The Man Behind the Microchip

by Leslie Berlin

  Bowers says that Noyce treated Jobs “like a kid, but not in a patronizing way. He would let him come and go, crash in the corner. We would feed him and bring him along to events and to ski in Aspen.” Noyce answered Jobs’s phone calls—which invariably began with “I’ve been thinking about what you said” or “I have an idea”—even when they came at midnight. At some point he confided to Bowers, “If he calls late again, I’m going to kill him,” but still he answered the phone.

  Jobs agrees that his relationship with Noyce was almost more filial than professional. “The things I remember about Bob are the personal things,” he says. “I remember him teaching me how to ski better. And he was very interested in—fascinated by—the personal computer, and we talked a lot about that.” Jobs thought that “Bob was the soul of Intel,” and Jobs wanted, he said, “to smell that second wonderful era of the valley, the semiconductor companies leading into the computer.”52

  What did Noyce get out of the relationship? Jobs surmises, “Apple was probably the first Silicon Valley company that was widely known as a lifestyle company, the first that made a broad consumer product—and here I was, twenty-five [years old]. And for Bob, it was a bit of ‘What?! Who is this guy? What’s going on here?’ It was just a little strange for him. Bob might have been a little curious.”

  Apple went public in December of 1980 at $22 a share. The offering netted Apple more than $100 million, roughly 14 times the proceeds Intel received from its IPO.53

  Noyce had a front-row seat for all that transpired at Apple. Not only was he one of Jobs’s mentors and Markkula’s friends, but in August of 1980, Ann Bowers joined the company as the human resources vice president. Apple burst with the young-company spirit and hunger that Noyce adored, and every once in a while, Noyce would, as Markkula put it, “come over to Apple and just hang around. Go in the lab and talk to the guys about what they were doing.” Years later, when Noyce was testifying before Congress against a “national industrial policy” administered by the federal government, he would refer to his experience with Apple to bolster his point. “If I can’t pick the technological winners,” he said, “how can we expect the U.S. government to do so?”

  LIKE APPLE, many of the successful Silicon Valley companies formed in the 1970s were built around microelectronics, and by extension, around Noyce’s integrated circuit. In 1974, James Treybig started Tandem Computer, a company that made nearly fail-safe minicomputers by linking 16 processors and programming them to back each other up in case of failure. Tandem’s primary backer was Kleiner Perkins, where Treybig had worked before starting the company. The company went public in 1980—Noyce’s broker Bob Harrington arranged for employees to participate in his same-day stock-sale program—and within three years had a book value of $1 billion. (It was sold to Compaq computer in 1997 for $3 billion.)54

  Video game maker Atari was started on $500 in 1972 and within three years was among the most recognized names in American business. Several of its more complex games ran on Intel microprocessors. The home version of Atari’s video-tennis game Pong was the bestselling Christmas gift of 1975, and the Atari 2600, introduced in 1976, ushered in the era of video console games, in which a person could purchase any number of games on cartridges that plugged into hardware connected to a television set. In 1977, Warner Communications purchased Atari for $28 million.55

  Genentech, one of the world’s first biotech companies, was started in 1976 by a San Francisco–based biochemist at the urging of a Kleiner Perkins partner. The company was the first to produce a human protein in a microorganism and among the earliest groups to clone human insulin and human growth hormone. The anticipation surrounding Genentech’s public offering in 1980 was so great that in a single hour during the first day of trading, the company’s share price shot from $35 to $88. In 2004, Genentech had a $57 billion market capitalization.56

  In the same way that these companies built on the previous generation’s technical advances, they also took advantage of the network of suppliers, venture capitalists, equipment vendors, specialized law and public relations firms, contract fabs (that would build chips designed elsewhere), and customers that had sprung up in the past decade to support high-tech entrepreneurs in Silicon Valley. By 1983, more than 3,000 small consulting firms in Santa Clara County provided new companies with startup expertise and continuing help over the early years of operation. Many of the chip designers, glass blowers, fab houses, and die cutters that catered to Silicon Valley high-tech entrepreneurs were themselves small privately held firms. This “supply chain,” most often mentioned for its support of small companies, is itself an entrepreneurial phenomenon.57

