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Trends in the semiconductor industry that became apparent in 1985 prompted some rethinking of strategies in the semiconductor industry. Rather than compete with Japan in basic chips and try to buck slow commodity sales, US semiconductor houses resorted to their strong suit-innovation-in an effort to develop a major future market: application-specific ICs. A related shift in design was seen in several areas: mixing power and logic functions on an integrated chip, mixing analog and digital functions, and mixing bipolar and MOS circuits. All of these approaches were attempts to make chips that perform more functions better than chains of commodity chips linked to do the same job. The changes brought about by price wars on commodity chips are surveyed, as are the inroads being made by GaAs circuits.