SEMI Oral History Interview
April 27, 2006 , New York City
Interviewed by Craig Addison, SEMI
Sheldon Weinig spent five years as a professor at Columbia University before founding Materials Research Corporation (MRC) in 1957, where he served as chairman and CEO for more than 20 years. Sony acquired MRC in 1989 and following the merger Weinig remained with Sony America for seven years as vice chairman of engineering and manufacturing. In April 1996, he retired and accepted Adjunct Professorships at Columbia University and The State University of New York at Stony Brook , New York . In 1980, he received the SEMI Award for developing the critical materials necessary for the growth of the semiconductor industry. In 1990, he was elected to the International Technology Institute's Hall of Fame for Engineering, Science and Technology. Weinig served two terms as a member of President Ronald Reagan's Board of Advisors on Private Sector Initiatives, was a member of the U.S.-Japan Scientific Exchange Committee, and served on the board of directors of SEMI. Weinig received his doctorate in metallurgy from Columbia University .
CA: Could I start off with asking you about your early days, where you grew up, what sort of education you had, your family background.
SW: Sure. I was born in the city of New York . I went to what we call a magnet school here, Stuyvesant High School , which is a pre-engineering, pre-science, pre-med type of high school. And about that time World War II was going on. And I graduated from high school on Friday and I entered the United States Army on a Monday. And fortuitously three months later in August they dropped the Atom Bomb and the war ended. But I received the full benefits of a war veteran. What this meant was that I was then able to go to school on the GI Bill of Rights, which I did. And I ended up obtaining a doctor's degree in metallurgy from Columbia University . I then became a professor and I spent approximately five years in academia. At which point I no longer enjoyed the pleasure. Not of teaching, which I always enjoy. I couldn't stand the bureaucracy of university life and so I came up with an idea to start a company. And a keyhole of the company at that time was that all advances technologically would require some new advances in materials. In other words, that was the blocking, the obstacle, for all advances in technology were available materials. And you know what? A lot of years later you can use the same idea to start a company. Because it's still true.
At that time there was a considerable amount of government supported research at the universities and in companies. And what would happen would be that a particular government agency would give out, let's say, ten contracts on titanium, to use one material. And they'd give one to Bell Labs. And they'd give one to IBM. And they'd give one to this school and that school. And in the end there were ten laboratories working in titanium. Nobody ever coordinated the material they actually worked on so that IBM got their titanium from some lab at DuPont. And the chaps at Bell Labs, they got it from Titanium Metals Corporation of America . And the chaps at the university got it from their brother-in-law who worked for National Lead or something like that. So when you got together six months later and all these labs are now reporting, every one of them has used a different starting material. Well, we don't have to bring in scientists to understand that part of science is controlling the variables and then you study the effect of one variable on a particular property.
So my first idea was to go to Washington and see if they would support materials centers of excellence. And what the idea was if they would help me, for example I wanted to be in the area of metals but there certainly should be one in ceramics and one in III/V compounds, etc., etc. And it took a long time. It took several years before what was then called ARPA, which is now I guess DARPA, advanced research projects agency, finally appropriated about, I think, it was $5 million to set up a series of highly specialized laboratories that would work on these materials. And then when the government gave out, for example again 10 research programs on titanium, all the titanium would come from one lab. All of it would be, as I like to call it, pedigreed. We know its mother, its father. We know where it came from. We knew everything we can about it. It would be pure as hell. And then we would be able to at least get together and compare apples to apples.
Well, after a number of years that program was finally initiated and I did receive one of the contracts. And that was a real push for us to go into the purification of materials, the pedigreeing of materials. Actually, a nicer word for it is the characterization of materials. So we'd characterize them. And then we sold them to laboratories to be used for research. And at one point I used to joke and say that I was the most published scientist in the world because literally thousands of laboratories bought our stuff. And you would read journals, like the Journal of Applied Physics and The Journal of Materials and so forth. And it would start out by saying the specimens used in this research was obtained from Materials Research Corporation. Well, it's an easy link to put my name in and say Shelly Weinig provided all the materials for all the research in the world. So that is what I was really up to.
CA: Talking about the actual formation of the company, did you need a lot of money? Where did you go for the funds or support to actually get the thing going?
SW: That's a good question. In those days there was not a developed venture capital industry. Venture capital then was the local obstetrician, the local used car dealer and they met behind the pharmacy. And each one was willing to put up x thousands of dollars. And it was very funny because I met with a number of these groups and they would all say things like oh, we have great confidence in you, you seem to know what you're doing, and we'd be happy to provide you some monies, but we'll have to lock your children in the cellar until you pay us back. Things like that. In other words, I'm joking but what I'm saying is that they didn't have the sophistication to really set up a venture capital group. And that was good for me…the longer you can go the better off you're going to be if you don't take in outside monies because it won't dilute the company as much.
