The Man Behind the Microchip

by Leslie Berlin

  A month after Noyce floated his proposal to Moore, the Camera and Instrument board stripped Hodgson of power and told him to report to an “office of the chief executive,” which consisted of four Camera and Instrument directors: Noyce, Walter Burke (Sherman Fairchild’s personal investment advisor), Joseph B. Wharton (a financial and tax consultant), and Sherman Fairchild himself.

  Meanwhile, the board announced a search for a permanent CEO. Everyone at Semiconductor, in the industry, and on Wall Street expected Noyce, the logical internal candidate, to be named CEO. Noyce was under consideration for the top spot, but he was surprised to learn that the board felt that while he might “be considered as presidential material someday,” he was not ready now, at age 40. The decision left Noyce, in Moore’s words, “kind of ticked off”: “kind of” only because Noyce probably did not want the job. But he certainly wanted it offered to him. The slight, coupled with the ousting of Hodgson, confirmed Noyce’s long-held suspicions that the Camera and Instrument board had absolutely no idea of what they were doing, and no appreciation of the fact that for years Semiconductor had been the tail wagging the corporate dog.76

  According to one version of events, an irritated Noyce went to Sherman Fairchild and resigned in person, but the chairman (who by now was on the verge of panic) asked Noyce to stay on long enough to find a replacement CEO. Noyce offered his own suggestion for the position—C. Lester Hogan, the general manager of the powerhouse semiconductor division at Fairchild’s arch rival, Motorola—and even arranged a meeting between Camera and Instrument director Walter Burke and Hogan. Hogan, however, had no interest in the position. Motorola’s Phoenix-based semiconductor operation was already bigger than Fairchild’s, and it was not encumbered with aerial cameras and printing supplies. Sherman Fairchild flew down to Arizona in an attempt to change Hogan’s mind. Hogan demurred. Finally Noyce flew to Phoenix and spoke frankly about the company and his own reasons for leaving. He urged Hogan to reconsider the job.77

  Hogan ultimately negotiated a compensation package from Fairchild Camera and Instrument so extraordinary—an estimated $120,000 annual salary, plus 10,000 shares of stock and an interest-free loan to buy options on another 90,000 more—that it was reputedly immortalized as a distinct unit of measure, the “Hogan.” (As in, “That guy can’t be worth more than half a Hogan.”) He brought with him to Fairchild every senior manager from Motorola’s semiconductor operation, save one. He even convinced Camera and Instrument to move the corporate headquarters to the Bay Area—tangible evidence of the pivotal role of the Semiconductor division in the corporation. Even given the spectacular deal he finessed, Hogan insists, “I wouldn’t have gone if Bob Noyce [had not encouraged me]. I had great respect for Bob Noyce and he’s a great salesman.”78

  Noyce formally resigned from Fairchild on June 25, 1968. He included with his brief formal letter of resignation a heartfelt two-page missive addressed to Sherman Fairchild, which Fairchild read aloud at the July board meeting. “As [the company] has grown larger and larger, I have enjoyed my daily work less and less,” Noyce explained. “Perhaps this is partly because I grew up in a small town, enjoying all the personal relationships of a small town. Now we employ twice the total population of my largest ‘home town.’”79

  Noyce wrote that he wanted to find or start a smaller company, a place where he could “get close to advanced technology again” and enjoy “more personal creative work in building a new product, a new technology, and a new organization.” Again and again he expressed the desire for a professional home nearly completely opposite from Fairchild Semiconductor: not a mass manufacturer, but a “small company which is trying to develop some product or technology which no one has yet done”; not a division of a diversified large organization but a place that would “stay independent (and small).” He acknowledged that “the limited resources of any small company will be a handicap” but claimed to “have no large scale ideas.”80

