T. J. RODGERS
November 4th, 2013
RB: Hello, I’m Robert Blair for the Silicon Genesis Program at Stanford University Archives in California. Today, November the 4th, 2013, we will be talking to T. J. Rodgers, Silicon Valley icon and one of the industry’s most progressive and outspoken veterans. T. J. Rodgers, always known as T. J., was born in Wisconsin and attended Dartmouth College and Stanford University, earning undergraduate and post-degrees in chemistry, physics and electrical engineering. Following a period at Advanced Micro Devices with Jerry Sanders, T. J. founded Cypress Semiconductor in 1982, where he remains to this day as its President and Chief Executive Officer. Over his career, T. J. has accumulated multiple awards and has testified before Congress multiple times and has been one of Silicon Valley’s advocates for free enterprise. He has published multiple articles and books, and has also established his own Silicon Valley Winery that has a mission of producing the best Pinot Noir in the world, maybe other than in France. Time will judge that claim.
RB: So now let’s hear from T. J. about his story of rags to riches and what he sees for the future of the semiconductor industry in Silicon Valley. T. J., welcome to Silicon Genesis at Stanford Libraries. You founded Cypress in 1982, based on high performance memory products. And today it’s grown to be a company that’s approaching a billion dollars in revenue. You’ve served as founder, president and CEO for thirty years and that’s a long while in Silicon Valley to be with one company, but when it’s your own company, it’s probably easier. You have degrees in physics, chemistry and electrical engineering, including a Ph.D. from Stanford, with excellence in classes. So clearly, in the early days, you were a very bright guy in the field. Before we go into semiconductor career stories, tell us about where you were born, your upbringing, little bit on your parents maybe, and how you ended up in physics and chemistry as your first love.
TJ: Well I was born in Oshkosh, Wisconsin. I liked science from the time I was fourth grade. I went to a very good grade school. It was the experimental grade school of the Teacher’s College in Oshkosh, which was the Teacher’s College for the State of Wisconsin. And we had library hour a couple time a week and I always read science books. So it was clear to me I was going to do science. When I got to high school, I took chemistry and physics. I also played football. We had—we’re in Wisconsin, right, so my team was State Champion two years in a row. In our division were Green Bay East and Green Bay West teams. I’ve played in what is now called Lambeau Field. At that time, it wasn’t called Lambeau because Curly Lambeau hadn’t died yet. It was called Brown County Stadium against Green Bay West. So I’ve got Midwest Oshkosh and a love for science. My mother was a teacher, grade school teacher, from the same college where I went to school in their grade—in their experimental school. She went to Cheboygan, Wisconsin, which is on Lake Michigan to teach during World War II because she couldn’t get a job at home because a lot of teachers in the Teacher’s College home. And she lived in a hotel with four other single teachers. She flirted with a “cute soldier” in the lobby of the hotel where they were staying one day and she kind of filled out the forms of the recruiter and she got the letter “You will report to Truax Air Force Base Madison, Wisconsin and she got drafted. She signed up but she didn’t know what she was doing. She went into World War II. They tested her. They sent her to St. Louis University and she taught radio electronics during World War II. So that’s where the electronics came from. My dad didn’t graduate high school. He was a pilot and a mechanic during World War II but he was from Alabama. He was a rebel, easygoing guy. My mother—I’m more like my mother than vice versa. So that’s why I started electronics. I loved electronics even when I was a kid. I remember reading her books on how to make a superheterodyne radio with vacuum tubes and understanding not all of it because I was only in high school at the time. How did I get to Dartmouth? I got recruited to play football there. And my freshman year at Dartmouth—Dartmouth, at that time, was a very tough school. They had mandatory Saturday classes till noon. And freshmen, in particular, had the 8:00 AM Saturday classes. And one Saturday, we were playing away at Yale and I missed a physics class and I just said, this is not going to happen. Football is a sport. It’s not what I do and I won’t miss classes for it. So I never went out for football after that. At that time in the Ivy League, there were not athletic scholarships anyway. So you only played because you wanted to play. You could get in with a word from the coach, a little green checkmark on your file helped you get in, but you couldn’t get any money. So at Dartmouth, I pursued chemistry, which is my love. I actually blew up the chemistry lab in Oshkosh High School one time. I was making some flare powder. It was a mixture of gun powder and magnesium metal powder and it kind of went off inside the school. Dumped the school. Burned me pretty badly. Hospital two weeks. I continued on chemistry at Dartmouth. When I was taking