AS POLITICIANS ACROSS THE COUNTRY formed joint government-industry committees to study the proper role of government in the economy, Silicon Valley businessmen and SIA members, including Noyce, played prominent roles. President Reagan established a Commission on Industrial Competitiveness, chaired by Hewlett-Packard president John Young (another member of the Page Mill drinking and investment club), on which Noyce served. A select committee of prominent Democrats—including businessmen, labor leaders, and Senators—formed a special “Industrial Policy Study Group,” and one group of young Democrats, led by Gary Hart, Tim Wirth, and Michael Dukakis, pushed so hard for high-tech industries to be the focus of the party’s industrial policies that the young men came to be known as “Atari Democrats.” In Sacramento, Governor Jerry Brown established and chaired a California Commission on Industrial Innovation. Charlie Sporck, along with Apple Computer’s Steve Jobs, served on Brown’s commission, but Noyce declined to join, despite multiple requests from the governor himself.27
High-tech executives were highly sought for these committees because the politicians believed information-based technologies represented the nation’s economic future. No politician wanted to be caught designing policies around the needs of the declining heavy industries. The Brown commission spoke for many when it said, “Our former policy goals of a strong economy built on heavy industry and cheap energy are no longer appropriate for an age marked by national economic sluggishness, fierce international competition and emerging third world nations reclaiming their resources. … We must look to a new ‘post-industrial’ economy built around relatively resource-efficient information technologies and innovation.”28
The debate over industrial policy and the politicians’ high hopes for high tech informed the SIA’s second round of lobbying on the issue of Japanese competition. Although Noyce freely admitted behind closed doors at an SIA conference that “we are attempting to influence our national strategy,” the organization was in a delicate situation. The SIA had to encourage President Reagan to consider actions that on first blush appeared departures from his much-ballyhooed free market, small government ideals and more in line with some of the Atari Democrats’ calls for industrial policy. At the same time, the SIA had to convince Democrats to support the semiconductor industry—perhaps over the heavy industries that employed many members of the Democrats’ most reliable constituencies.29
The SIA also needed to take into account the semiconductor industry’s reputation as the last bastion of do-it-yourself, up-by-the-bootstraps American individualism—exemplars of treasured American values, and the polar opposite of the Japanese. This linking of the semiconductor industry with “American values” was so pervasive that one newspaper article attributed the industry’s problems with Japan to differences in national culture: “One is a nation of immigrants, the other a homogenous society of isolationists. One values adventure, innovation, and debate; the other security, conformity, and harmony.” How, on the one hand, could the SIA take the seemingly quintessential Japanese step of asking for increased government involvement in their industry—and at the same time stay on the right side of adventure, innovation, and individualism? How, in short, could the semiconductor industry ask for government help without seeming un-American?30
IN JUNE 1985, THE SIA LAUNCHED a two-pronged campaign to accomplish two goals: open the Japanese market, which the SIA argued was closed to foreign chip imports; and end what the SIA alleged were Japanese firms selling chips below the cost of production. To achieve the first goal, the SIA filed a petition with the United States Trade Representative for relief under Section 301 of the Trade Act of 1974, the section that authorizes the president to penalize countries that deny United States products fair access to their markets. Three months later, Intel, National Semiconductor, and Advanced Micro Devices—working in close cooperation with the SIA—began work on the second goal by filing an antidumping case pertaining to 64K EPROMs. The SIA had considered filing its Section 301 petition and lawsuits much earlier but waited until Clyde Prestowitz, a former colleague of SIA’s lead attorney, joined the Reagan administration as counselor for Japan affairs for the secretary of commerce. This personal connection encouraged a favorable reception for the SIA’s agenda.31
The SIA planned its strategy with great care, working in close consultation with the Washington law firm of Dewey, Ballantine, Bushby, Palmer & Wood, chosen largely for its international trade expert, Alan W. Wolff, who had been deputy United States trade representative in the Carter administration. The SIA did not have a Political Action Committee to donate money to candidates, but member firms—including Intel—formed PACs that together donated some $350,000 to national political candidates during the mid-1980s. The SIA also strategically expanded its membership base to include small companies that built specialty chips; major chip buyers such as Hewlett-Packard; and large captive producers of chips, such as IBM, which build chips primarily for use in their own products. Some of these new members, whose primary concern was maintaining reasonable prices and flexible supplies, might potentially oppose SIA initiatives that would result in higher overall chip prices. By bringing these companies into the tent, SIA could solicit their opinions and cultivate their support before initiatives were made public. Finally, to make its message as appealing as possible, the SIA consulted regularly with public relations expert Regis McKenna. The SIA also devoted at least one board meeting, which Noyce attended, to a discussion of the organization’s “image—what are we trying to accomplish.”32
The SIA rounded up a cluster of allies known informally as the Congressional Semiconductor Support Group. This group of 20—Democrats and Republicans, senators and representatives from states including California, Missouri, Florida, and Pennsylvania—made calls to the White House and met with cabinet officials to express support for the SIA’s requests. Another 180 federal representatives and senators sent letters, drafted by SIA general counsel Alan W. Wolff, to people in the executive branch. Both senators from California worked hard to support the SIA’s position.33
The SIA used the executives who ran its member companies as a “platoon” of CEOs that could be sent to Washington, D.C. to lobby on behalf of the semiconductor industry. This was an unusual and highly successful innovation. Other trade associations had at times pressed well-known executives into lobbying duty on particularly critical issues, but most day-today industry lobbying was the purview of paid professionals based in the nation’s capital. The small SIA staff worked closely with its general counsel to draft articles and position papers and to brief the executives on the political nuances and stakes at play in specific issues.