So the original start of the company was based on a small amount of money that I had made playing the stock market. Knowing the metallurgy game I had been playing some metals companies and I was fortunate and made a little money. And then my father signed a loan from a local bank, which allowed me to get some additional monies. And I learned all the tricks. I learned that when I got a job I said would you mind giving me an advance. And I always remember, it was very funny, somebody said to me, an advance? Don't you trust us? I said, good God, of course I trust you. I have no money though to run the business. I need the money. And you just did everything you could in this particular manner. We had a government contract with the Navy, I remember. And I found out there was some Navy machine shop equipment available in the surplus. Well, through this contract I was able to obtain that equipment. And it was a learning experience. And it was fun. I can't say I look back with pain. I thought it was fun. You needed a desk, you went to an auction and bought one for 20 bucks. My own personal desk I had for six years, it cost $22. Until my board said for God's sakes, it's time to upgrade a little bit. [Laughs] It was really, I think, about three years before outside money came in. And then we sold 30 percent of the company to the General Instrument Corporation. We had got to know them because we had been working on tantalum for them for solid state tantalum capacitors. So I got to know them and they offered to put some money in. And that was the first major amount of money that came into the company.
CA: Did you have any kind of business acumen? You obviously had a technical degree, but starting a company and asking people for money, did that come easily to you?
SW: That's always an interesting one because sometimes I think either you're born with it or you're not. And I sometimes wonder whether you can really teach business. God knows there's a big industry known as the MBA schools. So I shouldn't really say that. But I learned as I went. But I just seemed to have an instinct. My father had always been in business and so I had learned some things from him. There was a time when I used to keep his books so I learned a little bit about accounting that way. But basically it was survival, I think is the right word. So I learned as I went. And I learned one thing and that was that you had to just be up front with people. Like the story of asking for an advance. What, would you make up a big story about how you don't trust them? The name of the company was US Steel, IBM, I mean…No, I just played it straight out.
CA: Were there any other people as co-founders or people who actually came with you and started the company?
SW: There were at least four other people that I brought in. Some were from Columbia . Some were from the NYU engineering school. And they joined me and they each had a small piece of equity as well. But the bulk of the equity was mine.
There were two Ph.D.s that I knew from Columbia . Each of them had taken a class with me when I had been teaching there. And then I had gone on, I'd taught for a while at NYU college of engineering and I had two young men who had bachelor's degrees who had studied under me. So yeah, I would say there was a handful of students that I took out of the schools who came with me. And each one got some equity.
CA: So what was your first revenue-generating product or service? I know you talked about the government contract, but the first thing that you actually built or brought in revenue.
SW: The first thing that we actually built that brought in revenue was what was called a diffractometer. Any x-ray diffractometer. And what this was, was a chamber that went on an x-ray machine. Now you could take a piece of metal and put it on an x-ray machine and you could do various studies. But that isn't adequate. What you really want to do is do those studies in a controlled atmosphere. So the first diffractometer chamber that we made was one in which you could put the specimen in and the specimen could then be raised in temperature or, later on, a second version, it could also be lowered. So it was cryogenic as well as heat. And it could be in a vacuum. Now this was very good because if you wanted to study a piece of metal that might be part of a space shuttle, you don't want to study it at room temperature. You want to study it in an atmosphere of some design of your own. You want to see what happens to it when the temperature changes because it gets very hot and then it can get cold.
So this was an x-ray diffractometer, which was really nothing more than a hot and cold atmospheric chamber to study materials. And we made several of those. And God, they looked like coffee cans. A coffee can on a stick. And they fit onto, for example, a Philips x-ray machine or a GE x-ray machine or a Picker x-ray machine. And it was the first one on the market commercially. It was an awful looking little thing. I remember the pictures of them, they were just unbelievable. And then lo and behold…you need luck in business, and I'm a great believer in luck. And Philips came to see us and they liked what we were doing. They had a number of customers who had asked if they could get an x-ray diffractometer attachment that would allow temperature variation. And they said that they would like to market these for us. And they gave me an order for, I think it was, 100 of them to be spread over a couple of years. And this of course was a godsend. This was it. This was the first commercial business. And we worked our tails off and lo and behold…I remember the first delivery.