organic chemistry in my sophomore year, I started to get bored with chemistry. I didn’t relate to organic chemistry. I do today. I’m very into organic chemistry today. Then I went into physics. I had almost all my chemistry stuff done for a major, changed to physics. I did all of that and in my last term, I got both of them done. So I had two majors. Interestingly enough, it sounds like it’s random but it’s not in retrospect. My last term of my last year, Spring of 1970, the Kent State massacre quarter, on a lark, I took an electrical engineering course at the Thayer School, which is a graduate engineering school at Dartmouth. So in that electrical engineering course, I just said I want to change. I don’t want to do physics anymore. I kind of got bored with physics—with solid state physics the same way I got bored with organic chemistry. So I called up Stanford and I said, you know, I don’t want to be in your physics program. I really want to be an electrical engineer and, of course, you can only imagine what—the amount of guff I got. I got no transfer. I drove out without a job, without an acceptance really, because I wasn’t going to go to physics. Just before I went in, I got an offer to—to work for one professor in Double E, Gordon Kino, working on microwaves. Well that was microwaves and I wanted integrated electronics. So I went to Stanford and I started looking around to get into integrated electronics and went to see Professor J. D. Meindl who ran the Stanford IC Lab which, at that time, was a premier IC laboratory in the world. We used to brag that, among the students in that lab and they were all great ones, we would put more papers in the—ISSCC, International Solid State Circuits Conference, the show—and we put more papers in than Japan Inc. would. And that was true back in those days. So I wanted to get in there. Professor Meindl’s secretary blew me off and said that I was a new master’s student and until I had taken my master’s courses and gotten my Ph.D. qualifying exam behind, Professor Meindl wouldn’t even talk to me. So I left my resume in chemistry and physics and, as luck would have it, they just got in a brand new machine called an epitaxial reactor, which is a machine that uses gas phase high temperature chemistry to grow silicon crystals with dopants like boron, arsenic and phosphorous in it. Well, the boys that knew about transistors and diodes didn’t know anything about gas phase high temperature chemistry and I did. So I got pulled into the lab from my first day at Stanford. And I worked at Stanford forever—for five years and I was a lab rat. You know, if you know the book Outliers, I spent my ten thousand dollars making transistors. And it was a very good time for that because the equipment was sophisticated enough to make a transistor, an integrated circuit that worked but it wasn’t so sophisticated that one person couldn’t run all of it. So in those days at Stanford, you’d think about what you wanted to do as a circuit, you would draw it, which means you draw the gates and contacts of the chip and the metal wires and the bonding pads. You then cut rubylith which basically is a double-sided sheet of Mylar with red and clear Mylar and you take a stainless steel ruler and a razor blade and you peel off the Mylar to form the images, black and white images, red and white images. And then we made our own masks and then we’d make our own chips. And I personally made working integrated circuits hundreds of times. And I—my—I like to be fast so I would be able to make a transistor in two days, which is, by today’s standards, very fast. It takes two months if you’re fast today and three months if you’re not to make an integrated circuit. So I had my experience thinking in the electrical engineering world what to make, simulating the physics world, how does it work, and executing in the chemistry world by accident, all the degrees that I had.
RB: That’s interesting. I mean, so you enjoyed the practical side of things.
TJ: Oh absolutely.
RB: Rather than the pure physics and the chemistry.
TJ: Oh yeah, absolutely. I liked—still today, I like making things. Let me grab something from my toy show here. I keep these—these are from a paper I gave. It actually won the Best Paper Award at the International Solid State Circuits Conference. But this is a transistor called VMOS, substrate of silicon so the wafer’s like this and then there’s an etched groove, a notch, cut in the silicon and then the layers of semiconductor. I have a patent on that. We made chips with it. So there’s a chip that I made. There’s the mask that I made so it’s a step and repeated. There’s twelve copies of the chip. The way you got the twelve copies was you’d put the photographic plate in and then you’d take a picture and then you’d move the photographic plate and you take another picture and you take twelve pictures. And with that Kodak high resolution mask, we would make chips. And there’s a chip—this is a one and a quarter inch wafer. And to save money, we’d cut them in four parts and there’s twelve chips on there. So I spent five years between ’70 and ’75 making chips and writing my dissertation. And that—I loved doing it. I loved every minute of it.
RB: That’s interesting. As you may know, Corrigan also came through the epitaxy world.