In 1985 and 1986, the SIA sent so many executives to the nation’s capital that United States trade representative Clayton Yeutter told an SIA meeting, “We joked in Washington that many of you were becoming permanent fixtures.” An academic study concluded, “Direct lobbying by top company executives is the most effective tactic adopted by the SIA.” SIA co-founder Charlie Sporck called it “the secret to the SIA’s success.”34
Politicians and political appointees in Washington were indeed impressed that the semiconductor industry’s leaders, who had for so long disdained government “interference” in their business, were willing to dirty their hands with lobbying. Counselor for Japan affairs Prestowitz wrote that “appealing to Washington was not easy for these men and the others like them in the industry who embodied the ideals of the American dream. Coming from modest, even poor, backgrounds, they had succeeded through initiative, inspiration, and perspiration, in founding an industry widely seen as the key to the twenty-first century. They had done it on their own as lone riders without government help—indeed, sometimes in the face of government harassment.”35
Most prominent among the “lone riders” for the SIA was Bob Noyce. He “is something of a legend in the electronics world,” wrote the Harvard Business Review. “The Washington establishment wanted to get to know him as much as he wanted to develop political contacts.
” Counselor Prestowitz put it this way: “Noyce is one of our guys, and if anyone can hack it, he can.” Noyce’s mere appearance at a congressional hearing sent a compelling message: the semiconductor industry is in such trouble that even Noyce—the embodiment of entrepreneurial spirit—is willing to swallow his pride and ask for help.36
Noyce possessed the time, confidence, political savvy, and credibility necessary for any successful lobbying campaign. And he pointed to another reason he was so effective—he was wealthy. “I found that money gave you power, that your opinion was more highly valued in Washington if you were rich. [Money] was a way of keeping score. It was a way of keeping track of who had contributed [to society] and who had not, and consequently [if you were a politician], who you should listen to and who you should not.”37
Promoting the SIA agenda was, in some sense, another one of the high-level sales jobs at which Noyce excelled. And in this case, he passionately believed in the “product.” It must have frustrated him to consider that American semiconductor companies, so money-hungry and so supremely confident of their technological edge in the 1960s and 1970s, had inadvertently helped to create their own Japanese competitors when they sold them early licenses to key American patents. And Fairchild had led the way, charging for the rights to the Noyce integrated circuit patent a royalty of 4.5 cents on every dollar the Japanese makers earned on chips—and effectively handing them blueprints that represented years of advanced research at Fairchild.38
Throughout his career, Noyce had enjoyed an unusually close relationship with Japanese semiconductor executives and researchers. He hosted delegations of Japanese visitors at Fairchild and later at Intel, and he had been flattered by the respect accorded to him when he visited the island nation. “Bob was a very trusting person,” Ann Bowers explains. “You had to practically punch him in the nose to have him think there was something untoward happening. You can imagine how he felt when he realized that all those years that he had been hosting the Japanese guys, they had been trying to get [American] secrets.”39
AS PART OF HIS CAMPAIGN to save the American semiconductor industry, Noyce raised money for several political candidates and encouraged the formation of a Government Affairs Committee at Intel. He estimated that he spent nearly half his time in Washington, D.C. in the mid-1980s. There he met informally (for various meals and coffees) with senators, congressional representatives, and people from the Democratic National Committee. Recalls Tom Campbell, who first worked with Noyce on an effort to discourage frivolous shareholder lawsuits and then served as a United States representative from the district that included much of Silicon Valley, “He really helped me to see the importance of letting invention happen—letting people take a risk. It is important to create a system in which people are free to innovate, create, be bold. [Noyce believed in] empowerment, rather than in the government directly helping out.”40
Noyce also testified multiple times before Congress, at one point identifying himself as speaking “as a representative of all high-tech industry.” He began working with a speechwriter in the early 1980s. Jim Jarrett, now Intel’s vice president of legal and government affairs, was a newly hired public relations manager in 1980 when he began helping Noyce on his presentations and occasional articles. The two men had an easygoing relationship: Noyce would talk to Jarrett about his ideas and what he wanted to say, and then Jarrett, after conducting a bit of research, would draft a talk, which Noyce would edit—usually quite lightly. Together Noyce and Jarrett developed a plug-and-play system of speech building in which they would craft various “modules,” each ranging from one to a half-dozen paragraphs, and each centered around a different theme or slide. These modules could be assembled in any number of ways and linked with customized transitions tailored to a specific audience.41
Jarrett recalls that Noyce never seemed entirely comfortable when he delivered his talks, even though he would regularly ad-lib and appeared from the audience to be quite at ease. “He wasn’t a great speaker from an oratorical style standpoint, but he had so much charisma that it really overrode his moderate ability as an orator,” explains Jarrett, in a remark that recalls Gaylord Noyce’s explanation of how his brother always managed to land lead singing parts with only a better-than-average voice. Jarrett continues, “His presence was the really the thing that mattered. He did not have a Baptist-preacher approach. [His] was a thoughtful, kind of modestly presented style. He was just being himself.” When Noyce spoke, his body, tone, pace, and intonation all sent the same message to the listener: this talk is not about me; it’s about the points I’m making.42
By this time, Noyce had learned to keep his emotions under control in public presentations. There were no more “karate chop” or “slit our throats” comments after 1978. But in private, he was still very upset. The depth of his feelings gave his lobbying efforts a compelling fervor and passion. His message in his testimony built on three points—economic vitality, fair play, and national security—that the SIA had identified as key to building support for their goals of opening the Japanese market and stopping chip dumping.