  NOYCE PLACED A GOOD MEASURE of blame for Semiconductor’s troubles on the management of Fairchild Camera and Instrument. “The necessary overall sense of direction and leadership have been lacking,” he wrote. “It’s not enough to say simply that our objective is to grow and make a profit—everyone is trying to do that.” He told Sherman Fairchild that the parent company had grown erratically and irresponsibly, that it had denied Semiconductor the incentives it needed to keep employees; that it “lacked interdivisional awareness, support, and cooperation”; and—most “disabling” and “dishearten[ing]” of all—that it had commandeered Semiconductor’s profits to carry other divisions, rather than plowing the monies back into the division. “I believe this has caused our difficulties,” he said. He was characteristically careful never once to name a specific person or group of people whom he would hold personally responsible, but it is clear that the culprits, in his mind, are John Carter and the board of Camera and Instrument.81

  “I accept whatever part of the responsibility is mine,” Noyce continued. And he must indeed bear some responsibility for the decline of Fairchild Semiconductor. The very geniality and openness to new ideas that contributed to Noyce’s success as a leader and entrepreneur hampered his ability to manage a large organization. As a manager, Gordon Moore recalled, “Bob really thought that the logic of his arguments was the [only] tool he needed to make the organization work.” Recalled Harry Sello, who worked at Shockley and Fairchild, “He was too nice to too many people.” As Charlie Sporck put it, “You could get him to say yes on something and then the next guy who came in could get him to say yes too, and that was Bob.”82

  Noyce’s manner of offering general directives rather than following up on specific process details was ideal for supervising highly creative technical work—indeed, it was the source of his success as the head of R&D—but this management style did not translate well to large, multifaceted organizations. Moreover, Noyce’s and Semiconductor’s focus on innovation, which had served the company so well in its early years, proved debilitating as the firm matured. It contributed to a culture that privileged research over manufacturing and disdained such routine but important work as knowing inventory levels or the status of an order. As business historian Alfred Chandler has so aptly put it, “Fairchild’s problem was that it produced entrepreneurs, not products.”83

  Noyce had long had his own secret doubts about his management ability, and he certainly held himself partially responsible for Semiconductor’s fall from grace. He once said that by leaving Semiconductor he “gave up and tried again.” He later elaborated: “One thing I learned at Fairchild … is that I don’t run large organizations well. I don’t have the discipline to do that, have the follow through…. My interests and skills are in a different place, that’s all. It’s getting people together to do something, but that only works for me in a smaller group.”84

  7

  Startup

  The news of Noyce’s departure from Fairchild took Wall Street investors and nearly everyone in the semiconductor business by surprise. Rumors rushed in to fill the vacuum created by uncertainty: Hogan would spin off Semiconductor as its own company separate from Camera and Instrument. No, Semiconductor would merge with Hughes Aircraft—no, with Jay Last’s semiconductor group at Teledyne; no, with Signetics. Charlie Sporck would return to run Fairchild; no, Noyce planned to join Sporck at National to build a new semiconductor powerhouse; no, Noyce was going it alone. The trade press promoted the saga of Fairchild Semiconductor like a particularly juicy soap opera: “the industry has devoured each chapter in the exciting story—readers wonder, ‘What’s going to happen next?’ while they anxiously await the latest report.”1

  “Bob is having a harrowing time, but will come out all right in the long run,” Betty wrote shortly after Noyce left Fairchild. The day his departure was publicly announced, telephones began ringing at the Noyce house even before the sun had risen, when one East Coast recruiter, forgetting the three-hour time difference, placed a call at the very start of the work day—and start
led Noyce out of bed at five in the morning. A firm in New York City offered “to back you financially in another electronics company which you would head.” A Southern California investment group promised to “commit ourselves to no less than $200,000 towards any venture you are heading.” Noyce fielded calls from Fairchild employees and competitors, reporters, headhunters, bankers, and well-wishers.2

  Most people assumed Noyce had turned down the CEO job, rather than having not had it offered to him. Noyce did little to dispel this impression, and he tried to keep his plans for the future from the press, acknowledging only that he would not have enjoyed “pushing more and more paper” at Fairchild. Sherman Fairchild also hewed to this version of events. When asked why Noyce was not the company’s new CEO, Fairchild said, “I don’t think he likes management. He has been cooperating with us, but he prefers a technical atmosphere.”3

