The Man Behind the Microchip

by Leslie Berlin

  49. Jobs at McKenna dinner: Ann Bowers, interview by author.

  50. Not very appealing: Arthur Rock quoted in “HBS [Harvard Business School] Working Knowledge,” http://hbswk.hbs.edu/pubitem.jhtml?id=1821&t=special_reports_donedeals

  51. Noyce and Jobs Seabee accident: Steve Jobs, interview by author.

  52. Remember personal things: Steve Jobs, interview by author.

  53. Apple Computer IPO: Apple Computer prospectus, 12 Dec. 1980.

  54. On Tandem: Smith, “Silicon Valley Spirit”; “The fall of an American Icon,” Business Week, 5 Feb. 1996. Compaq acquisition of Tandem: David Lazarus, “Compaq Boosts High End with Tandem Deal,” Inc., 23 June 1997.

  55. On Atari: http://www.campusprogram.com/reference/en/wikipedia/n/no/nolan_bushnell.html

  56. On Genentech: Timeline and Investors Fact Sheet at http://www.gene.com, accessed 24 Aug. 2004.

  57. More than 3,000 small firms: Lenny Siegel, Testimony Prepared for the Subcommittee on Science, Research, and Technology of the House Committee on Science and Technology and the Task Force on Education and Employment of the House Budget Committee, 16 June 1983, PSC. Supply chain: James F. Gibbons, “The Relationship Between Stanford and Silicon Valley,” unpublished speech manuscript, 11, courtesy James Gibbons.

  58. Noyce joined drinking club: Jack Melchor, interview by author.

  59. Educational offerings: This paragraph relies heavily on Saxenian, Regional Advantage, 42.

  60. Prestige and clean image: Wells Fargo, “Economic Forecast,” IA. Business machine: Andy Grove, handwritten notes titled “Stanford talk—Si Valley,” IA.

  61. Look around Silicon Valley: Noyce quoted in “Bob Noyce talks to Upside,” Upside, July 1990 [interview date is 23 May 1990]. Former Stanford Dean of Engineering James Gibbons, a long-time participant in and observer of Silicon Valley, makes the identical point—“the heroes in Silicon Valley are the entrepreneurs” in James F. Gibbons, “The Role of Stanford University: A Dean’s Reflections,” in The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship, ed. Chong-Moon Lee, William F. Miller, Marguerite Gong Hancock, and Henry S. Rowen (Stanford: Stanford University Press), 200–217.

  62. Why do we love: Martin Meeker, “Silicon Valley’s Silver Lining,” (Letter to the Editor), Inc., Dec. 1982, 11.

  63. Violation of Murphy’s Law: Noyce, “Big Bang Paris—RNN Talking Points,” [speech outline] 12 Apr. 1988, IA. Established companies flourished: Only one semiconductor company was launched in the 1973–1978 period, when the prohibitively high fixed costs of building a fab—roughly six times what Noyce and Moore paid in 1968—discouraged most new entrants to the industry. Top twelve American firms: Electronic Market Data Book: 1981 Edition (Electronic Industries Association: 1981), 92.

  64. Intel tenth anniversary celebration: “Intel Celebrates,” San Jose Mercury News, 23 Aug. 1978.

  65. Birthplace of freedom: Such ideas can be traced to the writings of historian Frederick Jackson Turner. The “free lands” of the West, Turner wrote, served as a “gate of escape” and reinvigorated the country by promoting “individualism, economic equality, freedom to rise, [and] democracy.” Frederick Jackson Turner, “Contributions of the West to American Democracy,” Atlantic Monthly, 91, Jan. 1903, 91. Broad and fertile plain: Noyce, “Competition and Cooperation—A Prescription for the Eighties,” Research Management, March 1982, 14, IA. Thanks, in part, to Noyce: Jacobson, Passing Farms, Enduring Values: California’s Santa Clara Valley, (Los Altos, Ca.: William Kaufmann, Inc., 1984), 237.