  Wealthy investors, many of whom had made their fortunes at small high-technology companies, perpetuated the success-breeds-success cycle through formal venture capital funds and “angel investments” such as Noyce’s funding of the shoebox startups or his Callanish fund investments—or the $30 million drinking club, which Noyce joined sometime in the 1970s.58

  Local educational institutions committed to meeting the needs of nearby industry helped to replenish the pool of talent from which Silicon Valley firms drew their employees. Universities such as Stanford, Berkeley, and San Jose State trained engineers and offered relevant coursework in their business schools. Foothill College in Los Altos offered an A.S. degree in semiconductor processing and a program for electronics technicians. Stanford developed a distance-learning program that allowed engineers at select local high-tech firms to take Stanford courses, for credit, via television.59

  Real estate developers and city planners also formed an important part of the entrepreneurial support system. Developers were clearing orchards south down the Valley as fast as they could, hurriedly constructing low-slung buildings to house new companies. “It is likely that [non-high-tech] growth will be inhibited by both economic factors and policy decisions. High technology firms will be strong competitors for the best available sites,” noted an independent study of the Valley in 1982. “The prestige and ‘clean’ image of the electronics industry will favorably influence planning and zoning decisions in many cases.” By the mid-1980s, Andy Grove was calling Silicon Valley a “business machine,” implying that the region churned out companies the way that Intel churned out chips.60

  Zoning laws, venture capital companies, and course offerings—unrelated as they may seem—were predicated on a common assumption in Silicon Valley: that high-tech entrepreneurship was the best way to assure personal and regional vitality. Venture capitalists on Sand Hill Road, entrepreneurs in their garages or plotting defections in their low-walled cubicles, planners in City Hall, and students picking their way through course offerings made decisions based on a faith that the cycle of success would continue to perpetuate itself, that the innovations would continue to flow and the markets to develop and grow.

  At the heart of this assumption stands the entrepreneur. As Noyce once put it, “Look around Silicon Valley and see who the heroes are. They aren’t lawyers, nor are they even so much the financiers. They’re the guys who start companies.” Silicon Valley could not function without the abiding faith that entrepreneurs will continue to succeed.61

  And for many, Noyce was the paradigmatic entrepreneur at the center of the story. His financial success directly benefited the entrepreneurs whose companies he funded, but the stories about Noyce’s success indirectly inspired many more. One entrepreneur put it this way: “Why do we love this dynamic environment? I’ll tell you why. Because we have seen what Steve Jobs, Bob Noyce, Nolan Bushnell [founder of Atari], and many others have done, and we know it can and will happen many times again.” In other words, if they could do it, why couldn’t he? Such rationale functioned as a self-fulfilling prophecy in Silicon Valley, propelling the region forward on a self-perpetuating cycle of entrepreneurship and wealth.62

  Noyce once happily explained that with semiconductors, “Everything gets better simultaneously, without any tradeoffs. As they get smaller, devices also get faster, use l
ess power, are more reliable, and cost less per function to produce.” The industry, he said, was “a violation of Murphy’s Law.” To be sure, established semiconductor companies flourished in the late 1970s boom in Silicon Valley. Profits at Charlie Sporck’s National Semiconductor were $34 million in 1979—more than double its 1975 performance. At AMD, Jerry Sanders’ operation in which Noyce had invested a small bit of seed money, profits grew tenfold over the same period, to $11 million. At the end of the decade, the top 12 American semiconductor firms claimed 80 percent of the world market.63