TJ: Oh yes.
RB: He’s a chemist from London and so...
TJ: Wilf and I have talked about epitaxy on multiple occasions.
RB: I’m sure you have there so—okay. So now you’re through the Stanford phase of your career. So what came after Stanford?
TJ: Well after Stanford—first when I got to Stanford, I had pulled a U-Haul trailer from Hanover, New Hampshire to Palo Alto. I’d chain my trailer in a parking lot in Stanford and enjoy just having a meal and relaxing. The next day I talked to some student in McCullough, which was one of the buildings in the IC—where the IC Lab was. And I heard the word Silicon Valley for the very first time. And I heard all these guys talking about how they wanted to start a company. And that’s 1970. So you’ve got to remember, you know, Intel was two years old, AMD was one year old and National Semiconductor’s three years old when I showed up here. So the big—what ended up being the big three of Silicon Valley were all startups. They weren’t even public yet. So I got pumped up for starting a company and that’s sort of what I set my goal on. My first goal was to get some academic credentials. So that paper I just showed you right there—those are the raw pictures from a paper that I gave and I won—I set my goal to win the International Solid State Circuits Best Paper Award. And I won that twice. So that kind of gave me a technologist’s credential and today, I would say I spend forty percent of my time—two full days a week—working in only technology. So I can go into a technology meeting, a startup meeting, a technology being developed, a technology’s in trouble and I can add a lot of perspective, for example, immediately bringing business and manufacturing judgment to what might be a technical idea. And I like that. I still do. I’m 65 and without a doubt, I learn more new things per week today than I learned in 1970 when I was getting my Ph.D. Without a doubt, my knowledge rate is accelerated because, you know, I’m around everybody that—that’s—they’re all experts. And I immerse myself in the people and the company who learn about all this stuff. Then three days a week plus executive staff time I’m CEO.
RB: So your first real job after Stanford then was what T.J.?
TJ: First job—I realized when I came out of Stanford and said I wanted to be a CEO, that I couldn’t, that I got to understand by doing consulting here that these businesses were pretty tough to run and you had to know something. And I also realized that MBA knowledge was not about what it was about. MBA’s are hirable. Running a company in a technology world, that’s not. So I watched and emulated the people that I admired here in Silicon Valley. Andy Grove—I got a—I have it in my desk—an offer letter from Intel. I interviewed with Grove, decided to go to AMI. That was my first job. American Microsystems Inc. Bad business judgment. At that time, I said let’s see, Intel started in 1968, AMI started in 1966, Intel seventy million or sixty million at that time, AMI 90 million. So AMI’s bigger and older. I’ll work with them. Plus when I interviewed with Andy Grove, he was a hard-ass and I wanted to still kind of do what I wanted to do to have academic freedom, if you will, to work on what I wanted to work on. In an industrial laboratory more and more, the company has to make a strategic choice and people have to line up to make that happen. You can’t—like academics, you can’t go off and work on something cool and write papers about it. So I went to AMI, five years. That technology, VMOS, we tried to commercialize it. It was the worst possible level of working. Some things don’t work. They crash and you write off a year and a half and get on with your life. Some things work and they turn into, you know, CMOS or whatever. In the middle, you have things that don’t work but work enough to cause five years of pain and agony. And, in our case, that bizarre transistor worked. It yielded and we shipped it and we shipped millions of dollars’ worth but we never, ever could get it economically successful. So after five years and seventeen days, I left AMI. Still have the—my resignation letter—and I went on to better things. But it was a disaster for AMI. They lost, in effect, half of their R&D funds for five years. And AMI never recovered. They’ve been bought and sold a couple times since then. And it wasn’t all mine. They—as I learned later, they had a bunch of bad habits. They had a bunch of good habits that I kept and learned. Bad habits that they had that I later learned were bad, I avoided. And then everywhere I went, I worked—I learned more. So then I went to AMD.
RB: So you didn’t pick up the phone and try to go back to Intel?
TJ: I did.
RB: Oh you did.