And the plant then was in Yonkers , New York . I started the plant in a loft over a yo-yo factory. Do you know what a yo-yo is? They were still making yo-yos down there. We were on the second floor of this loft. And we made these diffractometer attachments. We rented a truck and Mount Vernon was where Philips was. Just across maybe 40 minutes away. So we sent someone with these diffractometers nicely done in beautiful wooden boxes that we'd had made up. And really felt wonderful because it was our first shipment. And a few days later Philips called and said they had rejected them all. And I neared to faint. My God, what's wrong? And oh, well, this is just not up to our workmanship, blah, blah, blah. And I said let me please go over to your place and explain it to me. And they did. And they are sticklers and wow. This one had a little scratch on it and this one maybe a little abraded over there. And onward and onward and onward. I mean, they had gone into a quality control mode on these diffractometers. I took all of them back, took them back to our factory and we redid them one by one and inspected them one by one.
And you know what? I thank Philips for that. It changed us from a garage operation, I'll use that term, to someone that had to produce a product now to meet commercial standards. And they were tough boys. And they helped us. And that was our first real commercial product. After that we go into products which were very important. They're germane to the story because the next product that I made was a horizontal bench zone refiner for purifying metals. This zone refiner was under license to Bell Labs. I'm a very straight guy and I went over to Bell and I took a license. I can't recall what the percentage was, but it was fairly high. But over the years as we improved things they would keep lowering the license fee until finally we were at parity and we had to pay no license fee to Bell and they became fine customers. At any rate, that was my second product, which was a zone refiner to purify metals under license to Bell Labs. Again, this was the first zone refiner on the market.
CA: Did either of these, the diffractometer or the zone refiner, have application in the semiconductor industry?
SW: Oh, very definitely the zone refiners. Very important because when the semiconductor industry first begins and we call it the transistor, then the first material that was being used was germanium. Not silicon. Silicon comes later. And you zone refine germanium in a horizontal mode in order to make the transistors. So yes, this was a very important piece of it.
So we're selling some zone refiners. We're started to refine some materials. We're starting to sell little bits and pieces of material. And then of course, lo and behold, again that mother luck comes along and this contract is let from ARPA. And we get, in those days it wasn't an enormous amount of money, but you didn't need an enormous amount of money, but it was in the hundreds of thousands of dollars per year, which was a considerable amount for us, to purify and characterize materials. And we of course start using zone refiners.
Since I now had a horizontal zone refiner I heard about an invention in a British Admiralty Lab which was an electron beam zone refiner. And now I was really fascinated with this possibility. So what I did in this case, since at that point there were no patents on this for some reason. I don't recall why that was, but there were none. I hired a British scientist, a young Ph.D. from Britain . I brought him over. I think the Brits then called that the brain drain. There were many British scientists then who were coming to the United States to work. I hired my first one and the assignment I gave him, he in conjunction to one of the young engineers who had been my student, was to build an electron zone beam refiner. And this electron beam zone refiner would refine things like tantalum, tungsten, molybdenum. In other words we were talking about higher temperature melting materials, not low melting point. There are the high temperature. For low melting point you could do horizontally in a horizontal zone refiner using an RF coil or a resistance wound coil. But to melt something like tantalum or tungsten or molybdenum, you had a little filament, you fired electrons at it, and you moved it along the rod, and you pushed all the impurities along. And an amazing thing happened. You left behind a single crystal. This became very exciting. Up until now people who were trying to study, for example, tantalum to get a little piece of single crystal was a monumental task. All of a sudden I'm making single crystals 12 inches long, an eighth of an inch in diameter and I'm pumping them out daily. And they're high purity. Wow, now we're in a new business. We're selling single crystals.
So now you see how we were armed in terms of this ARPA contract. We now have a pretty fine array of instrumentation to purify. We can do vacuum melting, we can do horizontal zone refining, we can do vertical electron beam zone refining, and there were a few other tricks as well. And at the same time we were developing analytical capability. A whole different area, but you had to have the equipment to analyze this stuff. So now I've got a kind of a drugstore. And people are beating a path to my door and they're buying. And of course it's hysterical because when you think of metal, people buy metal in sheets, in rod, in wire. I'm selling it by the inch. Someone would call up and want to buy one inch of tantalum single crystal. And we'd sell it to them by the inch. Or they wanted to buy 50 grams of something. This was really a pharmacy. Of course we charged pharmaceutical prices as well, but that's the way it ought to be. [Laughs] And we had just zillions of these little orders going all over the world of bits and pieces of metal.