  Intel’s growth was most dramatic of all. In 1979, the company’s profits were $78 million, quadruple the 1975 performance and nearly 40 times 1972 profits. The company had been the largest supplier of semiconductor memory components in the world since 1976. The stock had split five times between 1973 and 1979. The company celebrated its tenth anniversary in 1978 with an extravagant party at San Francisco’s Cow Palace that included a casino with play money and two discotheques. The highlight of the festivities was the announcement that Intel would give every one of its employees one share of stock for every year of service. This amounted to a distribution of more than 10,000 shares with a combined value that surpassed $560,000.64

  In May 1979, Intel debuted on the Fortune 500 at number 486. By this time, every dollar that Noyce invested when the company began in 1968 was worth $600. The stock he had bought at the founding for $245,000 was now, 11 years later, worth $147 million.

  With stories about spectacular successes at Intel, Apple, and Tandem Computers crossing the media wires at the end of the 1970s, it is no wonder that Silicon Valley came to represent an innovative, wealthy, daring, successful, world-leading America that some had begun to fear might have disappeared forever in the difficult middle years of the decade. Indeed, stories cast the region as a reincarnation of the most “American” place imaginable, the mythic West, legendary birthplace of freedom and rugged individualism. Many accounts called Silicon Valley entrepreneurs “cow-boys” and “pioneers.” These men had staked out new territory where they could build egalitarian, antibureaucratic companies in the same way that Americans a century earlier had headed to the frontier to escape the confines of a stultified Eastern culture. Noyce himself used the same vernacular when he described large-scale integration as “a broad and fertile plain,… more or less virgin territory … less verdant today, but it will support a large herd still.” The daughter of a displaced Santa Clara County orchardist wrote (in a rather poignantly titled book Passing Farms, Enduring Values) that although the Old West was gone, its spirit endured in men like Bob Noyce. “Thanks, in part, to Noyce, today’s Santa Clara County has a reputation for egalitarian management,” she wrote. “He has been credited with establishing the style that is the hallmark of the new corporate culture: open shirts, casual clothes, interaction on a first-name basis. He has also helped to show the way for employees to become owners very much as farm laborers used to become landed farmers.”65

  In his 1983 State of the Union address, President Reagan, who regularly used images of the American West as shorthand for freedom, independence, and small government, praised Silicon Valley’s “pioneers of tomorrow”: “Surely as America’s pioneer spirit made us the industrial giant of the 20th century, the same pioneer spirit today is opening up on another vast front of opportunity, the frontier of high technology.” A week later, in a speech before a Washington, D.C. conference on high-technology public policy, Noyce quoted Reagan and added, “I wish I’d said that.”66

  11

  Political Entrepreneurship

  By the end of 1979, Intel employed twice as many people as lived in Grinnell, Iowa, when Noyce was growing up. The company had a dozen major facilities in seven countries and roughly twice that number of sales offices. The dramatic growth led Noyce, Moore, and Grove to decide they would again shuffle jobs and assume new positions at Intel. The president/CEO job occupied by Moore would be split. Grove would become president, Moore would retain the title of CEO but also serve as board chair, and Noyce would leave the chairmanship to become vice-chairman of the corporation. In effect, this meant that Grove would run the company with Moore in close consultation.1

  This second round of management musical chairs was significant for Noyce because it left him, for the first time, without an official leadership role at Intel. His status as a founder would always give him some measure of special influence within the company. He would still be brought in when Intel needed to access a high-level executive at a key account or to close a particularly important deal. In 1985, for example, he presented to IBM as part of an effort to convince the company to use Intel’s newest microprocessor in its personal computer. But as vice-chairman, Noyce no longer felt obligated—or entitled—to “watch the store,” as he put it.2