TJ: I went back and I interviewed with Intel. At that time, I liked Advanced Micro Devices. They had the cool image in the Valley. And Jerry Sanders was a sales guy, engineer and a cool guy. So I asked them to interview. And then I interviewed at Fairchild. Those three—and National. I was never serious about National or Fairchild and I just confirmed that I was right. I got another job offer from Intel, which I was serious about. And then I interviewed with Jerry Sanders, the man. And comparing the two interviews is interesting. At Intel, I walked in, I waited for forty-five minutes in the lobby, filled out my little badge and then I went upstairs and interviewed and they made me an offer second time. I walked into headquarters at AMD to see the receptionist and she was doing her work and I walked up and said, “My name’s T. J. Rodgers. I’m here to see Jerry Sanders.” And she went—smiled at me and said yes, Dr. Rodgers. Mr. Sanders will see you right away. Here’s your badge. Five seconds. Upstairs. Walked into the man’s office. So you go past the man’s—his receptionist, then you get to his private secretary, then you get to the hallway that leads to his office. Big office, right. That’s Jerry. Jerry was big everything. So I walk down the hallway and I’ll never forget, I’m walking into the Jerry Sanders’ office and I look up and there’s a frame on top of his door. And it says, “Yea though I walk through the valley of the shadow of death, I will fear no evil, for I am the meanest son-of-a-bitch in the valley.” And that’s—I look up and I go okay, I got to—I got to meet this guy. So I walk in and there’s Jerry and everybody knows Jerry’s Jerry, right. And I had a great interview with him. He knew it, of course, he’s a salesman. He had a—the hook was in my gut, right, after eight minutes and then we just talked for a while. And I went to work for AMD. And I was a RAM guy. I had RAM credentials. The RAM we built with that technology was the smallest and best static RAM that you could buy at the time. And that’s what they wanted me to do. They wanted me to put them back in the game of SRAMs against Intel. Had been beating them. So that’s what I did at AMD. I ran SRAMs.
RB: So what year was it that you actually went to AMD?
TJ: I went to AMD in ’79 and I was there through ’81. And met the man. And it turns out, I haven’t seen Jerry—by the way, when I left, it was not harmonious. You don’t leave the man. So it’s kind of amazing. I love the guy like a father and he liked me like I was his man down in the tech area. Then I left to start my own company. I was—I won’t say lured out—I always wanted to start a company but I was given an offer by a Venture Capitalist and that got him angry and then I hired four guys out of AMD. That got him more angry. And then we had like a war for the first ten years of Cypress. And he sued Cypress three times. And whenever he sued me, as a matter of courtesy, he would have his operations VP or his admin VP, George Scalise, who later ran the SIA, call me.
RB: Yeah, I know George.
TJ: Call me up and tell me well T. J. you’ve done this wrong, you’ve done that wrong and we’re going to have to sue you again. And what’s interesting is the year Jerry retired; I hadn’t gotten a call for like five years. So I figured the bad blood was over between us and AMD. And I got a call from George and he says hi T. J., this is George Scalise. And, you know, my secretary warned me in advance who it was and I’m sitting there. George, what have I done wrong now that you’re going to be forced to sue me again? And George says, “Jerry’s retiring and he wants you to talk at his retirement dinner.” So George Scalise, Wilf Corrigan and I were the guys that talked at his retirement dinner. And he had both his wives and both his families there. [laughing] And I gave a talk about primarily what I learned at Advanced Micro Devices. They were all great stories. My favorite one is I learned how to be cheap at AMD. AMI was not a frugal or financially well-run company. AMD was. And one of the first guys I met at AMD was Elliott Sopkin, who’s a VP of PR.
RB: We interviewed him a month ago, by the way.
