January 25, 2016
RB: Hello again. This is Robert Blair for Silicon Genesis at the Stanford University Library archives. Today is Monday, January the 25th, 2016. And I’m here in Carmel, California to talk to Jay Daniel McCranie, or Dan McCranie as his semiconductor industry friends know him, about his personal perspective of the industry over his almost five decade career. Dan was brought up in a technology home environment and became a radio enthusiast at a very young age. This set him on this path for an electrical engineering degree from Virginia Polytechnic where he graduated in 1966. Following graduation, he found his first job as an engineer with General Dynamics where he was a project leader in system design. He was able to use his early experience in analog design which was to become ultimately a very valuable asset in a new digital world. Over the next decade, Dan worked for a number of leading semiconductor companies, including Signetics, AMI, AMD, and Harris Semiconductor where he became a group vice president. He next joined SEEQ, a pioneer in the EPROM and E-squared memory market in the mid ‘80s, becoming the CEO and working with Floyd Kvamme of Kleiner Perkins, one of the leading venture capital companies at the time in the semiconductor industry. This was followed by multiple periods with T. J. Rodgers at Cypress Semiconductor, and eventually with ON Semiconductor where Dan has been chairman now since 2001, which is almost fifteen years. Dan is also currently on the board of Mentor Graphics, a leading EDA company based in Oregon. Recently Dan retired yet again and acquired a restaurant in the Bay Area, a very different business. Dan resides in Gilroy, California, and also in Carmel, California with his wife. Dan has kindly invited us to his home today to talk about his personal stories in the semiconductor industry from the early ‘60s up to today. So let’s now hear from Dan McCranie.
RB: Well, Dan, thanks for taking the time today to talk to Silicon Genesis about your experience in the growing semiconductor industry.
DM: You bet, Bob.
RB: We’re pleased to add you to the library at Stanford University and have your perspectives on the industry over a long career of several decades. I’m sure you got some interesting stories to tell, so just tell them like they are. We’d love to hear them. So let’s start at the beginning, Dan. Tell us where you born and a little bit about your parents. Were they technically qualified people or not? And where did you grow up?
DM: I was born in Fitzgerald, Georgia. I was the son of a navy man, and so I moved from place to place. I think I had eleven schools before the 8th grade. So bounced all over the place on the West Coast to Hawaii to up and down the Eastern Seaboard, Pensacola, Florida. My father was a career enlisted man. He was the chief petty officer, a radioman. And my mother was a housewife.
RB: So you grew up somewhat in a little bit of a semi-technical environment and you got good training on moving from place to place, which was potentially good training for moving from job to job maybe. [laughter]
DM: Yeah. [laughter] And good training for kind of making your own fun because you kind of – you’re kind of isolated when you have that many moves in your – when you’re a young man. Yeah, my father was a chief radioman, so I think the one gift he gave to me from that point of view is he taught me Morse code when I was a – I don’t know – six, seven, eight years old and I got my ham radio license when I was nine or ten. And that kind of got me on a – and in those days, if you didn’t have any money you built your own gear. And I think that’s what’s got me started in electronics at that time was I was a ham radio operator early on. Then I was an experimenter and so, yeah, I think the grounding that started the whole thing was the fact that my father was a radioman. I begged him to teach me Morse code. He did. And I – from that I became a ham radio operator.
RB: So in terms of hobbies as a kid, electronics was already one for you before you were ten.
DM: It was. It was. And it stayed with me all the way through, up until, you know, when you get somewhere around high school you kind of forget everything but girls. So I – and sports. So I got into sports in my junior and senior year in high school. But up until that point, and we bounced around so much, it was mostly electronics.
RB: So that probably gave you a good grounding in analog versus today’s digital world [talking over each other] –
DM: Analog vacuum tubes, if that helps you. [laughter]
RB: – give you [talking over each other] for the analog world, which is still with us today.
DM: I have a test I sometimes give the CEOs I deal with when I join boards. And we have a contest as to who designed with the earliest product. I always win because I built a code practice oscillator with a Raytheon CK722 germanium transistor back in the mid ‘50s. So I always win.
RB: Okay. So there we go. There we go. Okay. So in high school, how did you sort of begin to align your potential career? What sort of interest you – history major or were you already leaning in the tech direction by then?
DM: Always leaning in the tech direction. I had a big interest in writing, communication, but tech was my first love. My high school years I went four straight years to the same school, which was very unusual for me. It was to a catholic school. And it was a great school. Matter of fact, I have contributed to that school numerous times as a result. It really got me started. Good science teachers and I was science biased in high school.
RB: So university coming up. What were your plans on what to take and where to go?
DM: Ah, where to go. My father was – this is the times. He was anti-education, if you will. He didn’t want – he thought it was waste of time after high school to spend time. You should get a trade to get (?). So – and there wasn’t any money in the family. So my choice of schools was pretty limited. I went to a junior college called Old Dominion, which is now a four-year school in Virginia. And at Old Dominion I learned of the co-op program, which I think many engineers are involved in where you work a quarter, go to school a quarter, and you keep that up for six years and you get your degree. So I was the first year at Old Dominion. And then as soon as I could I transferred to Virginia Tech. And I put my way through school as a co-op.
RB: Interesting. Interesting. I – actually, I did the same thing back in the UK at that time. It was called a sandwich course.
DM: Great program.
RB: Industry, university, industry, university, and –
DM: Did you –
RB: – give you some real hands-on practical –
DM: It does. It’s not much of a college experience. I think I – I know I worked spring and fall quarters, and I went to college winter and summer. So I really didn’t have the classic college experience, if you will, because there’s not much college experience in the summertime.
RB: Yeah. Yeah. Yeah. So Virginia Polytechnic. So you graduated EE I believe.
RB: And so now you’ve got a degree. What are you going to do?
DM: Well, my – as I said, my hobby through the whole time was electronics, and I was a good practicing technician at the time, and I got a job offer to go work at Cape Kennedy. If you remember, the Vietnam War was hot and heavy at that time and I figured I’d be called. I’d already been – I’d already gone through my physical. I was 1-A, which means you’re going to go as soon as they call you. So I went to Cape Kennedy, Florida. I was going to stay there until I got called. When I got there, I got the opportunity to work on the Apollo program. They had ships they were building, converted tankers actually, that would be strung along from Cape Kennedy all the way to Ascension Island in the Atlantic Ocean in order maintain constant contact with the capsules. And I got assigned to the Apollo ship program and got a defense deferment, and so I stayed on that doing that.
RB: Hm-mmm. So that was your first fulltime job.
DM: First time was that. And then I stayed there for a while. I’d say less than a year, speaking of my peripatetic career, as you mentioned. And I got a job offer to go work as a designer at General Dynamics in Pomona, California designing the frontends of missile systems. And so I took that in ’67.
RB: Okay. So now you’re in California already.
DM: California. Southern California. I was at GD for several years. Once again, I had another deferment because the Vietnam War – this is ’67 – was still raging pretty heavy. We built frontend systems for air-to-ground missiles, for shoulder-fired missiles, the forerunner of the Sidewinder and the Stinger missiles. And I stayed there for a few years.
RB: Okay. So while you were at General Dynamics, what are the major semiconductor companies that stand out for you? Who were your friends and who did you not like?