  In all the hubbub surrounding Noyce’s resignation, another departure went “practically unobserved,” according to its overlooked subject. Gordon Moore, head of the lab at Fairchild, resigned on July 3, 1968, a date he always remembered because payroll refused to compensate him for the Independence Day holiday. The press may not have paid attention, but the timing of his resignation—one week after Noyce’s departure—was no mere coincidence. In May, Noyce, undaunted by Moore’s previous lack of interest in starting a company, had tried again. This time Noyce had been much more definitive. He had been passed over for the CEO’s job, and he was not going to work for someone new at Fairchild. He was leaving at the end of June. He had talked to Arthur Rock, who after a bit of ribbing—“It’s about time!”—had said that if Noyce and Moore kicked in some of their own money to seed a new semiconductor operation, they “wouldn’t have any trouble” securing enough additional capital to launch the firm.4

  Now what did Moore think about joining him?

  Moore paused. He strongly believed in the potential of semiconductor memories. He did not want to take his chances on a new boss. And although he and Noyce were not particularly close outside of the office—while Noyce pursued flying and daredevil skiing, Moore enjoyed quiet early morning fishing trips and, as one friend affectionately put it, “weekends spent painting the windows”—they had worked together productively for more than a decade, thanks to their remarkably complementary skills. Where Noyce saw the big picture, Moore could discern detail. Where Noyce had honed his abilities to construct strong connections between Fairchild and various outside constituencies (the press, the board, customers, suppliers), Moore had become an expert leader within the company itself. Noyce rarely set foot in the lab after 1965, but Moore had an intensely loyal following in R&D, which he led with a light hand and a quiet, laid-back style that recalled Noyce’s approach but added the extra layer of deliberation and moderation that Moore brought to everything he did.5

  And for all their apparent differences, Noyce and Moore shared one key trait—a burning competitive desire to do something extraordinarily well. To be sure, this drive was harder to discern in Moore than in Noyce, but it was there nonetheless. “Gordon loves fishing, but he doesn’t do it for relaxation or mediation,” explains one friend. “He does it because he wants to get the fish.”6

  Moore agreed to leave Fairchild and launch a new venture with Noyce.

  What would Noyce have done if Moore had said no? It is difficult to imagine Noyce starting a company alone. The experiences at Fairchild—particularly Sporck’s departure—had taught him the importance of having a strong team around him. Moreover, without Moore, Noyce would have had difficulty attracting the top Fairchild scientists he wanted for the backbone of a new organization.

  Had Moore not agreed to join him, Noyce might have involved himself in some form of venture capital. By the end of the 1960s, more than two dozen venture capital firms had sprung up in the San Francisco Bay Area, many of them targeting the semiconductor industry. In Rock, Noyce knew the single most important player in this vibrant new financial community. Venture work would also have appealed to Noyce’s love of starting new things, and he possessed the financial reserves to make a material difference in new firms. Indeed, even before Noyce left Fairchild, he had begun to do a bit of informal investing on his own, giving young entrepreneurs small sums of money and accepting the occasional board seat in their companies.

  Noyce and Moore had begun brainstorming together in Noyce’s study at home for nearly a month before they officially resigned. During these weeks, a few intimates joined the effort. Andy Grove, a physicist who by his own description “worshipped” Gordon Moore, had invited himself to join Moore in “whatever you’re planning to do” within seconds of Moore’s telling him he was leaving Fairchild. Moore had not even had time to mention the company’s plans or Noyce’s participation, much less officially offer Grove a job—something Grove is not sure Moore planned to do. Grove possessed not only expertise in a new semiconductor process called MOS, but also a surfeit of ambition, a fastidious eye for detail, and a take-no-bullshit attitude that had catapulted him to assistant director of R&D. Grove, in turn, suggested the addition of Les Vadasz to the team. Vadasz was an engineer in charge of big chunk of Fairchild’s integrated circuit development and another expert in MOS. When he resigned from Fairchild, the human resources manager, instead of trying to convince him to stay, asked how he could join Noyce and Moore, too. Grove also brought in Gene Flath, a former manufacturing foreman at Fairchild who had managed the proprietary integrated circuits group.7