TJ: All right. So Elliott tells me a story about Jerry where, in the startup days of AMD, Elliott’s the PR guy. So you type and you’re right. So he went into Jerry and gave Jerry a purchase order—Jerry signed all purchase orders—real tight. It was like that in the old days. And Jerry looks at him, pencil sharpener. What do you want this for? We’re a startup. You want us to take startup money at the cost of startup money and waste it on stuff like this? What the hell’s wrong with you, throws the PO back at him. Elliott goes all right, fine. So Elliott goes out and buys a pencil sharpener with his own money. So Elliott says I got my pencil—electric pencil sharpener on my desk and Jerry’s walking by and he looks in my office. And he frowns and he said I thought I was really going to get it. And then Jerry just keeps on going. Three minutes later, Jerry comes back with a big handful of pencils that are all dull and sharpens them all in Elliott’s sharpener—and then takes it back. So that’s a little vignette of the early days, the seventies and semiconductors. I also learned from Jerry he was probably the best promoter of any CEO of any semiconductor company. And he always—there was always excitement. I mean, you didn’t just have a company meeting. There’s something going on. Jerry wanted to talk to the troops. So I enjoyed it a lot. He, in retrospect, it was a perfect dichotomy for me. He’s the sales guy. The company ran on sales. He demanded what he needed from technology and manufacturing and he was tough on that. But then he let you alone. So I got to make stuff. And whatever I made, I knew it would go to the world and it would go out for a premium price. When I came into AMD, I found out AMD was selling a slightly inferior RAM to the one we’d failed at at AMI for twice as much money, 2x the ASP. So remember Jerry well. I talked at his retirement dinner and interestingly enough, last year, I had to go to L.A.—business trip. And I said what the hell, I’ll call up Jerry and see if Jerry wants to do lunch, right. So I called him up and he said sure. So Jerry’s place is Spago, you know, fancy restaurant in downtown L.A. He knows Wolfgang Puck and he has his table there. So I go to Spago and I ask for Jerry Sanders and the maître d gives the waitress a nod and says take these people to Mr. Sanders’ table. So I go and there’s Jerry sitting there in Spago. And then Jerry, classic Jerry explains to me what his table’s about. Word is why it is where it is, how that used to be his table but it got kind of crowded the way he wanted it. Now this is his table and this is how it works. And then he talks about Spago and how he’s eaten lunch there every Friday for twenty-four years. So I was down there—my Friday was my walk-around, screw-around day. I had business on Thursday. And we talked—we had lunch from eleven till three and I had to get my airplane. And I had so much fun. I’ll show you this picture. I had this done—you know, what you’re doing is history of Silicon Valley, right. And I kind of figured okay, let’s do some history of Silicon Valley. So I had this done and I put it up on the wall in front of my office. So there’s Spago, Jerry and me, at that lunch, which was, you know, like six months ago. And I enjoyed myself a lot.
RB: Looks like the lawsuits are over there.
TJ: [laughing] Oh yeah. Oh no, he and I always liked each other. You know, he had to do what he had to do for his company and I had to do what I had to do for mine but we understood that. And there was no long-term bad blood.
RB: So at the end of AMD then, T. J., you said you got a call from a VC, something that triggered you to actually press the button and do Cypress. Tell us about how that happened.
TJ: Okay, between AMI and AMD, I tried to start a company in 1980 and it failed. And the deal was—well I can tell you—Hambrecht and Quist turned me down. It was the only connection I had and specifically Larry Moore of Hambrecht and Quist didn’t get it and I tried to start a company in 1980 with pretty much the same founding team that started Cypress three years later and they didn’t fund us. And the knock was, I guess, reasonable. You know, you guys flamed out at AMI and we need to see you do something right first before we give you money. Then the Japanese started crashing our industry in ’81 when I was at AMD there was a—the beginning of basically a decade where the Japanese beat us up whenever they wanted. And I kind of gave up that I could start a company. There was a venture capital crisis and stuff like that and it didn’t appear to me that I could get the money. And, at that time, the paradigm was start a company and build a fab, build a technology, build products, take them to market. So you had the whole thing you had to fund. And it was, for that time, pretty big money. So I was—and I liked AMD. So I was hunkering down and I would have moved up at AMD for sure. I ran a business unit which was a lot of fun. So we get a call, Ben Rosen, New York. So Ben Rosen of Sevin Rosen. Ben Rosen was the analyst for Morgan Stanley for semiconductors. Everybody wanted to be on the good side of Ben Rosen because if he wrote bad things about your company, Wall Street would take care of your stock price. So Rosen called me up and said I’m doing a reference check on a guy, Bob Plaquenil and there’s a startup by a guy named Frank Wanlass. Frank was one of the technology—technology/technologist geniuses, like he wasn’t a super well-educated guy but he’s the guy that worked miracles in the fab and he had the super low mass comp process for making chips and they were planning on making some fairly trivial TTL chips, a little simple SSI chip. And Ben asked me if Plaquenil could design those chips. He was going to be the VP of design. I said sure he can because it was a simple job. And I said, by the way Ben, you know, if you got money to invest in semiconductors, I have a business plan and I can do a lot more with that money than these guys can. And Ben said well when are you going to be in New York? And totally by accident, having won those two awards, I was going to be in New York the next week for paper selection for that same group. And so I went to New York and I met with Ben. And Ben took me up to the 45th floor of some private dining room where the tables were twenty feet apart so he could talk without hearing somebody. And they had—I remember they had Domaine Leflaive, when nobody knew about white burgundies. At that time I did because I liked