DM: Oh, yeah. So I barely knew the sales guys of the companies. But you have to remember that when I started out we were vacuum tube. And then when I was working in Cape Kennedy it was single transistor. So you did a lot of your designs, they were massive eight inch by four inch boards full of transistors, resistors and capacitors. That’s how you did you logic, that’s how you did your analog. When we built those shoulder-fired missile, the size was extremely critical. And the first design that I can remember that was – took use of integrated circuits was Motorola. I still remember the part number, MC-1598 – 1596. It was a analog multiplier. And I used that for phasing of the incoming rosette signal – in the infrared rosette signal coming into the foot sensor and out to the autopilot. So – well, I knew Motorola. We knew TI. I’d used TI, of course, as a kid. Who else was there?
DM: Fairchild was just starting. And there were some op amps. Remember, they were [talking over each other].
DM: Oh, 709. Plus twelve minus six volts.
DM: Those awful things. Had crosstalk. Had – you – it was a perfect oscillator and even if you didn’t want it to be an oscillator. Then National I think, or – I think National – maybe it was Fairchild – came up with the 741 op amp. Remember that?
RB: Yeah. 741. It was Fairchild.
DM: Which was a wonderful op amp compared to the 709. And then National did come out with a 101, 201, 301 series.
RB: Yeah. And then the competition started.
DM: That – that’s right. But, yeah. So I did – you’re right. Most of my work in those days was with analog ICs.
RB: Yeah. Yeah. That’s interesting. Yes. You know, I joined Fairchild early on, and one of my duties there was product marketing in linear. And so, in fact, my (?) –
DM: Real – real quick thing. The 1596, that was designed in – I did the design in – I don’t know – ’69. Do you know it’s still being made by ON Semiconductor, and they sell about a half a million units a year?
DM: Now, ON makes fifty billion things a year. But still, isn’t that stunning?
RB: It’s nice when products, you know, survive all that time.
DM: [laughter] Yes. [laughter]
RB: I mean it’s – today’s short life cycles of everything is –
DM: Well, there’s nothing to the part. I looked at it – you know, I hadn’t seen it for thirty years, and just on a whim one of my – one of the EVPs gave me a little gag gift of the 1596 because he knew the story. And she gave me the schematic. I mean it’s nothing. I don’t think it’s fifty transistors.
RB: Yeah. Yeah.
DM: It’s really quite –
RB: Simple by today’s standards. Yeah.
DM: Quite simple. [laughter]
RB: So what was after General Dynamics, Dan?
DM: That was three years of that. And what happened then – you probably know the military business. It’s feast or famine. And so when we were doing the designs, I just couldn’t have had more fun. You had a lot of freedom. Didn’t matter what your age was if you had right ideas you could do the designs and you were – you know, like kind of unencumbered. In the early ‘70s, there was kind of a swale in military spending. And we went from having good budgets for next generation seeker designs to no budget. And they wanted to keep (?) they put you on sustaining programs. And I wanted to be a designer. So I left GD – I think somewhere around 1972, and went to San Diego and I went to work for a disk drive company called Digital Development Corporation. I was hired by this brilliant VP of engineering just to do – just a senior designer. And I was there for a few years. But after the first year, I became head of the hardware development program there. And that’s where I first started working with digital. I still was predominantly analog because the problem in those days – these were disk drives that were probably fourteen inches in diameter, maybe a foot high, nickel cadmium – nickel overcoat on it, and maybe twenty-four megabytes. They were huge hogs. But the secret was you flew the heads, the magnetic heads, as close to the surface without crashing as possible. Therefore, the signal integrity was poor. And so analog was critical. And – but you had to have digital to do head selection. I had to use digital for some of the sector scanning. But – so my first experience with digital circuits was there.
RB: And by that time, of course, TTL had emerged and became (?).
DM: T²L. At that time I was using – remember ECL, emitter-coupled logic?
RB: Yeah. Hm-mmm.
DM: It had speed. You remember CML, current-mode logic?
RB: Yeah. Yeah.
DM: What’s the biggest problem with current-mode logic?
RB: Probably too much current.
DM: Well, gain was less than unity.
RB: Yeah. Yeah.
DM: Gain was less than unity. So every so many steps you had to put in buffers to amplifiers. But for the speed of the head I had used ECL, CML, and T²L and the periphery.
RB: Okay. Okay. Okay. Okay. So, you know, at that time the big shots I guess in the industry, as I remember, were, you know, Fairchild, TI and Motorola –
DM: That’s correct.
RB: – were the big – the big guys with heavily overlapping product lines.
DM: They really were. They really were.
RB: Transistors, op – linear, TTL, memory. And some of the other companies that were spun off by then, you know, among them, of course, you know, Intel and Signetics, were starting to emerge. And after that I believe you went to Signetics.
DM: I did. So this was a little, small company. I don’t think the revenue was any more than fifty million dollars, and they competed in niche markets, this digital development company. And I was near the – it was in La Mesa, California. And it was near Rancho Bernardo, which is where NCR was. And I would have the TI sales people, the Motorola sales people, the Signetics sales people – I – they came and showed me the new products constantly. To be honest, Bob, I think they were doing that as kind of a test sell to go to the real company who could spend real money, which is NCR. Because I always got – I got the presentations, they would bring their marketing and technical guys in to show me these new chips, and the work that was just beginning. To remember, before this, before the early ‘70s, in the late ‘60s and early ‘70s, most of this product went to military. If it didn’t go to military, it went to IBM. It was very high priced. And the common use of these integrated circuits en masse was not really done. Fairchild, National, TI, Signetics, Intel and others started driving down the price curve. So all of a sudden, now little companies like Digital Development could start putting integrated circuits rather than rolling your own transistor circuits in there. It was just fascinating to watch how fast they could come out with products. Now, to be honest, the product wasn’t near as good as you could design yourself with transistors. It’s hard to believe today, but it’s true. You always had a compromise when you were dealing with a mixed signal – not mixed signal – an analog part as a designer. But, remember, this is a disk drive and space was important and you had the economy of size scale, and you had time to market. You had a product you got fast rather than do, you know, ninety days, a hundred and twenty days on a system test of a transistor product. So I was interested in everything that was coming out. It was pretty obvious that they had improved their cost. They were moving down the price curve. And this could become revolutionary. And I really wanted to get it in the ground floor. I knew nothing about chip design. I only knew circuit design, the systems design. But I wanted to get into that business. And so the – one of the – I think the application managers from Signetics – I had designed in a video amp. It’s funny. I can remember those numbers, but I can’t remember anything else – NE592 video amp into one of my drives. And I had – I wanted a special version of it. Without getting too technical, is that it was a balanced differential frontend. And the way they had actually designed it, they actually begun to balance the both sides and they actually put a metal connect across it. Well, if you took that metal connect out and took both those ports out, you could then put resistors and capacitors in the middle there and you could actually change the configuration of that video amp with very good high common-mode rejection ratio. So I actually built differentiators using capacitors in the middle and I worked with Signetics to build this custom. And so I knew Signetics. Of course, I knew Motorola, I knew TI, but – and I knew Intel, but at the time, Intel was mostly a memory supplier, predominantly a memory supplier. One more quick story, I’ll get off.
RB: Yeah. Please.