  Noyce invited Bob Graham, the marketing expert who had argued for demand-based pricing in his job interview, to join the new company. Graham was in Noyce’s study on the evening after Senator Robert Kennedy was murdered in Los Angeles. Noyce thought the tragedy, following on the heels of Martin Luther King, Jr.’s assassination, proved that “instead of drawing the people closer together for the mutual good, our society seems to be polarizing itself into antagonistic groups, each with little regard for the rights of the other.” The notion of a “mutual good,” the achievement of which was the ultimate goal of society, could have come straight from a sermon by Reverend Ralph Noyce. In Bob Noyce’s case, the message served as a call to action. No one knew how long he had allotted on this planet. After Robert Kennedy’s death, Noyce was more determined than ever to carpe diem.8

  GROVE ALONE among the group planning to leave Fairchild with Noyce and Moore had serious doubts about its leadership. He did not like Bob Noyce. Grove, who had attended two of Noyce’s staff meetings, was shocked to see how Noyce let “people bite into each other like rabid dogs” around the conference table: “Bob just sat there [at his meetings]…. He wore a pained expression and a slight, somewhat inappropriate smile. His look said either ‘Children, would you please behave,’ or ‘I want to be anywhere but here’—or some combination of the two.” Noyce’s refusal to take charge irritated Grove, who had, by the time he was 20 years old, hidden in a cellar to elude the Nazis, fled the Communist takeover of Hungary, and crossed the Atlantic to the United States, where, a few years later, he graduated first in his engineering class at City University of New York despite having begun his coursework without knowing how to say “horizontal” or “vertical” in English. Grove had little respect for a man who, in his estimation, “did not argue [but] just suffered.” For his part, Noyce probably expected to have little to do with Grove, who was slated to head R&D and report to Moore.9

  Noyce and Moore officially incorporated NM Electronics on July 18, 1968, with Rock as board chair, Noyce as president, and Moore as executive vice president. “We don’t care who has what title,” Noyce told his son. “[Titles] are mainly useful for helping the people outside the company figure out what you do.” Both Noyce and Moore considered themselves partners and peers. “It’s very comfortable to have someone on essentially the same level to discuss problems with,” Moore explained in 1994. “He and I had worked together so long, we were very comfortable doing that.” The incorporation was a much more subdued affair than the ceremonial dollar-bill si
gning that Bud Coyle had choreographed to launch Fairchild Semiconductor. Neither Noyce, nor Moore, nor Rock assigned great value to symbolism or ceremony. They signed only legally required papers, which one of the attorneys hired to help with the incorporation then submitted to the secretary of state. Then they got to work.10

  The new company was incorporated with two million shares of authorized capital stock. Noyce and Moore had considered investing $500,000 apiece—but then, Moore says, “We both kind of gulped at that [much money].” Half that amount, a quarter of a million dollars apiece, was much more tolerable, though it still represented a sizable portion of their personal wealth, nearly all of which, in Noyce’s case, was concentrated in Fairchild stock. Noyce’s $30,000 annual salary represented a 66 percent cut from his Fairchild pay, but he fully expected his stock holdings in the new firm would cover the shortfall.11

  Noyce and Moore each bought 245,000 shares in their new company at $1 per share, and Rock bought 10,000 at the same price. Of the half-million dollars thus raised, Moore and Noyce expected to spend $200,000 on equipment and improvements to whatever building they leased. Another $100,000 would go to R&D expenses, with the balance earmarked for working capital. Noyce and Rock also secured a $1.5 million loan to keep the company afloat until Rock could line up private investors. Noyce could not resist bragging to his mother that the company could secure this sort of money largely on the strength of his name, an idea she found almost impossible to believe.12

  THE SEMICONDUCTOR INDUSTRY was in the midst of a near-ecstatic flurry of entrepreneurial activity at the end of the 1960s. NM Electronics was just one of two dozen semiconductor companies launched in 1968 and 1969. Thirteen of these startups were founded in the Santa Clara Valley, and of these thirteen, eight were begun by refugees from Fairchild Semiconductor, and several had been financed with venture capital. Silicon suppliers reported a 40 percent increase in business between mid-1968 and mid-1969.13