  66. Surely as America: Ronald Reagan, “Address Before a Joint Session of the Congress on the State of the Union: January 25, 1983,” Papers of the Presidents: Administration of Ronald Reagan, 107. I wish I’d said: Noyce “High Technology Industries: Pulbic Policies for the 1980s,” 1–2 Feb. 1983, IA.

  Chapter 11: Political Entrepreneurship

  1. Political entrepreneurship: Philip A. Mundo uses the term “political entrepreneurs” to describe executives working with the Semiconductor Industry Association. Philip A. Mundo, “The Semiconductor Industry Association,” Interest Groups: Cases and Characteristics (Chicago: Nelson-Hall, 1992): 41–66.

  2. Close deals: In June 1985, Noyce submitted an expense report for his having traveled to present on the Intel microprocessor to IBM. Noyce’s expense reports from this period also list a meeting with Burroughs in April 1983 and an LME Customer Meeting in January 1984 (expense reports, ASB). Access important accounts: Intel marketing executive William H. Davidow discusses Noyce’s help in closing deals and accessing executives in Marketing High-Technology, An Insider’s View (New York: The Free Press, 1986): 130, 152. Watch the store: Noyce, “Creativity by the Numbers,” Harvard Business Review, May–June 1980.

  3. Rare Bob Noyce Sighting: Inteleads, 1 Apr. 1983, IA. Twentieth anniversary celebration: video, IA. Hard to get off the stage: Mar Dell Casto, interview by author.

  4. Noyce’s poem: courtesy Maryles Casto. The poem is signed, “1980, Bob Noyce.”

  5. Friendship, friendship: Oh Say, Can IC? (script excerpt), First Annual Industry Banquet, Semiconductor Equipment and Materials Institute, 26 May 1971, IA.

  6. Japanese vs. American share of market: Leonard Hills [Intel employee] to List, 15 Oct. 1986, IA. Hills includes figures from Dataquest that he describes as “‘Doom & Gloom’ graphs” in his letter. Figures based on world market revenues.

  7. Like taking a hilltop: Jeffrey Beeler, “Semi Industry Reps Raise Alarm on Japanese,” Computerworld, 25 June 1979, 64.

  8. 1985 trade deficit: McCraw, From Partners to Competitors, 4. Nippon Steel, Japan number one threat: Richards, “How America Lost the Edge”; Lou Harris and Associates poll results cited in Robert Noyce, “SIA Industry Conference,” 3 Sept. 1989, SIA.

  9. Originating and nurturing: Robert Noyce, World Trade and the Challenges Facing the U.S. Semiconductor Industry: Semiconductor Industry Association Annual Forecast Dinner, 28 Sept. 1978, SIA. Nineteen firms purchased: Noyce, Testimony Before the United States International Trade Commission on Behalf of the Semiconductor Industry Association, 30 May 1979, SIA.

  10. Brilliant minds: Noyce, “Keeping California Competitive in R&D,” 10 Oct. 1986, IA. Slit our throats: Noyce quoted in Gene Bylinsky, “The Japanese Spies in Silicon Valley,” Fortune, 27 Feb. 1978; Almost thrown out of Japan: Rich Karlgaard, “Bob Noyce Talks to Upside,” Upside, July 1990 (interview 23 May 1990). Karate chop: Noyce, World Trade and the Challenges Facing the U.S. Semiconductor Industry [speech before the SIA Annual Forecast Dinner], 28 Sept. 1978. 1981 meeting with Japanese: Charlie Sporck, Spinoff: A Personal History of the Industry that Changed the World (Sarnac Lake, N.Y.: Sarnac Lake Publishing, 2001): 247. Noyce burning paper flags on cake: sources requested anonymity.