And that's what I'm now running. I'm running a pharmacy. And this pharmacy goes on for…we have the pharmacy and then we're selling a little bit of equipment over here, we're selling the x-ray diffractometer attachments, we're selling some zone refiners. Needless to say we start to sell electron beam zone refiners. A bit piece of capital equipment, these were $25,000 at that time. They probably cost about $2.5 million today if you wanted to buy one. But we thought that was big time. And business was perking along. It's not growing very fast. By this time we're probably several million dollars a year, $2 million or $3 million a year. We move the operation from Yonkers , New York , across the river to Rocklin county. And we build a new building which the state of New York graciously helps us to build under their state grant, etc. And we're sort of perking along at this level. And it's not breaking out. In other words, it's not going uphill in a rapid growth pattern. And then we come to the semiconductor part of the story.
And this is where again, fortune has to always be there. You can have the most wonderful thing in the world, but somehow you have to get it situated. So here we are, a modest size little technology company in the metallurgical pharmacy business and selling some peculiar equipment for purification and this diffractometer for analysis. And one day a gentleman by the name of Bob Noyce gets in touch with us. And Bob was then with Fairchild. And he tells us a story that in the original integrated circuits patents, of which there are two, one is from Texas Instruments that Jack Kilby… or is it Jack Kirby?
SW: Jack Kilby worked on and then there's the one that Bob Noyce worked on. Now I think I've got them right. I think that Noyce wanted to use a thin film of gold to integrate them, whereas Jack at TI wanted to use little wires to integrate them, but also of gold. So what we have here are the two inventors, each integrating a bunch of semiconductors into an integrated circuit. And each one doing the physical integration with gold. Well, an amazing thing happens. Although patents are issued and they'd played around in the labs, and they'd obviously, you know, proven their concept, it really didn't work. And it didn't work because the contact resistance at the P junction for the gold was different than the contact resistance at the N junction. So what you had was another variable, which upset the application. And what they were looking for was a material that would have high conductivity, that could be applied very easily be it by deposition of thin film, or by the wires. And what could we use? And of course have equal contact resistance at the P junction and the N junction. That was the thing.
So the first chap that came was…I have it backwards. I'm sorry. Jack Kilby comes first. And we work for several months playing around with various materials in conjunction with TI. And we finally settle on this wonderfully complex, unbelievably rare material known as aluminum. [Laughs] I mean, it was selling for about 55 cents a pound in those days. And we zoned the living hell out of aluminum. Back and forth and back and forth in the zone refiner. And it goes on for the best part of a month and finally what comes out is super high purity aluminum, that's the best way to describe it. It's super high purity aluminum. And we make up one pound and we send it to TI. And the first question is asked of me, one of my guys comes in and says hey, Shelly, what should we charge them? I said “how the hell do I know.” We didn't even understand what our costs were. We'd been working on it for months. I said $2,000 for the pound. So we sent them a bill for $2,000, which they paid. A few weeks goes by and TI calls one day and said that stuff worked real well and we'd like to buy 500 pounds. And I, figuring out that we could produce about a pound a month, make a quick calculation. I said well, if we were going to fill that order with our present capacity it's going to take my 40 years. And they laughed and I laughed. And that's the beginning of the story. That's the real breakthrough part of the story. In other words, we had technology waiting for the right problem, if you will. We have an answer, we're waiting for the question. And the question was what material should we use in a semiconductor. And lo and behold, the electronic materials business is born. And they used to joke with me and call me the father of electronic materials. And I said no, I have to find the mother first and then we'll see what's really happening.
And that is the explosive moment when the company goes from being this sort of piddling along pharmacy for materials to a producer now of materials for electronics for manufacture. And all of a sudden we're dealing with tonnage of aluminum. And we're dealing with banks of zone refiners, not one. We had to use our own product. We had to build racks of these things and just pump through the aluminum and purify the living hell out of it. And of course then the game, we'll just run ahead a little on that, the game gets far more complicated. Because we get smart cats at IBM and other places who figure out that well, if it's not pure aluminum but if we put in 0.2 of a percentage of silicon or 0.2 a percentage of this you can improve the operation. And it's a whole family of materials now. And so we are now in the real business. The only business I never went into is I never really went into the silicon business. I'm not really sure why. It's maybe we just didn't have the capacity then to even go in that direction. Because that was a whole different business. It was a whole different way of growing the crystals and purifying the silicon and lapping them and cutting them. I never went into that business. Well, for one thing there were people like Monsanto that went into it. People who had raw material capability as well. So we now have a booming electronic materials business. And we're really doing well and the company is now forced to go and obtain outside funding. And we get a venture capital group in now. They're a little more sophisticated. And three venture capital companies come in and pump some money into the company for the next financial phase. And then there's the second momentous occurrence. And that is when…I have to go back a little bit in time here.