DM: I think this is the way it was for all the young designers in those days. You looked at the product that the IC people showed you and you really tried to find a way to use it because it was so interesting. I mean it wasn’t a case where you had a problem and then you went and looked for a solution. I mean you did that sometimes. Most of the time they’d come in with something new and neat and you tried to find a way to get it into your circuit. The Intel salesman came into see me toward the end of my career at Digital Development. I bought nothing from them because it was mostly memory and I didn’t use memory. I used PROMs. He was presenting a microprocessor. It was a 4004. Not an 8008, not an 8080, a 4004 processor.
RB: This one.
DM: You remember it?
DM: I and my techs – I don’t know how long we spent. We spent days trying to see how we could use that so we could play with it. Now, what you do in this head per track disk system, the mechanics are huge. The most expense is on the spindles and the motors and the nickel cobalt, and so you had redundant heads. And they occasionally crashed or broke. And you had to sense that they broke by reading the preamble, understand, and then – and sometimes they didn’t just crash, they made subtle changes which effectively made them broke. And so you rerouted the signals to redundant heads. And we were doing that with PROMs – PROMs and a little bit of logic. We contemplated – this is how much we wanted to play with that 4004. We contemplated putting that in and replacing the – I don’t know – a handful of T²L and a PROM with this 4004. But we never did it. We thought that carrying it too far. But most of the kids that I knew that were in, you know, my generation of customer engineer, we mostly loved the stuff they came up with and tried to find a way to make use of it. But I never did put in a 4004.
RB: Hmmm. Yeah, Intel would have loved that, and, of course, they were, you know –
DM: I think it was a custom they did for somebody and they were trying to sell as a standard because it was so weird. The arch – if you ever viewed the architecture, you know, the instruction set was bizarre. Anyway, yeah.
RB: So right now this is probably a bit of a pivot for you. Right? Because you moved to sales [talking over each other].
DM: Hm-mmm. Well, actually started out in applications.
RB: In applications. Okay.
RB: So you sort of forgave the engineering at the desk, the bench –
RB: – and made a transition here into the money world. And –
DM: And that’s where the money was at that time.
DM: One more quick story. I pull quick stories. You didn’t make much money even as head of the hardware development as an engineer in those days. So I remember – I think it was ’72, but ‘71/’72. I was working obviously fulltime, a lot of hours, as head of the engineering department of that disk drive company. I was teaching college, or teaching classes at San Diego College of Engineering. I was teaching a transistor lab and Laplace transforms, and I had my own little hardware consulting business. And that year, Bob, I don’t think my W2 was twenty thousand dollars. And I just knew that – you know, there was no venture capital, there were no startups in those days. You kind of saw your life in engineering as a good life and an interesting life, but not a financial – particularly financially rewarding life. So amongst the things I wanted to do when I went into Signetics is I wanted to get closer to the money. And on top of that, I had no skills as a chip designer. And so I went into app. Actually went into applications first, then marketing, and then field sales.
RB: So the concept of base salary and commission based on the successful selling,
DM: You bet.
RB: – which, of course, was a hot topic at the time.
DM: Oh, yeah.
RB: And that attracted you out. So now you’re in sales and couple of other companies come up on the radar – AMI and followed by AMD.
RB: Both very interesting companies, very different companies. So a few words about AMI. And then on AMD, were you close to Jerry at AMD, or –
DM: He interviewed me.
DM: And in those days, Jerry interviewed everybody. And to show my ignorance of AMD at the time, you know, you’re so – such tunnel vision you have when you’re a young man doing this stuff. I had – of course, you had interviews of various houses – TI, Intel. And Steve Zelencik asked me to interview with AMD. And I – so I went to Beverly Hills where the AMD office was. Now, Beverly Hills is near no customer. It was an hour and a half out of your way to get there. But that’s what Jerry wanted. Anyway, I went in there and I thought I was going to see Steve and his boss, which was Terry Smith. I did see Terry Smith there. But in comes this tall, powerful, good looking guy dressed in this tan suit with a green shirt and a green and tan tie with a – sporting a beard. He got a goatee type thing. And he didn’t introduce himself and he started really banging on me. I mean very technical questions. You know, I – and trick questions. Technical trick questions for a salesman. Now, I was – fortunately I was technical. But I thought this was quite an interview. Only later did I figure out – that I realized it was Jerry Sanders. He interviewed one hundred percent of the salesmen at the time. So, yeah, I went work for AMD.
RB: Yeah, he’s a, you know, micromanager and – at the time –
DM: Yeah, he was.
RB: – and a hard driver, but – so you already had exposure then to one of the guys that was going to be an icon in the industry.
DM: Yeah. And he was – you know, AMD in those days was nothing but second source.
DM: It was all Fairchild, National. That’s actually why I went to AMI, to be honest. That was a relationship sell. You know, you spent a lot of time with the distributors, a lot of nights with the distributors schmoozing up to the inside and outside sales guys. You got – since I was technical, I used that as a lever. I would go with the distributor salesmen. I would be their FAE basically even though I was a sales manager. In return for that, they would give me first quotes and first calls. It was all relationship and it was less fun than design app. And after a few years – it was good money. Jerry had a no-cap commission which I loved. But it was kind of tedious after a while, just relationship. And AMI was a custom company. And it was much more interesting, get your hands dirty. Plus AMI, I could see the path to becoming – to running an entire area quicker, whereas I’d come late to AMD and there was lots of good men ahead of me at the time and I could see myself – of course, this sounds like crazy, but I could see myself spending years before I got to be area manager, and I wanted to be area manager faster. So AMI offered that opportunity, and it was a custom silicon which made it fascinating to sell as opposed to the type of distribution relationship selling you did with AMD in those days.
RB: Hm-mmm. Yeah. Yeah. So after your experience then at AMD, then I think you ended up at Harris –
DM: I did.
RB: – which was an interesting move. I mean it’s a smaller company. They never became very large.
DM: Actually, at the time, Bob, it’s hard to believe, they were larger than AMD. They didn’t become anything, and they became part of Intersil, but they were – I don’t remember the exact numbers, but I remember they were quite a bit larger than AMD. The opportunity there was group VP of sales.
RB: That was out in Florida, was it probably?
DM: It was in Melbourne, Florida. It had a high analog bias in those days. They had CMOS logic, but it was – they were an analog company. And, once again, analog was where I had most of my successes. AMI was good, but I could talk analog. And there was a group VP position open. I toyed with the idea of actually getting out of the industry, or getting out of this – the OEM side of the industry and forming my own rep company. I don’t if you remember Irwin Federman at MMI. I had – I think I had the opportunity to bring on those kind of deals. And that was a pretty lucrative business in those days. Reps made good money back in the ‘70s. They don’t now. It’s very different world. But in the end, I decided to try Harris as a group VP.
RB: Yeah, I interviewed Irwin Federman recently actually, so –
DM: Oh. [talking over each other]
RB: – he’s recently joined the club here. So that’s interesting. Very interesting guy.
RB: So after Harris then, so you brought a couple of things in your career, Dan, which are kind of standout for both either longevity or high “interest”. One of those has to be SEEQ. You went to SEEQ after much – what should I say – agitation by Gordy Campbell.
DM: [laughter] Yes.