  11. Slow down Japanese government: Minutes of SIA Board of Directors meeting 16 June 1977, SIA.

  12. Seven percent of revenues: Joel Stern, “International Structural Differences in Financing,” (Study undertaken by Chase Financial Policy at the request of the SIA), IA.

  13. Government-conferred benefits: Okimoto, Sugano, and Weinstein, Competitive Edge, 6. Japanese banking: Stern, “International Structural Differences in Financing,” 134–135. Stern estimates, “Many Japanese semiconductor companies maintain debt-to-capital ratios as high as 60 to 70 percent. … During the past three years [1978–1980], the median debt-to-capital ratios of the nine US companies reviewed were between 16 and 18 percent.” In part, the willingness of Japanese banks to lend to such highly leveraged firms also stemmed from the “keiretsu” structure of Japanese industry. Each of the major Japanese semiconductor firms was a longstanding member of one or two “keiretsu,” cross-industry corporate groups—usually headed by a major commercial bank—joined together through equity and cross-shareholdings, management and interlocking directorates, financing, and buying/selling relationships.

  14. On the capital gains tax: Ed Zschau, interview by author; J. Andrew Hoerner, ed., The Capital Gains Controversy:
A Tax Analysts Reader (Arlington, Va.: Tax Analysts, 1992).

  15. American share of market: Douglas A. Irwin, “Trade Politics and the Semiconductor Industry,” NBER Working Paper 4745. 16K EPROM price cuts: Noyce, Sacto Speech, 28 Sept. 1983, IA. Lead the group in prayer: Noyce, SIA Speech, 1 Oct. 1981, SIA.

  16. Japanese share surpassed American: SIA, “The Semiconductor Industry Association, Key Facts and Issues,” 4.

  17. $2 billion, 27,000 jobs: Noyce, “Testimony on National Technology Development and Utilization Provided to the Technology Policy Task Force Committee on Science, Space, and Technology, U.S. House of Representatives,” 25 Sept. 1987. How far we’ve fallen: “Fairchild Sale Touches Us All,” San Jose Mercury News, 26 Oct. 1986. Industry considered united opposition: Evelyn Richards, “Bottom Line Indicated Who Would Buy Fairchild,” San Jose Mercury News, 7 Sept. 1987. World turned upside down: Christopher H. Schmitt, “Japanese to Buy Most of Fairchild: Fujitsu Ltd would Take Over 80 Percent of Chip Pioneer,” San Jose Mercury News, 24 Oct. 1986.

  18. Go through the revolving door: Andy Grove quoted in Robert A. Burgelman, “Fading Memories: A Process Study of Strategic Business Exit in Dynamic Environments,” Administrative Science Quarterly, Vol. 39 (1994), 24–56.

  19. Most gut-wrenching decision: Arthur Rock, speaking at a “Legends of Venture Capital” panel, Computer History Museum, Mountain View, Calif., 30 Sept. 2002. Japanese beating the heck: Ann Bowers, interview by author, 16 Aug. 2004.

  20. 7,200 jobs, annual losses: Noyce, “Testimony on National Technology Development and Utilization Provided to the Technology Policy Task Force Committee on Science, Space, and Technology, U.S. House of Representatives,” 25 Sept. 1987. How to shut down Intel: Ann Bowers, interview by author, 16 Aug. 2004. Japanese Buy Intel: Inteleads, 1 April 1987, IA. It’s hard for someone: Daryl Hatano to author, 2 Feb. 1998.

  21. Decline of empire: Noyce, Competing in an Open Economy, Keynote Address UCB [University of California at Berkeley], 22 Jan. 1987, IA. Death spiral: Noyce quoted in Evelyn Richards. “How America Lost the Edge on the World Trade Battlefield,” San Jose Mercury News, 20 April 1986. What would you call Detroit: Noyce quoted in Evelyn Richards, “Two Valley Visionaries Don’t See Same Horizon,” San Jose Mercury News, 20 Jan. 1986. Job loss figure: David Sylvester, “2017, A Silicon Valley Odyssey,” West Magazine (Sunday supplement to the San Jose Mercury News), 7 June 1987, 18. Optimism is essential: Robert Noyce, “Innovation for Prosperity: The Coming Decade,” delivered to the National Governor’s Association 21 Feb. 81 and to SIA’s conference on the “International Microelectronics Challenge: A Response by the Industry, the Universities and the Government,” Washington D.C. 10–11 March 1981, IA.