We're a very small company and when orders came in we didn't have computers in those days. When an order came in a girl would take the order and she'd give it a number. Order number 1175 and the next one was 1176. And then she'd write next to it in this log, Bell Telephone and then what was the product and the date and the price. In other words, just a log of orders coming in. I, being a very curious man, and it's one of the things I always teach when people ask me how do you become an entrepreneur. I say, a) be curious as hell. And b) you have to be highly committed because you're going to go up a lot of blind alleys. So I used to come in every Saturday morning and take this book and just look through the book. And I would ask questions. I always had a staff meeting on Monday at lunch time. And so if there was anything there that was interesting I would go in the next day and I would ask about it. I mean, on the Monday. So I went in one Saturday morning and there was an order from Bell Laboratories in Murray Hill for a round piece of metal about an eighth of an inch thick. OK. Now, that's a very strange thing for a metallurgist. Who the heck buys a round piece of metal like a little saucer. And I could see someone buy 100 feet of wire or 1,000 feet of wire or 10 pounds of pellet for evaporation, or sheet, which is generally done rolled. But here's a round piece of metal. I go into my staff meeting on Monday and I turn to my sales manager and I say what the heck is this round piece of metal used for? Why would they buy that? And of course he, being a brilliant man, would say I don't know. I'd say well, get yourself in gear and let's get an answer because I'd like to find out. I'm always curious to know what it's for. He comes back the next day and he says to me, they're sputtering. And I said oh, that's interesting. I haven't a clue what sputtering is. So I make a beeline for a book, look up the subject of sputtering. And that's my second major break. I researched this and I found that sputtering was really a process that had been developed back in 1850 or something, rather primitively. But people had played with the concept way, way back.
And so I became intrigued by it and I could see a lot of possibilities. And I asked…I assigned actually a couple of my engineers to develop a small sputtering machine so I could see how the thing worked and what we could do with it. And once we got the thing up and running it became apparent to me that what was being done was truly primitive. In other words, companies didn't know much about it. They had one target material, which was this round thing that was being bombarded and then it was being laid down in a thin film. And what you really wanted was either multiple or sequential, maybe you want to put down first metal A and then metal B and then perhaps metal C. Or you wanted to have a rotating table so you could either do it sequentially or you could keep the material in one place and you could rotate the targets. So you have different target positions. And long story short, we played with that for a while and came up with a small unit and took it to a trade show. And it's the only time in my 30 years in the industry where someone came and bought it right out of the trade show. He said I want that and I'll pick it up when the show closes. The fellow was from GE Labs in Schenectady and he bought the thing right off the floor. Needless to say it was the only one we owned because we hadn't made any. [Laughs] This was our prototype. And that was the first commercial sputtering machine to ever go into industry. And that was it. Of course from there that piece of our business at one point was $100 million making sputtering equipment. And it became a major leg of the company.
I think the Japanese one was fun. And that probably occurs around…I would have to make a guess that would be around…I hope I'm not wrong here…sometime in the '70s or late '70s. Up until that time if you wanted to open an operation in Japan you had to have a Japanese partner. And I don't mean a partner of 5 percent. I mean a substantive partner. And if I'm not mistaken it may have had to have been a majority partner or at least a 50/50. Well, no small American technology company wanted to do that. Because that's giving away your birthright. So we all worked through so-called Japanese rep organizations and it was very complicated. The Japanese system is a complicated one. You'll find a rep organization and they only sell to Mitsubishi, but they don't sell to Panasonic or to Sony or whatever. Each one has their own sort of district. Soon you're dealing with five, six, or seven rep organizations. And it's not an easy deal.
So one day I read in the papers that they're going to change the law. And that you can now have an operation in Japan without having a majority or certainly equal Japanese owner. So I get on my horse and get over there and I go to visit the U.S. embassy. And I go to the commerce part of it and they couldn't be more useless if I designed it that way. I mean, it was a real disappointment. They were totally useless. I even go to MITI, which is the Japanese development agency to see if they would be of some help. Well, they certainly weren't thrilled at the idea of helping an American firm come in. And I was sort of up the creek without a paddle here, to use an old saying. And where do I go from here. I don't know how to get this damn thing started. And my rep said…they're all very good, but they weren't exactly going to help me to put them out of business. So you're not getting what we'll call a high degree of cooperation. So I came up with a crazy idea and it's really based on SEMI. And I had been on the board of SEMI at this point. And I'd gone over to Japan . We had the first Japanese SEMI show and so forth. We had used a PR agency in Tokyo for the SEMI show in Tokyo . And I called that agency and said look, I'm stuck. I need help and what I would like you to do is develop a press conference for me at the American Club in Tokyo . And invite as many newspaper people as you can in. Because I want to present the message here. They did it. They were very efficient. And in Japan everybody reads at least four and a half newspapers a day on average. So there were, I don't know, 20 or 30 reporters there. I got up and my message was very simply that what I have you need, therefore why should there be obstacles to my coming here. In fact what I should see are large signs saying welcome. And this is literally what I said. And of course as I tell this story jokingly, the next day there were headlines in Japanese papers that said “Inmate of lunatic asylum in the United States escapes and comes over here and wants to be welcomed.” They practically said that, but not quite. Well, bottom line, within weeks I had four letters from four governors in four different prefectures on the island of Kyushu , which they were trying to turn into semiconductor island. The reason being Kyushu had been a mining island. That's where all the Koreans who were brought and kept as slave labor were there. But they had depleted the mines. There wasn't much coal left in them. So they needed industry. And what they were going to do was build up a semiconductor industry there. That was the idea.