RB: You didn’t want to go there apparently. So tell us a little bit about how he convinced you to move to SEEQ.
DM: Yeah. I don’t know if you talked to Gordy about that. But I knew Gordy from – actually I was at Signetics. I was in the middle part of the United States, and I was banging on Minnesota accounts and he was banging on them for Intersil. So he wanted me to go there. He started a company with Kleiner Perkins back in – called SEEQ Technology. And it was E-squared and EPROM. Well, I did not – I was down in Florida. I had really not been in California for a long time. I didn’t understand what was happening with startups. I didn’t trust it. And I just couldn’t imagine making a company, a corporation out of nothing but EPROMs and E-squared. And actually E-squared were brand new. The tam on E-squared at the time was zero. Intel had built some E-squared, but nobody was using it. It was way too expensive. So he talked and, you know, a lot of conversations, and I just, of course, refused. I was – I liked where I was. So what he did is he got on a flight and he flew – he told me he was going to come see me. I said don’t do that, I’m traveling a lot of Harris. I’m not interested. You know, don’t do that. He did it anyway. So he flies to Melbourne. I didn’t know he flew to Melbourne. He calls me up. I think it was on the weekend. Calls me up and he’s at the Melbourne airport – Melbourne, Florida airport. And so I went and picked him up and took him home to my house. And somewhere in the conversation – of course, I was irritated because I told him not to come. And so he was talking. Somewhere in the conversation I remember I went out for a while, or I went – did something. And he’s walking around the house and schmoozing my wife, Kathy. And he stops at a painting and he says, that’s interesting. And Kathy says, oh, Dan did that. And he says, oh, Dan paints? And she says, well, he doesn’t anymore, but you know, back before he got into this industry, he painted a lot. But he hasn’t done it for years. And then Gordy tells her, he says, Kathy, I promise you, you get Dan to come to SEEQ and give us a thousand days and he can spend the rest of his life painting or doing whatever he wants. And so then he leaves. He didn’t tell me this story. I get him back on a flight. And that night my wife is giving me the silent treatment. And she didn’t like Melbourne, Florida anyway. It’s a very closed little town and everybody knew your business. As you might imagine, the only employer of significance in Melbourne, Florida is Harris Corporation, so everybody knew your business. She didn’t like that. And she didn’t like my traveling. I was traveling, like all VPs of sales do. And it was my first VP of sales worldwide sales job, so she wasn’t used to that. And Gordy had somehow convinced her that it was a quieter life with SEEQ. Anyway, she – I remember she said to me, when’s it going to be my turn? And so I thought about it. I said, okay. So I called up Gordy and I went to SEEQ. And I stayed there for thirteen years.
RB: Interesting. Interesting. Now, obviously Kleiner Perkins at that time was one of the early pro-semiconductor companies.
RB: I know they were our major investor in LSI Logic.
RB: And –
DM: Frank Caufield was our representative, and John Doerr if you remember those names.
RB: Yeah, yeah. Absolutely. But not –
RB: – Floyd. And –
DM: Not yet.
RB: – and not Tom Perkins.
DM: Yeah, not – I had met Tom and I’d met Gene, but not yet. Most – every time we had board meetings, which was continuous – you know, it was a private company – it was John, and it was Frank Caufield.
RB: Hm-mmm. So during that era, obviously Gordy was, I guess in the end, asked to leave.
RB: And the board headed by the VC’s were anxious to get things moving. And lo and behold, you’re offered the CEO job.
DM: Yes, I was offered a CEO job. I turned it down at first. I wanted them to bring in a hero. SEEQ was a hot commodity in those days and it had fallen on hard times. It wasn’t making money. Kind of what I thought. E-squared was a real missionary sale. I don’t know what the market was, but it wasn’t much. EPROMS were – the Japanese were starting to encroach in the EPROM market so prices were going bad. It just a – we had Ethernet. Dado Banatao had developed an Ethernet product for us. So there was a possibility of that. Maybe physical layer. That really required an expert. And I told Caufield, I said why don’t you go get us – go get me – you know, go get us, you know, someone like the LSI Logic CEO, like Wilf. Bring us somebody who could actually make some money on this thing. It’s not me. I’d be a first-time CEO in a troubled company. I don’t know how to design a chip. Still don’t. I know how to use them. I know the physics on them. I know how to use them in large quantities, but I don’t know how to design them. And he brought in a man. He – the board brought in a man. I’m afraid I’ve lost his name. Bob McPherson. Bob came from Signetics. Or it wasn’t Signetics then, it was Philips by then. And he brought in – they brought in Bob to be the CEO. Bob lasted about nine months. Then they came back to me again.
RB: Did you strongly resist the job, or did you – so –
DM: Not – after Bob left I didn’t because if that was my Wilf Corrigan replacement – I pray to God Bob doesn’t listen to this. If that was our Wilf Corrigan replacement, it was hopeless. So I took it after that.
RB: Hm-mmm. So Floyd apparently did get involved [talking over each other] -
DM: Then he did. Yeah.
RB: – because he’s a semiconductor guy.
DM: Then right after that – I think right after I – I – maybe – I can’t remember whether Floyd came on before or after I made CEO. I didn’t – memory escapes me. But then Floyd became my chairman shortly thereafter that. Caufield went on to all his other deals, and so it was Floyd, which was terrific.
RB: So once you were in the seat with Floyd’s help, then SEEQ started to look up presumably.
DM: It did. It wasn’t just Floyd’s help.
RB: You made some changes and –
DM: It wasn’t just Floyd. It was Irwin Federman was – who had no reason to help me. I mean MMI was doing fine. We had no connection with MMI whatsoever. There was an article that came out about the company and I was in it, that article. He called me up and said, well, you got to – this is going to be a tough one, and if you need any help, I’m here. And I took him up on it immediately. And so I would go over to MMI to Mountain View, I think, and sit down with him and he would – he provided me, A, frontend advice, B, a sounding board for my ideas. And, of course, Floyd.
RB: What’s interesting, when Irwin joined MMI, I mean he knew nothing about designing chips. And –
DM: That’s what he said.
RB: He’s an accountant from New York. [laughter]
DM: That’s what he said. He said when MMI was in trouble he said he would just walk around. Didn’t know what he was doing. He was just kind of hoping he’d – his presence would keep the walls up or something. [laughter] It was just a –
DM: Yeah. And look what he did with MMI.
RB: Yeah. He sold it too soon he said.
DM: Well, he did. He did.
RB: So anyway, so – so how long were you at SEEQ in total, and why did you move on from SEEQ?
DM: Thirteen years.
RB: Thirteen years. So that’s a big chunk of time.