French wine. And they had these exceptional wines by the glass and Ben taught me or talked to me. Money was easy to get. So Ben said to me well, on your way home, don’t fly back to San Francisco direct. Fly Dallas, San Francisco and talk to my partner, L. J. Sevin. So L. J. is a cagean. He worked his way up in the hierarchy of TI. He quit because the thought TI was kind of a anti-human, hard-ass company, which it was at that time. It’s a much better run company today. And he became a venture capitalist. So L. J. picked me up at DFW and it’s exactly what you expect for a businessman who made a company called Mostek in Dallas as the CEO. Came from Louisiana. He drove up; he had a Cadillac, big boat, big square Cadillac, one of the ones that bounces when you go over the railroad tracks. And he picked me up and he said oh I’m out of gas. So he stopped and put some gas in his car. And then he took me to his office up in a skyscraper in downtown Dallas and then we—I had created the business plan on the airplane. So my business plan started in New York and ended in DFW. I had a mechanical pencil, an HP calculator, an engineer quadrille paper so I could do drawings and writing on the same thing. It was handwritten, seven pages. So I gave him the plan. He gave it to his secretary. She copied it. Took my plan, leaned back in his chair, put his feet up on his desk and spent fifteen minutes and read every word of the plan. And he goes, well, this is not as nearly as bad as I thought it was going to be, because he had declared when he started Sevin Rosen, they were not going to do chips. Too hard. So eventually I worked with those two guys and they decided to fund the company. And I pulled a founder out of Intel for a fab guy and then I had the guys from AMI and AMD that I had met during my career. And we became the six founders of Cypress Semiconductor. I quit in November of ’82. I got the name Cypress assigned to us in December 1st, 1982. That’s our birthday. And the founders, they’ve all now retired. I’m the only one left and we just had a founder’s dinner. There’s one founder that’s not with us anymore but the rest of us we had a dinner just a few weeks ago celebrating the thirtieth anniversary.
RB: Oh that’s cool.
TJ: We also invited fifty-five of our alumni who left Cypress and are now CEO’s of their own company, or had been CEO’s of their own company. And I gave four awards out to CEO’s of companies where the guy worked here and then later became a CEO of a company bigger than Cypress, like Lothar Maier at Linear Technology, for example.
RB: Yeah, that’s interesting. We did a fiftieth anniversary for Fairchild a few years back and then a thirtieth anniversary for LSI. So it’s nice to do those and get the guys together before it’s “too late.” So now that Cypress is founded, the initial focus, I believe, is SRAM because of your experience and your knowledge of the market and the technology. And so Cypress is launched with a very memory-centric strategy. So how long did that last as being the core of the business and when did you start to diversify?
TJ: Okay. So we got our funding on April 7th of ’83, got seven and a half million. In total, we took down forty million, four rounds, one per year, forty million cum. Thing about it we built a fab, built a company and went public at forty total million dollars. I have chips today that cost me twice as much for one chip to build as the start of the company back in 1983. We got in the SRAM market. At that time, Moore’s Law—nobody talked about Moore’s Law. There had been—Gordon Moore had written one paper on it but it wasn’t called Moore’s Law but we all—if you’re a device physicist guy, which is what I did, that’s my degree if you want to say what’s your Ph.D. in, it’s transistor physics, we all realized. And it was sort of codified by IBM in a technical paper that everybody read that, you know, was in the business. That basically as geometry shrunk by a factor of x, you got a factor of x squared in area and you got a factor of x cubed in performance, which means you could have it be much lower in power or much faster or some combination of the two. And we all realized that if you took CMOS—in those days, high performance computers were made from bipolar transistors and they had to be water cooled because they put out so much heat. They were one one-hundredth the power of a PC today, but they required giant power supplies and heat removal, bipolar technology. NMOS, which is when Intel started Moore’s Law and which is the bottom half, the N channel only part of CMOS, was making high density medium speed stuff and the CMOS was relegated to, you know, watch technology, super low power and very slow. And everybody came to realize that if you made CMOS small, it could get very fast. And, in particular, I realized that CMOS could attack bipolar. That is, we could make chips just as fast and have five times less power, which was a big problem for the computer makers. So we focused on attacking bipolar products and that’s how part of the AMD Cypress war happened because AMD had a bipolar division. And I wasn’t particularly aimed at them. I was aimed at Fairchild. I was aimed at Signetics. I was aimed at companies making bipolar technology. But simple, bipolar was hard to make. It was expensive and the chips were big and you could sell the same function for two times more money than you could sell a CMOS function. So we made bipolar compatible stuff. That got us profitable. We had our three quarters of profit and we went public on May 29th, 1986. So we had twenty percent profit quarter in Q1. Then we went off those numbers in Q1 to go public. We actually started the four divisions. The money came from static RAMS, our base. We also did programmable logic, logic functions and programmable memory, EPROMS. The other three were being paid for by the SRAM bucks. Today, we still are in programmable logic and it’s particularly programmable logic and micro controllers today and SRAM. We’re number one in the world and we have a forty-one percent market share as of last quarter in SRAM. So we’re by far the biggest SRAM maker in the world. So that one is still a cash cow for us. We’re still in programmable logic and we still make programmable memory. So the only thing that’s gone is the fixed logic which died a Moore’s Law death when any chip you could make could be integrated in somebody else’s bigger chip as every generation of Moore’s Law started sucking more stuff onto the chip.