  22. Target entrepreneurs: Noyce, “High Technology Industries: Public Policies for the 1980s,” [speech], 2 Feb. 1983, IA.

  23. Democratic argument: Lazarus and Litan, “Democrats’ Coming Civil War,” 95.

  24. Time for more attention to micro requirements: Senator Adlai Stevenson II quoted in U.S. Senate Democratic Task Force on the Economy, “Report of the Subcommitteee on Industrial Policy and Productivity,” 4 Aug. 1980, 3–4. Make and guarantee loans: Lazarus and Litan, “Democrats’ Coming Civil War,” 93.

  25. Supporters cannot demonstrate best and brightest in Washington: Congressman Dan Lundgren quoted in Congress of the United States Joint Economic Committee, “Press Release: JEC Study Finds Industrial Policy Deficient,” 28 June 1984, SIA.

  26. Federal government purchasing statistics: Robert B. Reich, “Why the U.S. Needs an Industrial Policy,” Harvard Business Review, January–February 1982:75. Of course, as the contours of Noyce’s own career make abundantly clear, in Silicon Valley high-tech entrepreneurship and federal government support were far from mutually exclusive. Nearly all of Fairchild’s early products went to government—primarily military—uses. The Defense Department invested over $1 billion in semiconductor R&D between 1958 and 1974, and as late as 1965, the Pentagon purchased 70 percent of the nation’s integrated circuit output. Even after the rapid growth of the consumer electronics market in the 1970s reduced semiconductor companies’ dependence on government customers—by 1978, the Pentagon’s integrated circuit purchases accounted for only 7 percent of sales—the military maintained a strong presence in Silicon Valley. By one estimate, in 1980, Santa Clara County, with 0.6 percent of the American population, captured 3 percent of all Department of Defense prime contracts. (Defense department invested: Saxenian, Regional Advantage, 42.) Three percent of prime contracts: Findlay, Magic Lands, 144–145, citing SRI International, The Role of Defense in Santa Clara County’s Economy [Washington, D.C., 1980], v–vii.) American industrial policy implemented by Defense Department: Johnson, “Introduction: The Idea of Industrial Policy,” 4.

  27. Commission on Industrial Competitiveness: “Global Competition: The New Reality,” Report of the President’s Commission on Industrial Competitiveness, Jan. 1985, SIA.

  28. Brown commission comments: Winning Technologies: A New Industrial Strategy for California and the Nation, Executive Summary. Report of the California Commission on Industrial Innovation, Sept. 1982, 10.

  29. We are attempting to influence: Robert Noyce, “Introduction and Conference Theme,” in SIA, “Public Policies and Strategies for U.S. High Technology Industry: Proceedings of the SIA Long Range Planning Conference,” 22 Nov. 1982, SIA.

  30. One is a nation of immigrants: Richards, “How America Lost the Edge.”

  31. Chip dumping: Douglas A. Irwin challenges the SIA’s allegations that the Japanese were dumping chips. Douglas A. Irwin, “Trade Politics and the Semiconductor Industry,” NBER Working Paper 4745. EPROM antidumping case: Christopher R. Schmitt, “New Dumping Charges Leveled at Japanese,” San Jose Mercury News, 25 July 1986, 15E. In June, Micron Technology had filed an antidumping complaint about 64K DRAMs. SIA, “Events Leading to the Negotiation of the Agreement: Appendix A,” One and One-Half Years of Experience under the U.S.-Japan Semiconductor Agreement: Semi-Annual Report to the President by the Semiconductor Industry Association, 43. SIA had considered filing the petition: Daryl G. Hatano, “Why SIA Filed the 301 Trade Action,” Japan Economic Journal, 12 October 1985.