DM: It is. So we had some success. We started moving in the positive direction. What really enabled it for us, Bob was the not – not EPROMs at all. That was hopeless, E-squared and the modifications on E-squared, but really the Ethernet family. That we – we started with Bob Metcalfe at 3Com. He was looking for a low-cost transceiver. And Dado Banatao and his little team knew how to do it, and we built that part and that part saved SEEQ for a lot of years. Then we made the data link controller. So I don’t know if you remember those days, but 3Com used to sell an Ethernet board. It looked like a giant motherboard. And it was just an Ethernet board. It was that much electronics to do basically ten megabit – actually cheapernet, Ethernet over coax. And Metcalfe had the vision (?) – 3Com had the vision of moving that hardware down to where it was de minimis and they could focus on the firmware and software development for the company. And analog mixed signal circuits enabled that and that enabled SEEQ to go on. But for me, it was never going to be – and this sounds so crass – but there was never going to be a real payday. The stock I had was – had been deeply smacked around by the 1986 market drop. I owed money. Back in those days, you could not sell your options as a CEO. You actually had to buy your options and hold them for six months. Well, when I bought my options and held them for six months, (?) net was October of ’86. And so I was underwater and owed money to the company. So I got the company profitable. You could see how you could eventually find a good buyer. But I was almost fifty years old now. I’d been at it for thirteen years. And I really wanted a chance to see what else I could do. So I left after we put Dr. Salsbury in as CEO, got the company profitable again. And the company eventually got sold into two companies. Part of it, the E-squared part went to Atmel, and the Ethernet part went to LSI Logic.
RB: So next up, Dan, is also a critical point in your career timeline. And this is where your relationship with T. J. Rodgers begins at Cypress. So you joined Cypress in around ’93, I believe?
DM: Correct. September ’93.
RB: September ’93. And that was the beginning of a very interesting and very long-term relationship -
RB: – which actually has three parts, with you leaving and returning, and leaving and returning.
RB: So tell us a little about T. J. I mean T.J.’s a very interesting character. He’s an icon in the industry. And –
DM: He is.
RB: Good relationship with T. J.?
DM: Wonderful relationship.
DM: We never had a personal disagreement the whole time I was with him. We would disagree, of course, but never a personal disagreement. Actually, the first time I met him was not a pleasant experience. Remember I was at AMI for a while? I liked AMI because it was custom. There was a CEO came into AMI about midyear – mid – about towards the end of my term at AMI by the name of Glen Penniston. Glen decided to make AMI a darling of Wall Street. He had to get out of custom. And so he decided that we were going to become a memory company. And so you know who he hired?
RB: T. J.
DM: Right. T. J. did his doctoral thesis at Stanford on a technology called VMOS. Very exotic technology. He brought in T. J. T. J. brought in VMOS. And overnight – I mean overnight, basically they were no-bidding the custom contracts. They moved the NRE up so high I couldn’t get anything. And all the money was going into VMOS. And that’s where I first met T. J., when he was at AMI. And, you know, I – we had – we didn’t have words, but I didn’t have anything – I didn’t think VMOS was real. As little as I knew about processing, it looked like a nightmare to process. Well, it turned out it was – VMOS was essentially dead on arrival. But it almost wiped out AMI. That’s why I left AMI and went on. Subsequently, they got out of that VMOS stuff. They went back to custom, back to what I was doing before, and T. J. went over to Cypress to run their CMOS development. And then he left Cypress to – in – I think it was – I’m not quite sure – ’84? In 1984, I think, he started Cypress Semiconductor. And – which their theory was, which was a good theory, he had built – it was a CMOS technology, but he had found a way to make a really hot transistor, fast transistor. And so he was replacing bipolar with CMOS, function for function with the benefit that active power is one-fourth; the standby power was one-one hundredth. And so who wouldn’t buy that? And –
RB: It was the beginning of the CMOS wave –
RB: – and we had the same thing at [talking over each other] LSI.
DM: So, yeah. So I went and joined him. He gave me – in those days, Cypress didn’t have divisions. So I ran the sales, marketing, IR, and CTO reported to me. (?) weird structure. And all the divisions, marketing reported into me. And he gave me carte blanche to do product development. And it was great fun. And it worked.
RB: So how long was that –
DM: That was ’93 to 2001. And –
RB: That’s a pretty long stint for the semiconductor industry.
DM: It is. It is. Well, I had promised him four years. And frankly, what I wanted to do – you know this industry. It’s a lot of hours. We – you say that and people say, yeah, yeah. It’s a lot of hours. And so I was in my – by the time I joined T. J., I was fifty. But I had promised him five years. By seven years, it was wearing on me and I wanted to take a different – I wanted to retire. And plus, we had good success, and so I could. And so I left at age fifty-seven, Cypress, and basically intended to retire. Intended – (?) do some boards, but that was my intention.
RB: Hm-mmm. So on Retirement One, what did you do? Retire? Or find something else to do? [laughter]
DM: Well, I already had a couple boards, public boards I was on. And one of them, Xicor, looked to me like, if we brought in the right guy as CEO and did the right things, you could really have a wonderful exit for that company. Once again, in the beginning, you could have a lot of fifty and hundred million dollar semiconductor companies, Bob. But by the time you’re in the age we’re talking about now, 2001, 2 and 3, you know, the days of fifty million dollar semiconductor companies, especially fifty million dollar semiconductor companies that are fifteen years old, you know, you really need a different exit strategy. So I kind of got involved in the thought processes and the strategies and the – I found a good CEO for Xicor. We started working what we thought was the right kind of fundamental business strategy for the company, all with an eye toward mergers and exit. And we did. And –
RB: That was an Israeli-founded company [talking over each other].
DM: It was an Israeli-founded company many, many years ago. I think ’80, 1980.
RB: Yeah. Been around a long while.
DM: And Raphie Klein. Now, Raphie retired. And he called me up and asked me if I would be chairman. And I agreed. And now – so I was chairman for a while, but – for several months, and then I left Cypress. But – maybe three to six months into it I thought what we need is a new CEO, and what we need is a new strategy. And we did it. And we were able to work (?) successful conclusion of Xicor in I believe 2004. We sold it at a nice multiple to Intersil at the time. That got me going. And Texas Pacific, which is a private equity house, contacted me. Actually, not quite true. T. J. called me and asked me if I would take another look at Zilog. If you remember that company?
RB: Yes, absolutely.
DM: So I –
DM: Exactly. Z8000. I had looked at Zilog and we had gotten pretty far along when I was at Cypress. Ed Sack was the CEO at that time. Federico had long since left. And it never came to pass because we were outbid by Texas Pacific. Well, a year or two had passed and we were kind of interested, and T. J. was kind of interested in looking at that again, so I had lunch with John Marren to ask him if Texas Pacific still wanted Zilog. And turned out that – I didn’t know anything about it, but Zilog was heading into Chapter 7. Not 13, 7. And so it was – you know, the bondholders, the debt holders owned the company and not Texas Pacific. But in that dinner John asked me if I would consider coming onboard a company called ON Semiconductor, which went out in ’98 at – I don’t know – twenty dollars a share and fell onto hard times, was now selling at a buck and a quarter a share, located in Phoenix. So my retirement didn’t last long. I mean the Xicor thing was kind of fun. It got my juices going. Then John Marren called about – about ON, and then I got a call into – for California Micro Devices, which is an integrated passive company. And same type of thing. An exit strategy makes sense, and off I went.
RB: Now, ON Semiconductor, I mean going back to the old days of the big guys, was founded in Motorola.
DM: Motorola. Motorola Standard Products Group, SPG.
RB: Yeah. Yeah.
DM: Yeah. It was Motorola Standard Products Group became ON Semiconductor, and Motorola – I forget what they call it – Microelectronics became Freescale.