So four different prefectures invited me. I went back over there and visited all four. I had sumptuous banquets. I was treated very well. I was told what they could do. And I chose Oita prefecture, which is in the northeast corner and not too far from Oita airport. And I chose that as the place to build the plant. The problem was what are you going to use for money here. We're not kidding here. We're talking about, you know, land prices that were off the wall and that's before the great collapse of Japanese real estate. So on the land the prefecture made a deal. I don't know what the deal was. They certainly didn't talk to me about it. But whereas one day I'm being offered to buy this piece of land to build the plant that X millions and millions of dollars, when I said that's impossible…I mean, if I put that kind of money in there I'm not going to be able to build the plant here. The next thing I know the prefecture somehow gets the land and all I know is I'm told is we're going to rent it to you for 10 years and they give us an amount which is quite reasonable. So OK, I've solved the land problem. Now it's how do you get the building. So I said what do you do for the building? And they said well if you were a Japanese company you'd go to the Japan Development Bank. And I said well, I'll go there. And they said well, you're not a Japanese company. And I said that's not true. I have opened a Japanese company. I had Nihon MRC, which I had just opened legally. So we went off to the Japan development agency. And long story short, it took six months. My CFO always used to tell the story that when he went over there had a nice head of brown hair and at the end of six months he had white hair. He still tells the story. I see him. He's with a company down in the D.C. area, nice guy. And at the end of six months we were going nuts. You just never got an answer. You just kept being asked for more and more and more information. And finally I sent a cable telegram…I don't know what you called them in those days. We weren't using email obviously. But I sent a wire, let's call it that. I sent the wire to my American employee who was in Japan trying to organize this thing. And I said tell the Japan Development Bank that I'm coming over this Monday for the finalization meeting. Immediately the wires opened up. What is a finalization meeting? And I said don't attempt to explain it. Just keep using the same phrase. I'm coming over for a finalization meeting.
I was met at...we leave New York usually around Saturday noon , we arrive Sunday afternoon in Tokyo because of the time change. And I was met at the airport by a couple of guys from the Japan Development Bank. And the first thing out of their mouths were what is a finalization meeting. I mean, they can't stand being in the dark. And I put it to them very bluntly. I said we've been at this for six months and I would like to know, this week, either we're getting the loan or we're not getting the loan and I'll go on with my life and you go on with your life. OK. On Monday we're advised that there will be a meeting on Wednesday at the JDB. Wednesday morning I take a bath, clean up, look presentable, and go with my Japanese employee and my American employee. And the three of us go over to the JDB and we're taken to a room and we're sitting in three chairs. And opposite is a man over there. And he says in very good English, “I understand that you want to get a loan from the JDB.” I said yes sir, that is correct. Do you have an application? Do I have an application? They must have 400 tons of material that we've submitted. But my Japanese employee reaches in his pocket and he takes out a single piece of paper. This is the application. And on this application it says that Nihon MRC would respectfully submit this application to obtain blipteen million yen for the purposes of building a factory in Kunisaki-machi in Oita prefecture. And I said yes sir. I presented it to the man and he looks at it and he says thank you. And he says excuse me, and he leaves the room. And he comes back in about 10 minutes and he says will you please follow me. We go down the hall and we go to another room, very formal. And this is the governor of the Japan Development Bank, the head honcho now. And he greets us and then he says, very politely, “I have excellent news. We have decided to grant you a loan to build your plant in Kunisaki-machi.” And I want to explain however that you are the first American company to ever receive such a loan and we want you to let people know about this. Because we want them to understand that we're welcoming a foreign investment here, etc., etc. And with that he says will you come with me. And we go through a door in his office into a room and there are about 20 television cameras set up. They were all there, the reporters were there, the TV, everyone is there. This is a big surprise. They had set this up three days in advance. And needless to say I was on television and in newspapers, etc., etc., etc. The bottom line is that people always ask me was this enough money to build the plant. No. JDB doesn't give you an enormous amount of money. What they really do is they stamp your rear, you're kosher, you're OK. And it opens all kinds of doors. Suddenly banks will do business with you. Suddenly insurance companies will do business with you. In other words, you can now move ahead. Yeah, they give you a little money, some token money. But it hardly was enough to build a factory. But once you are JDB approved, that was the whole difference. And it's a lovely story and it was very nice.
