Unfair Competition in the Semiconductor Industry: The Case of Fairchild Semiconductor and Rheem Semiconductor

Rheem Semiconductor Corporation spent over $100,000 to qualify as a second source for transistors used in the Minuteman missile, but Autonetics, the primary buyer, delayed the approval process and ultimately decided not to purchase from second sources in 1962. Fairchild Semiconductor, the sole supplier, was accused of engaging in unfair competition by undercutting prices in the open market while profiting from the lucrative Minuteman contract. Rheem and other manufacturers were struggling to compete, and it was suggested that qualifying additional second sources could lower prices and save the Air Force money.