RB: Hm-mmm. Yeah, I was kind of sorry to see Motorola dissipate (?) – you know, when I got in the business that was, you know, one of the superstar names, and it sort of vanished. And – what ended up being the cell phone business, but –
DM: Don’t you think this industry, or all industries end up with the fads? And I think the fad was – fortunately TI resisted it. But the fad was is disaggregation. And so Motorola disaggregated to the point that who’s Motorola? And that was a shame. I mean that – I think if – looking at it in the cold light of day and with twenty-twenty hindsight, it was a terrible idea. You know, there’s reasons you can win on scale. Of course, there’s reasons you can be – you can be a dinosaur, you can be ponderous, but if you work it right, scale does count for something. And once Motorola – well, first they got rid of the semiconductor products, the ON semi thing. Once they did that, they had subcritical mass for a lot of the stuff that they needed to do from an operational point of view on the microelectronics side, and so then they spun off Freescale. So it was kind of fade-out complèt. Once they made the decision to dump the small signal group, Semiconductor Products Group, it was just a matter of time before they dumped the rest of it. I think it was a mistake.
RB: Yeah. So ON Semiconductor began a very important chunk of your career. And of course, you’re still there today –
RB: – which is very interesting. So that’s been a long road. And with all your experience you’ve done what looks like, you know, ten or so M&As.
DM: Correct. You mean at ON or generally?
RB: Yeah. In ON.
DM: At ON for – at ON alone, yes.
RB: The Cherry Semiconductor, AMI, Catalyst, CMD, Sanyo, piece of Cypress, Fairchild recently. So that’s been a really interesting –
DM: That’s the strategy. Think about it. There’s – at the time they made thirty-five billion things a year, mostly transistors. The major transistors prices in millicents, two decimal points to the right. I meant hat’s kind of the business it was in. That particular business, Bob, is lucky to have a CAGR of three to five percent. Lucky to have a CAGR of three to five percent. So what do you do? How do you make that work for the shareholder? I think the answer is you take a look at the core comp. That’s probably long answer. But you take a look at the core competencies that ON has. And we did a lot of work on that. And, you know, one of the interesting things at the time is that purchasing – our customers purchasing departments and material management departments pushed engineering to look at ON technology. Pushed it. And it’s because ON had – I used to call it derivative competencies. No one could touch their on-time delivery. No one. Not TI, not anybody. No one could touch their AQL – AOQL. They were on – typically in this industry you’re lucky to do ninety percent CRS, customer – to – typical. ON traditionally runs ninety-eight percent CRS. CRS, the customer request. ON measures their defect density rate in parts per billion, not parts per million. So if you get above a hundred parts per billion, ON gets upset. Your best auto manufacturer, your best semiconductor companies that sell to the auto industry are probably one part per million, or a thousand parts per billion. So ON had these competencies. What they didn’t have was product. And they didn’t have product of the right margins. You know, ON – you know, SOT-23 transistors been around since probably somewhere around the time you and I were born. And so you’re not going to get a lot of money for a SOT-23 transistor. And you’re not going to make a lot of margin. So you needed to find the product families that made sense, and we – and our – and so that’s why California – California Micro Devices. But you forgot one when you made the mention there, you forgot AMI.
RB: Yeah. Yeah. Yeah.
DM: So AMI was a fifty – well, I don’t know what it was when Chris ran it. I think it’s sub fifty. But it’s now high fifties gross margin business. Well, that’s a beautiful counterpoint to this thirty-some percent gross margin of ON. We got Excel which was a sixty percent gross margin business. Most of the stuff we got – Sanyo was the same gross margin as ON. But most of the stuff we got was well north of our standard gross margins, and they could take advantage of our quality, and our delivery, and then really our, if you will, our sales and distribution clout. You know, if you’re selling that much, you’re important to the distributors. So it was a strategy on purpose. And we recruited – we had to let go of the – the CEO was here (?) when I first joined. But we recruited a man who is a – not a CEO. He was out of Fairchild. Keith Jackson. He was the number two guy at Fairchild when we recruited him out of Portland, ME. And, you know, the most charismatic man I’ve ever met in my life was Jerry Sanders. The most unbelievably brilliant and deep, almost photographic memory executive I ever met was T. J. Rodgers. But without a doubt, the best hands-on CEO I’ve ever dealt with is Keith Jackson. And he’s scary smart. At the same time, he’s got that personality that causes people to do, without pressure, extraordinary work. And he bought into the vision. It was our vision, the two of us. He bought it in with gusto. He had discipline. You know, our rule is, it has to be accretive within – as soon as the first synergies are done. So it has to be accretive on paper within three months. So that leaves a lot of things you can’t buy because of price. But we’ve held to that. We’ve had issues where sometimes it didn’t happen for a variety of reasons – 2008 comes along, things like that. But basically that’s the model. Has to be accretive. Nowadays it has to be hyper-accretive after the first synergies. And so ON, I think that when I – when Keith and first started banging it together in early 2002, the stock was a dollar-twelve, something like that. Revenue was a billion dollars. Gross margin was thirteen percent. And losses – I forget the losses. But EBIT was, of course, heavily negative. It was going out of business. Fast forward to now, even before the Fairchild deal, ON is upwards of four billion dollars. It’s running about a billion dollars a year of EBIT. And stock is – up until recently was in the eleven dollar range. So – and all that was done on Keith’s vision knowing full well that the industry he was in wasn’t going to grow more than three to five percent per year, and the way to do it – the way to step out of that was to take your competencies, bring in – bolt into these important high gross margin companies, use the competencies of ON, and broaden. I took too long for that. But that – anyways –
RB: It’s worked very well.
DM: It has.
DM: He’s done a great job.
RB: Yeah. So congratulations on that. So chairman of Actel.
RB: Then John East’s era, I presume.
DM: Yes. John asked me to come in and I was the director at first. John was chairman beginning – this is back in the – a lot of companies had that combined CEO and chair.
RB: Dual role. Yeah.
DM: And then that got changed after a couple of years and I was chairman. And we had the charter – John was heading toward retirement. We had the charter of either finding John’s replacement or finding a meaningful –
DM: – acquirer at the right price. And I found – we found Micro Semi and bolted Actel into Micro Semi.
RB: Yeah. Okay. So not long after that then you’re heading back to a second relationship with Cypress.
DM: Yes. True.
RB: So –
DM: Yeah. Yeah, you – we were talking in the beginning before the taping about my peripatetic career. And I was thinking about that, and not so much. You know, thirteen years at SEEQ. If you count my Cypress stint, it’s kind of like ’93 to 2015. I was six years at Virage till we sold it to Synopsys. I was – most of the later stuff occurred because we completed the organic – we completed the acquisitions. So – but back at Cypress. So when I left Cypress in 2001, I – we had a four hundred million dollar quarter. Now, that was just before the 2001 collapse. But we were doing over a billion dollars. And we had a billion dollars of cash. By the time 2007 rolled around, or whenever it was I went back to the board, the billion dollars of cash was mostly gone. The billion dollars of revenue was now around seven hundred million dollars, eight hundred million dollars. And so the subsequent acquisitions that occurred didn’t meaningfully improve Cypress. Plus, T. J. was – he’ll probably say this. We’ll see if he says it. He was too late to go fabless.
RB: That was my – that’s just what I was thinking, was – was he slow on that transition.