And I'm sure you've run into Jim Morgan of Applied Materials. We've always had a little friction on one point. And I'll put it in the record so everyone understands. I gave 10 percent ownership in my Japanese company to my key distributor in Japan . We were very close and I thought that was a very nice thing that I wanted to do. I asked him if he wanted some and he said yes. And again, don't hold me to the number. It could be 10, it could be 15. But I gave him a small ownership in the company. Jim Morgan came to see me after I got my JDB loan to find out what I did. Of course I helped him. We knew each other from the board of SEMI and from being in business. But later I think he and his son put out a book. And in the book they state that they're the first company, the first American company to get a JDB loan. And the differentiation was that minority position that I had given away. So therefore I wasn't 100 percent American company, I was an 85 percent. Well, he could say what he wants and you could have it on the record. I am the first one that got the JDB loan because I helped him get his. So, so much for that.
Anyway, we go on to build that plant and it was just a great, fascinating experience. I enjoy these things. I enjoy the challenge of it, the fun of it. How do you solve these problems? And I must say, as I look back, those were just heady, wonderful times. You could write many books on these subjects because you have these differences, the cultural difference. And we never are willing…and you probably understand it very well being not American-born, the cultural differences are significant. And you can just imagine the cultural differences here. My engineers in the United States , they needed private offices to work in. In Japan you never use private offices. They have like a bull pen. And everyone is sort of sitting together and they maybe have two telephones and they're all yelling and talking to each other. And you know what? It's a very nice way to communicate. If somebody calls an American company and says “when are we going to have those parts?” You have to write it down and we'll call you back. And then you have to call somebody else at the company and maybe three days later…Not in the Japanese company. The guy holds the phone against himself and he yells out, “hey, when are we having those parts.” And a guy calls back from the other side of the room and he gives him an answer. Fantastic. Of course today we use computers, but in those days that was the way it was run.
CA: When you did sell the company to Sony I believe there was a bit of a hoo-ha about technology going to the Japanese.
SW: Here is a story. The company is now several of hundreds of millions of dollars in size. Yours truly is bored with it. I had spent some time in Washington working for President Reagan. I was on his private sector initiative advisory committee. I chaired the international part of it. I had taken this Australian Ph.D. that I told you about before. And he became the CEO of the company. I remained as chair. And I spent most of my time either in Washington or chasing around the world. And when I came back he hadn't done that great a job. He was the world's greatest No. 2 executive that I've ever met. But he had difficulty being No. 1. And there's no sense in going into the details. The point is that it just obviously wasn't going the way I thought it should be going. And we had a verbal altercation and he left the company.
So I was back in the CEO's slot and I ran the company. But in all truth I was beyond it at this point. I wanted to do other things. I didn't want to spend my entire life just in this one industry running this one company. I had done my thing and I wanted to do other things. So I was looking around to find someone who might be interested in making a major investment by either buying it or whatever. We were a public company now. And I couldn't find any investors in the United States . And the first ones that came forward was a company called Oerlikon-Buehrle who owns Bally shoes and they own hotels and insurance companies. But they also own a company known as Balzers, which was in the semiconductor equipment business as well, in Balzers, Lichtenstein. Balzers is a city. And they made an offer. I was invited then to go to Balzers and I spent a week there. I met them and I went to Zurich and met the people. I had a very strong feeling, although I didn't want to work with the company that my executives would last about 2.6 microseconds. That I didn't like the whole attitude of these guys. They had only one thing on their mind, which was how soon will you produce a stream of profits of at least this level. That was the only thing that interested them. They weren't interested in technology. They weren't interested in where are you going with this thing. It was purely grinding it out. And you could tell from the fact that it's a holding company. I mean, they own a shoe company, they own a hotel, they own an insurance company, they own Balzers in Lichtenstein which is making machinery. So they're not interested in the technology or the industry. They're interested in money. Period. I have nothing wrong with being interested in money, I am not averse to it. But it was not what life's all about.