  With the move to vice-chair, the Intel-centered phase of Noyce’s career effectively ended. Throughout the 1980s, he spent so little time at Intel—his one-time secretary estimates he was there no more than twice a week—that an April Fool’s edition of the company newsletter ran an article in 1983 under the headline, “Rare Bob Noyce Sighting Reported.” By this time, Noyce’s divorce and his decisions to sell some of his Intel holdings either to make purchases or to support startup companies had left him with less than half the amount of stock than was owned by his co-founder Gordon Moore, who had sold very little. At the company’s blowout twentieth anniversary celebration in 1988 (for which Intel hired a professional stage troupe of 50 people to perform a 90-minute musical tribute to the company), Andy Grove was celebrated as one of the company’s “three founders,” while Noyce was referred to rather lamely as “the physicist” in the showstopping “Grove, Noyce, and Moore” number that called Moore “the chairman” and Grove “the president.” In some Intel annual reports after 1979, Noyce’s name appears only in the list of directors on the last page. Around this time Noyce privately admitted, “It’s so hard to get off the stage.”3

  A poem he composed in honor of a friend’s fortieth birthday in 1980 makes it clear that Noyce wrestled with the possibility that he might grow irrelevant as he aged. “Now’s the only time to be,” he wrote rather stiltedly to his friend, whose nickname was Bougin:

  Time should come, my dear Bougin

  At least for those mortal men

  To act one’s age, and gone’s the day

  One stops to get “Chip chip hooray.”

  Saving for advancing years,

  Shouting down the gnawing fears

  Of missing something here on earth

  Because of time’s increasing dearth.

  […]

  Challange [sic] snowy slopes so steep

  Plunge through the waves of ocean deep

  Aerobic dance, and hit the ball

  Jet the world and see it all.

  This is the way the world should age

  This is the way the world should age

  THIS IS THE WAY THE WORLD SHOULD AGE

  Just with a BANG, not a whimper.4

  Determined to age “with a BANG,” Noyce built himself a new stage when he stepped down from the Intel chairmanship. The late 1970s marked the opening of a new phase of his career—one spent not in the service of any specific company, but in the service of the industry itself. During these years, and throughout the 1980s, the American semiconductor industry found its worldwide supremacy challenged—and nearly toppled—for the first time. The challengers were Japanese firms, and leading the American response became the defining animus of Noyce’s work.

  For decades, American semiconductor companies had sustained among themselves a tenuous balance between cooperation and competition. Many of the CEOs in the industry served together on the executive board of trade association WEMA’s semiconductor group, which Noyce chaired. Others had worked together—and for Noyce—at Fairchild. When they left Fairchild to run competitor firms, they stole each others’ employees, copied each others’ products, and occasionally sued each other, but much of this aggression was
akin to flashes of sibling rivalry among brothers who had come of professional age side by side and had grown wealthy and influential together.

  The chumminess of the American semiconductor industry was the subject of a self-parodying skit in 1971. The show, called “Oh Say, Can I.C.?,” concluded with a “Friendship Finale” that featured Sporck, Sanders, Noyce, and executives from Texas Instruments, Motorola, Signetics, and Intersil (or perhaps actors playing these executives) singing about their support for each other—“If you ever lose your shirt, I’ll be hurt”—and their “friendship, friendship, just a perfect blendship.” Every one of these singing executives, of course, wanted his company to beat the others—and each did what he could to ensure his triumph. But they all could take comfort in knowing that if their company was not number one in the world at any given time, at least one of their brothers’ firms was.5

  This all changed in the late 1970s, when Japanese semiconductor firms began selling chips that were less expensive and at least as high-quality as American devices. At the same time that the Japanese chips were being sold in the United States, the large and ever-growing Japanese market was almost completely closed to imports, which meant that American firms could not attempt to make up their losses by selling in their rivals’ territory. The appearance of competitive Japanese chips raised the stakes for American firms. Suddenly the consequences of not winning were much higher than they had ever been. In 1974, for example, American firms had supplied nearly all of the world’s demand for 4K DRAMs (memory chips). But by 1979, 35 percent of the next generation (16K) chip was supplied by Japanese firms, and three years later, the Japanese share of the DRAM market surpassed that of the United States. It was no longer a given that one’s brother firm would lead the world.6