DM: Yeah. So –
RB: I know LSI was slow on that (?).
DM: Oh, he was very slow. And, you know, it’s hard to believe, but the industry was spending about between twenty and twenty-five percent of revenue. The industry was spending between twenty and twenty-five percent of revenue every year on cap ex.
RB: Yeah. Unsustainable.
DM: Yeah. And so a lot of the industry, once TSMC became – that’s who you ought to get. Once TSMC became the juggernaut that it is for fabless, and cost effective fabless foundry work, and high quality, you’re crazy not to explore that opportunity. And – but I think T. J. was just too late doing that, and so part of his billion dollars that he had in 2001 that he didn’t have in 2007 was funding sixty-five nanometer, funding forty nanometer – well, funding ninety nanometer, ninety, sixty-five, forty, that’s just a lot of money to spend on that.
RB: Yeah. Yeah. Yeah. So now you’re back on the board. So what’s your duty now at Cypress relative to your first stint?
DM: You mean the board? Well, T. J. had asked me to come back. And what he wanted was a sounding board for mostly of his acquisition ideas, which I did. And – but in the process, there were other things to take a look at. And one was, which I don’t take any credit for this, although I was a voice, but not – one was the – to make sure he understood the disadvantage of having your own fab. So make sense, accretive transactions, acquisitions is good. They have to be synergistic. Again, Cypress’s core competencies. But more important in the early days was to get out of that death knell of being part of Moore’s law of driving it down with your own capital equipment. And bless his heart, T. J. made that decision to exit that – I think in 2008. 2009, 2008. So it was right around that timeframe. So anyway, that was part and parcel. We had to sell some businesses. And I was – I think I was helpful in that. We sold the – oh, what was that thing called? It was a networking business. Lost the name of it. We put about four hundred million – we spent about four hundred million dollars at Cypress buying these two businesses and unfortunately sold it for under a hundred to NexGen. I forgot the name of the technology.
RB: Now, they still have the Minnesota fab, right?
DM: It’s the last fab they have.
RB: Last one [talking over each other].
DM: Texas is closed. Fab1 in San Jose is closed. Yeah, Minnesota actually is now a – what do you call the government fabs? Secured fab?
DM: And ON Semiconductors in Nampa, Idaho and Oregon Fab. And so there’s that benefit. But I would bet that – now I’d be – just be guessing, but I would say two-thirds of the fab units are now fabless. And the only thing that’s fabs now is some of the SONOS material, silicon-oxide-nitride-oxide-silicon material used for the – his system-on-chip, PSOC.
RB: Yeah. So Cypress has gone through a fairly significant restructure with, you know, fabs going out and now the recent merger. So [talking over each other].
DM: Yeah. That was the other thing we wanted to do. And T. J., bless – once again, we – I pushed – T. J. was always doing technology-oriented acquisitions, which were hideously anti-accretive, overpriced, and either would or wouldn’t deliver something in the deep future. But we never did a big deal. We never did – we never levered up hard to do a big deal. And once again, we talked about an hour ago [laughter], that you really can’t be a fifty or a hundred million dollar semiconductor company in the late ‘80s, you really can’t be a five hundred million dollar semiconductor company in 2000s.
RB: Today. Yeah.
DM: And you need to get scale. And fortunately we looked at a couple of them, a few of them. But the one that worked out for us was Spansion. And Spansion was interesting because it actually played to – you know, T. J.’s – Cypress today is really two fundamental product vectors. It’s – it is embedded memory, either instantiated in SONOS, or in flash, or in non-volatile reprogrammable, and it’s SOCs. Either the Fujitsu automotive SOC family, or the Fujitsu ARM-based SOC family for general purpose, or the Cypress PSOCs. And so literally of the two billion dollars their forecast to do in 2016, it’s about fifty-fifty now. So now you have scale.
RB: So it’s back on track on scale.
DM: Back on track on scale. Now –
RB: Fabs are on the way out and it more fits the current, you know, business model of what you actually need to do to succeed.
DM: I think so. And I think it’s a – I think it’s going to be an interesting positive ride for Cypress.
DM: Now, to do that I had to leave the board to go back and work fulltime for them. And, you know, I’m no spring chicken, so I’ve elected not to go on any boards in the future. And so I didn’t go back on the Cypress board after the [talking over each other].
RB: Yeah. I think, you know, a number of people in the industry, when they read that Dan’s going to be “VP of sales” again for Cypress at, you know, “our age,” [laughter] what the hell’s Dan thinking? What’s that all about?
DM: I mean – and the sales department needed some work, too. You know, it was a – mostly morale. Mostly morale. I mean I –
RB: So that was kind of a “short-term project” to fix this and this and this and –
DM: Oh, no. There was never going to be, Bob, a long-term thing. Incidentally, I had advised against doing that at [talking over each other].
RB: Well, T. J. was lucky to have you to do that. I mean –
DM: But I would strongly advise any other seventy year old against that because the hours didn’t change.
RB: Right. I can believe that. So, yeah. So, no, I think T. J. went out on that one. [laughter]
RB: Okay. So now long time semiconductor guy, you buy a restaurant.
DM: Oh, yeah.
RB: So now you’re the meals business.
DM: Yeah. Yeah. We – yeah, we actually created a restaurant. We –
RB: What – how did that happen?
DM: Well, I’m –
RB: In Morgan Hill, by the way. So –
DM: Yeah. I’m probably like everybody else in this industry, there’s – it’s not ADHD – well, it might be with me – but it’s really a – kind of a desire to stay busy. I remember my mother used to tell me that she thought I would drive her to drink the way I was as a young man. And in 2010, I – we successfully negotiated the Synopsys acquisition of Virage Logic in June, and – I think June. And then in September/October, we successfully negotiated the Actel sale to Micro Semi. And this was before I became chairman of Freescale. So I was down to two boards – and before I went on Mentor’s board. I was down to two boards. And if you’re not doing operational work – I mean there’s all kinds of board members. Right? And if you’re doing operational work, it’s just a lot of work to do even on a board. And the other two boards were not particularly operational. I was just like a board member. And so I was, you know, antsy. And I had seen this location in Morgan Hill. I always thought that I’d like to do something closer to the community. I was at a – as far as I was concerned, Morgan Hill and Gilroy, wherever I live, were places to go to sleep. I never had anything to do with anybody in those towns, and I thought, well, I’m at the age now where it might be a – not a bad idea to give back a little bit or get connected. So I found this deli essentially with a beautiful location. And so we bought the deli. And then we took out the deli and we created this – it’s a nice restaurant.
RB: Yeah. I mean it’s if not the place to go in Morgan Hill, it’s one of the places to go in Morgan Hill. And it also happens to be right on the doorstep of the annual British car show there, which you kindly sponsor. And so that’s a –
DM: Has grown every year.
RB: – big annual event now.
DM: Yeah. Bill is doing a great job with that. [talking over each other]
RB: Yeah. Yeah. Yeah. So that’s –
DM: Yeah. We close down the streets and he does a great job.
RB: Yeah. Yeah. That’s – and it’s a good location for it, too. So –
RB: So semiconductor board member, restaurant owner. What’s next, Dan?
