on May 7, 1952. This was still years before practical transistor-based electronics would hit the consumer market, but the notion caught on with two very talented engineers: Robert Noyce, founder of Fairchild Semiconductor (NASDAQ:FCS), and Jack Kilby of Texas Instruments. Working independently, the two men would help build the entire semiconductor industry from the ground up, using Dummer's concepts as a starting point.

Kilby is credited with the invention of the first working integrated circuit, but it had some major flaws (not least of which was the use of costly germanium as a substrate) that Noyce would solve with his silicon-based chip. Several years later, a man named Gordon E. Moore, working at Fairchild as director of research, put forth another revolutionary idea about integrated circuits: The number of transistors on an integrated circuit could double every two years. This idea is now known as Moore's Law, and it helps explain the dramatic progress seen in integrated circuits since Kilby and Noyce first created their working chips.

Noyce and Moore moved on from Fairchild to found another iconic semiconductor company in 1968: Intel (NASDAQ:INTC), which developed the first true central processing unit, or CPU, in 1971. This integrated-circuit chip contained 2,300 transistors -- a big leap from the four transistors used to control the first commercial transistorized product released nearly two decades earlier. As the integrated circuit has evolved, it has also helped to power a new wave of business and commerce. All you have to do to see the change is to examine the annual growth rate of the Dow Jones Industrial Average (DJINDICES:^DJI), of which Intel is a member (and which counts four other integrated-circuit-dependent companies on its roster as well).

  • Dow annual growth from 1896 creation to Dummer's publication: 3.4%
  • Dow annual growth from 1956 to Intel's first CPU: 6.1%
  • Dow annual growth from first CPU to Intel's Dow induction: 9.6%

Now that the integrated circuit has fully, uh, integrated itself into the global economy, will investors enjoy even greater gains in years to come? Or was the dawn of the computer age a time of massive growth that will never be repeated? The technology to surpass integrated circuits might have already been presented at a lightly attended tech conference -- much as the integrated circuit was more than six decades ago.

Rise of the East
On May 7, 1946, Tokyo Tsushin Kogyo was founded in Japan in a former department store damaged by bombs near the end of World War II. The company had no machinery and minimal scientific equipment, but it had enough technological foresight to see where new markets might rise in the future. From the early days, the company pieced together advanced electrical equipment, occasionally using material scavenged from the war ruins when nothing else was available. By the early 1950s, the company became known for small consumer products, like the first tape recorder available in Japan. However, it was the founders' discovery of transistors in the United States that would build it into a modern technological powerhouse -- one that soon adopted a simpler name: Sony (NYSE:SNE).

Sony was not the first company to package the transistor in a consumer product, but within a year of the first American transistor radio, Sony had one of its own on the market. Three years later, in 1958, the company would rename itself, its new appellation a derivative of two Western words: the Latin word "sonus," for sound, and "sonny," an American slang term for a young boy. It would be more than two decades before Sony made its name as a consumer-technology innovator -- the groundbreaking Walkman was released in 1979. The new product was expensive -- about a third of the average Japanese graduate's monthly salary -- and only 3,000 sold in its first month on the market. But consumers warmed to the Walkman: More than 220 million were sold from the time of its release to its discontinuation in 2010.

Sony would expand from that base of strength into a number of consumer electronics segments, leading the charge for Japanese technology exports. The company's greatest successes came under the leadership of founder Akio Morita, who was a mere 25 years old when the company began and would remain in the corner office until 1989.

Following Morita's retirement, Sony began expanding aggressively into media production by buying up music and film companies, and it would also grow in other directions that would occasionally prove unprofitable. Without visionary leadership, Sony slowly lost its edge as a leading consumer-electronics producer -- but it has continued to stand on the vanguard of media technology, having most recently won the high-definition video disc format war with the Blu-ray format it helped to develop.

Fool contributor Alex Planes owns shares of Intel. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

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