The importance of the semiconductor industry to the United States economy was Noyce’s favorite topic in the early 1980s. He wrote more than a dozen speeches on the subject and delivered many of them more than once. He told the National Governors’ Association that Intel alone had paid over $245 million in taxes in its first 13 years of business and estimated this was a tenth of the amount contributed by the industry as a whole. Repeating an often-used SIA line, he told the House Ways and Means Committee that “the American semiconductor industry provides the ‘crude oil,’ or fundamental technology, for the electronics industry.” He told the Los Angeles Times, “Semiconductors are in everything from automobiles to aircraft. Our sales are an index to the state of the economy.”43
Always most comfortable with quantifiable claims, at one point he calculated the “‘social surplus’ which has been returned to the society by the semiconductor industry” to be more than $120 billion. Noyce’s calculations were hard to follow, but his basic argument was this: because semiconductors’ cost-per-function fell so dramatically with each new generation of chips, customers could greatly improve productivity over time at relatively little cost. The “$120 billion social surplus” was the difference between (on the one hand) the theoretical costs of such productivity improvements if chip prices had not historically fallen so precipitously and (on the other hand) the actual costs to consumers. This “windfall,” Noyce contended, “can be used to further the other goals of society.”44
Noyce repeatedly stressed the link between the semiconductor industry and the emerging “information economy.” He told the Department of Commerce that “half of the country’s work force is now dealing with information rather than goods” and that the semiconductor industry was “fundamental to the new information age.” He promised that the new information technologies would improve workplace efficiency “even more than the mechanical age enhanced the output of manual labor in the last century.”45
Noyce further sought to stress that the semiconductor industry was not seeking protectionist legislation: the Section 301 petition focused on gaining access to Japan’s market, rather than closing off America’s market to Japanese imports. As Noyce liked to say, “America has a concern for fair play, for having the rules of the game the same for all participants.”46
While Noyce was making these points, the SIA was making a third: a weak American semiconductor industry posed a significant security risk. Superior weapons technology depends on superior electronics, which in turn depend on state-of-the-art semiconductors. If the United States semiconductor industry could not stay on the technological cutting edge, the American military would be forced to use, perhaps even to depend upon, foreign sources for key electronics components. These foreign sources might dry up in wartime, and they might be supplying the Soviet Union as well as the United States, potentially compromising American security by passing along information abo
ut her technology to her most dangerous military rival.47
IN THE SPRING OF 1986, the SIA’s efforts began to bear fruit. After a year of inquiry, the International Trade Administration issued a preliminary determination that several Japanese companies were selling EPROM chips in the United States at less than the cost of production. In August, President Reagan signed the United States–Japan Semiconductor Agreement, which required Japan to “open” its semiconductor market, with the unstated goal of foreign firms gaining 20 percent market share within five years. The agreement also curbed alleged Japanese dumping of chips by mandating a “fair market value” at which semiconductors should be sold not just in the United States, but throughout the world. These were unprecedented steps, taken against a military ally, to extend United States government jurisdiction into a private-sector business on a global scale. A few months later, the Reagan administration determined that Japan was violating the accord and imposed 100 percent tariffs on $300 million of Japanese imports—the first such penalties against an ally since World War Two.48
That this outcome was engineered by an organization that was less than a decade old, staffed by fewer than a dozen people, and represented fewer than 40 member companies whose workforces were concentrated in only three states (California, Texas, and Arizona) is astonishing. In some sense, the SIA should be considered yet another remarkably successful startup, co-founded by Noyce and his peers. By mid-1989, a survey of government officials, paid for by several large computer companies contemplating the formation of their own SIA-like association, found the SIA to be the “most effective” of eight electronics industry trade groups because of its “clarity of purpose” and “constructive agenda.”49
The Man Behind the Microchip Page 41