DM: I don’t think I’m going to take on any more board assignments. In fact, I’m sure I’m not. They’re fun, but they’re – we talked about before the – we got taped up here. There are no one-year fixes when you – because no one ever asks you – no one’s ever asked me to join a board where everything was good. Never. It’s always something. More than something. And –
RB: Or a startup, which is work ahead.
DM: Or a startup, which is even crazier. And so let’s say your average time to have a meaningful impact is forty-eight months. Well, that’s a long time. So I’m not going to do that anymore. There is a couple young – there’s some young people that I’m working with now on a couple ideas in semiconductors, not in technology, but actually in – don’t you think that – in 2015, I think there was like a hundred and thirty billion dollars of semiconductor related acquisition transactions. Something like that. Over a hun – well, over a hundred billion, maybe less than a hundred and fifty billion. It’s obvious that this industry is just rapidly consolidating. So what does that mean? I think it means that there’s going to be opportunity for that – those businesses that these consolidators don’t want. Or those businesses these consolidators can’t keep for federal reasons. And so I’m working on, not fulltime, but I’m working with a team, building a team together, getting a strategy together, getting some funding together because you know that – well, you know that NXP and Freescale aren’t going to keep all those divisions. You know that – once there’s a large merger, there’s going to be those opportunities. And on top of that, now you’ve got a scale problem for all the smaller companies. So that’s what I’m going to be doing.
RB: Yeah. Okay. Interesting. Interesting. So looking back over your career, Dan, a couple of things. What did you enjoy the most, and what did you enjoy the least? I mean there’s probably a couple of things that stick out that you really, really loved and glad you did it, and couple of things that you wish you’d never bothered.
DM: Yeah. I think it’s a time-based question, right? When I was an engineer it – and you’re an engineer – working on those projects you lose all sense of time. It’s like a giant videogame. I mean it’s just so stimulating to solve problems. And I didn’t think I would ever leave that until I realized I was going to make no money ever on that deal. So I think at the time I really enjoyed that. I didn’t enjoy relationship selling. I did it and I thought I was pretty good at it, the schmoozing part of it. I much more enjoyed the technical selling where you offered real solutions to the customers. You got engaged with them. You got a chance to see the positive impact of your product. So I like that. So what I don’t like, I didn’t like the relationship selling particularly. I’m not really sure I’m very good at it but I didn’t like it either. There was time at SEEQ where we were down to quantifiable number of weeks of payroll left. You have to do some tough things. And not just the head count cuts, which was tough enough. But, you know, I remember coming in every morning with my comptroller. I’d come in at six o’clock to – for the grave/day shift transition out of the fabs. We had our own fabs in those days. But then I would sit down and we figured out who we’re going to pay and who we weren’t going to pay. And you know what happens in those deals. You pay the guys with clout – wafer suppliers. And you don’t pay the guys without clout, which are usually the mom and pops who need your money the most. And I – and that went on for – that whole dance went on for – right after I became CEO at SEEQ, probably for a year. And I hated close to every moment of that.
RB: Having to pick and choose.
DM: Well, yeah. We basically chose – the mom and pops always lost. And it’s a disgusting thing to do, but you had almost no choice. So I didn’t like that part. I like the boards; I don’t like steady state boards. I don’t like boards with no problems. Not – boards with companies with no problems.
DM: It’s a double negative.
RB: That’s okay. So fasting forward about – you know, there’s been a lot of changes in the industry, and we’ve talked about a lot of those today. You know, the fabless thing is permanent. It’s here to stay and –
DM: Oh, yes.
RB: – and so on. And mergers and divesting. And so if we just fast forward to 2025, you know, ten-ish years from now, if we’re still here to look down on it, what do you think the industry will look like ten years from now?
DM: First off, I think that – the industry started as aggregating transistors and resistors. You know, the IC industry. And so they were just little baby building blocks. And then – and it had all the problems associated with it. Then various guys solved problems of time to money with programmable systems. Then you solved the problems of time to money with – by building microcontrollers where you could actually do firmware development a lot faster than you could do a new board. Then they solved the even faster time to market and cost by building systems on a chip. And that is kind of where we are now. But what you’re seeing now going – as you go forward is that the classic vertical structure where you build this comprehensive solution and have no real visibility of the end product, end market, I’m not so sure is valuable anymore. The internet of things is not – it’s a – for sure it’s an overused, and therefore, overhyped term. But it’s a real deal. You now have the ability to do – you can run microsystems on a chip, and a button battery for as long as you live or until the batter rusts twelve, fifteen years. I think that’s going to – that’s going to drive a whole lot of new applications. But all those applications are going to be created mostly with firmware and development systems. And therefore, you have to have an understanding of the horizontal market, the market you’re going to go into. So in 2025, you know, of course, you’ll have your big giants. But I think the guys that are going to be emerging are the guys that are going to be offering a complete solution. Silicon firmware development and an appropriate attack on a horizontal side. So they’ll understand their end markets. For all I know, Bob, they may actually be in those end markets. In terms of the integration, I think it’s done. These five hundred million dollar companies should have been integrated a decade ago. I don’t think we’ll see that anymore. I think we’re going to see massive moves toward integration.
RB: I agree. So, Dan, over a long, long career you’ve had more than fifteen companies you’ve worked for.
DM: [laughter] Yes.
RB: And it struck me a few weeks ago talking to Wally Rhines at Mentor that he’s only had two.
RB: That – I knew it, but it shocked me when we talked about it.
DM: Wally’s only had two.
RB: So I mean Wally’s unique on that end of the spectrum. You’ve done a ton of M&As. You’re slowly trying to retire again, which is admirable. I think it’s interesting. So you’ve got restaurants as toys, cars as toys, and couple of houses as toys. And – so are there any other stories that you’d like to leave us with as we sort of wrap up here? Is there something that we’ve missed or something that the world will find really interesting they didn’t know before?
DM: Bob, I think you’re gracious enough to let me tell my stories the exte – as they occurred, so I think I pretty much did it.
RB: You’re pretty much done. So –
DM: But I do think Wally’s – Wally’s a different individual. You know, he was the youngest head of the semiconductor operation at TI. Youngest in the industry. And that was quite a credential. And he – and he’s the type of man who will not give up. And –
RB: He describes himself as Mr. Texas Fix-It.
DM: Oh, exactly.
RB: [talking over each other] rotated him around in Texas.
DM: He did.
RB: If there’s a problem, send Wally. So [laughter] –
DM: Well, and look what – and Mentor was beyond damaged when he got there, and look what he turned it into! I mean you have these juggernauts like Cadence and Synopsys, which for all intents and purposes should have snuffed out Mentor. And Wally (?) not only will not get snuffed out, he has a different vision – he probably talked to you about it – than either Art or Lip Bu. And I think his vision is good. I think what he’s doing with his EDA software and how he’s applying it to the automotive world, how he’s applied it to the cable world, how he’s applied it to military aerospace world, I think he’s onto something there.
RB: Great guy.
DM: Yes, he is.
RB: So, Dan, thank you again for your time.
DM: Hey, thanks a lot.
RB: I really appreciate. We’re in your private house here taking up your time. And all of this will be posted on the Stanford Library of Silicon Genesis. And again, thank you.
DM: This was great fun. Thanks a lot, Bob.
[End of Interview with Daniel McCranie – January 25, 2016]