So I had a look around for a white knight. I think that's the expression they use on Wall Street. Well, I already had a plant in Japan , which was relatively close to a Sony plant. This is down in the southernmost island of Kyushu in the prefecture of Oita . And in the whole other story which we won't bother with today, but in the process of opening that plant in Japan the governor of Oita prefecture had introduced me to Akio Morita, one of the two founders of Sony. As well as I was also introduced to the other founder. But it was Akio Morita who was the player here. And I got to know him reasonably well and liked him. He was a very smart man and very nice. So on a long shot I called Sony. And I asked them if they would be interested. And they did something I doubt a Japanese firm has ever done before. I called them on a Thursday. And I said I was under the gun from an offer from the Lichtenstenian bunch and we had to really move on this thing. And I had a bunch of people spend the entire weekend faxing papers to Tokyo so that they could look at it. And on the Monday, I had been given until 5:00 o'clock Monday to accept the offer of Oerlikon-Buehrle . And their point was that if I didn't accept the offer by 5:00 o'clock they could well make a tender offer, an unfriendly tender offer. Which I didn't want to happen. I think that kills a company. So I said to the chaps from Sony, if you really want to make an offer we've got to have it by the end of the day Monday. Well, that works because Monday night in New York is Tuesday morning in Tokyo .
And the [executive committee] of Sony met every Tuesday morning. They had a board of 35 people which of course do nothing, but they have seven people on the [executive committee]. They run the company. I was hiding out. Nobody could reach me. I was in my lawyer's office over on Park Avenue and 40 th [ New York ] with my entire board. We'd been closeted there. And at about a little after 7:00 o'clock , which would be 9:00 o'clock the next morning more or less in Tokyo , I don't remember if we were 13 hours apart or 14 hours apart. But at any rate, around 7:00 o'clock at night we got a call from Tokyo . And they agreed to the price. And that price was considerably more than what Oerlikon-Buehrle was giving. So not only had we found a white knight, but we also found a better price for the stockholders, which wasn't all bad. And the deal was therefore made.
The lawyer said to me go down and get yourself a drink or something and we'll have to draw up some papers. Come back in an hour and we'll have some preliminary papers to sign. So I went across the street. And to this day I have no idea whether I had four or six vodkas. It could have been eight, for all I know. The truth is the adrenaline was flowing, I felt nothing. And I came back up around 8:30. And as we're getting ready to sign the papers the lawyers for Sony and the U.S. representative said to me, Shelly, we want a contract. I said what do you have in mind. And they said five years. I said, five years, I'm not a kid anymore. It's a big hunk of my life. At this point I don't know whether it was my ego speaking or the vodka. But I had this crazy thought that gee, wouldn't it be interesting to be a corporate executive in a $60 billion corporation that is probably the best recognized name in the world. And I got carried away with my own juices here. [Laughs] And I still don't know what the deal was. I said all right, I'll go along with the deal on one condition. And they said what's your condition? I said I don't want to run any of your businesses. There were 26 Sony operations in the United States . And I could just see Charlie Brown in San Antonio , one of the semiconductor plants, leave and Shelly go down and run that one for six months until we find someone. And the guy leaves in Colorado and I'm over there for six months. And I could just see myself traveling around. And I didn't want that anymore. I'd been there. I said I'll work for you for the five years. I want to be involved in technology, in strategy, in anything that you think will help the company. But I will not CEO operations. I'd done that for 30 years, I had enough of it. To be a CEO is a seven day a week job. And I wasn't ready for it again. They agreed. And a deal was struck.
So now you asked a question, where were we relative to the U.S. government and to the [SEMATECH] bunch in Austin ? And the answer is exactly what you know. They didn't want it to happen. So the next thing I know I'm down in Washington with my attorneys and Sony's attorneys and I'm being questioned by various congressmen. And they said do we understand correctly that you have technology that is unique to your company, unique to this country, special technology needed for the semiconductor industry? And I said absolutely correct. Well, will you be doing this country a disservice if this deal were to occur? I said, absolutely. I said, however I'm between a rock and a hard place. This company needs a major infusion of capital. This company now needs management because I am finished managing it. I've really had it. And I have made it possible for people in this country to look at it and they don't want to put the money in it. But you can't force an American company to acquire something to maintain the technology. And the U.S. government wasn't stepping up to it. So in the end it was decided that they allowed it. Which surprised me, by the way. I wasn't certain it would happen. And so Sony was given permission.
Hey, I have no complaints, Craig. I've worked my tail off for a lot of years. I enjoyed it immensely. I never did it for the money because if you do it for the money you're crazy. It's the wrong industry. Go to Wall Street if you want money. This was real work. But it was real fun. And as you can tell…I enjoyed it. I had a lot of fun and there were good people in this industry and I assume there still are very good people in the industry.
Are we done, sir?
CA: Yes, we are. Thank you very much.
SW: Well thank you. It's been fun.
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