  32. Semiconductor PACs donated: Irwin, “Trade Politics,” 14. SIA image meeting: entry dated 23 Sept. 1984, Noyce 1984 datebook.

  33. Congressional semiconductor support group: this description relies heavily on Yoffie, “How an Industry Builds Political Advantage,” 87; see also Tom Redburn and Robert Magnuson, “Stung by Tax Bill, Electronics Firms Seek Broader Political Base,” Los Angeles Times, 15 Nov. 1981. California Senators supported: Irwin, “Trade Politics and the Semiconductor Industry,” 8.

  34. Permanent fixtures in Washington: Clayton Yeutter, “Speech to SIA Annual Forecast Dinner: September 23, 1986,” in Japan Semiconductor Market Access: Background and Source Book, 46. Direct lobbying is most effective: Mundo, “Semiconductor Industry Association,” 56. The secret to the SIA’s success: Charlie Sporck, interview by author.

  35. Appealing to Washington was not easy: Clyde Prestowitz, Trading Places: How We Allowed Japan to Take the Lead (New York: Basic Books, 1988), 149.

  36. He is something of a legend: Yoffie, “How an Industry Builds Political Advantage,” 88.

  37. Money gave you power: Noyce, transcript of “Machine that Changed the World,” Tape F8, IA.

  38. American firms money hungry and overconfident: a more sympathetic explanation would note that because most Japanese markets were closed to U.S. firms, when the firms received offers (quite generous ones at that) to import their technology into Japan, they jumped. As one scholar put it, the Americans knew that the Japanese “would simply have gone to other sources—namely European high-technology companies such as Siemens, AEG and Philips—to get what was needed in Japan.” Thomas K. McCraw, From Partners to Competitors: An Overview of the Period Since World War II (Cambridge, Mass.: Harvard University Press, 1986), 17–18.

  39. Bob was a very trust
ing person: Ann Bowers, interview by author, 16 Aug. 2002.

  40. Noyce informal meetings: 1985 and 1986 datebooks and Intel expense reports dated 6 Nov. 1984, 30 Nov. 1984, 26 Feb. 1985, 10 March 1985, 10 June 1985, 29 July 1985, 3 Oct. 1985, and 2 Dec. 1985, all ASB. He really helped me to see: Tom Campbell, interview by author.

  41. Representative of all high tech: Noyce, Statement before the Committee on Ways and Means, United States House of Representatives, on behalf of Electronic Industries Association, Scientific Apparatus Makers Association, Computer and Business Equipment Manufacturers Association, American Electronics Association, and Semiconductor Industry Association, 2 Apr. 1981, IA

  42. All quotes from Jim Jarrett: Jim Jarrett, interview by author.

  43. Intel paid over $245 million: Noyce, “Innovation for Prosperity.” Crude oil of electronics industry: Robert Noyce, “Statement Before the Committee on Ways and Means, United States House of Representatives,” 2 April 1981, IA. Semiconductors are in everything: Paul Richter, “Silicon Valley Wrestles with Hard Times,” Los Angeles Times, 15 Nov. 1981.

  44. Social surplus: Robert Noyce, “Innovation for Prosperity: The Coming Decade,” speech before the National Governors’ Association, 1 Feb. 1981, IA.

  45. Half of the country’s work force dealing with information: Robert Noyce, “Overview of the Semiconductor Industry,” Testimony before the International Trade Administration, Department of Commerce, April 1983. In High Technology Industries: Profiles and Outlooks—The Semiconductor Industry (Government Printing Office, 1983), 16.

  46. America has a concern: Noyce, International Competition in Electronics—An American View [speech to the Financial Times Conference on World Electronics], 11 May 1981, IA.