RB: Now your PSoC product line has become very successful. That’s an interesting product.
TJ: It is and it—and, you know, like my career where I jump from one thing to another, you know, every CEO can tell you why the strategy for going forward in the future is what we’re doing and he would lie. Basically, you roll on a roulette wheel four times and every fourth time, you get the number and you make some money if you’re still around. You know, back in the survival of companies, there were fifty-seven companies that are—that were American semiconductor companies when we were founded. There are only twelve of them alive today. Twelve out of fifty-seven. I keep that list. So just staying alive in our business is very difficult. National, for example, is now part of TI and was one of the big three of Silicon Valley. So SRAMs, we’ve ridden the entire cycle. They were important. They continue to be more important. They peaked out in 2000 when the dot.com boom hit. Turns out SRAMs were used to store the data temporarily on its way through a router. We made a huge amount of money. 2001 we crashed. We came very close in the first quarter of 2001 of having a zero book-to-bill ratio. That is cancellations equal new orders and zero net new orders on your books. There was another boom in ’95 that was self—or no 2000 was cell phones, ’95 was personal computers. Then that business has been declining. That business was six billion dollars in 2000. Today it’s more like six hundred million or even less. So it’s gone down by a factor of ten to twenty. So PSoC, our new product is really a survival tactic. If we don’t learn how to do something new and do it right, we won’t be around. We will be one of the three-quarters of the companies that didn’t make it, like the ones I talk about, as I brag about surviving. So basically PSoC is a microcontroller but if you want to be in the microcontroller business, you typically have five thousand parts. You have a micro—you have the computer and then you have peripherals. Pulse with modulators, timers, counters, analog to digital converters, digital analog converters, etc. You have digital peripherals and analog peripherals and then you make permutations of that with different kinds of memory; flash memory, e-squared memory, SRAM memory, and that becomes your product line. And we were something like twenty years later into the market. And I didn’t see how—it’s a very good, stable and profitable market but I didn’t see any way of penetrating a twenty company market where five of the companies were big Japanese companies that were pretty good. So we had acquired a clock company in Seattle. And the president of that company, John Torode, was a Ph.D. and a professor at Berkeley. And he came down one day and said he and his guys wanted to start a company internally. They wanted me to fund it like a venture capitalist and they would invent a programmable system on chip or PSoC and it basically would be a microcontroller core with programmable logic in programmable analog and programmable bus structure wrapped around it so you could pretty much turn it into any system you want. So I reviewed that and I bit in 2000. And today, that business is about four hundred million bucks for us and without that, we wouldn’t be around.
RB: That’s very significant. It seems interesting you mentioned the book-to-bill ratio. You know, in my opinion, that’s one of the classic, simple business characteristic ratios of the last twenty or thirty years. I mean, if your book-to-bill ratio number is this, you’re probably doing okay. If it’s this, you’re probably in trouble.
RB: You don’t hear that ratio talked about in other industries. I never understood why not.
TJ: Because—so book-to-bill—if your book-to-bill is 1.0, you got as many new orders as the orders are shipped, you’re going to stay flat. And if your book-to-bill is 1.10, you’re growing healthily. If your book-to-bill is 1.20, it’s boom time. If your book-to-bill is .9, hunker down. Don’t hire anybody. If your book-to-bill’s .8, you’re going to be in trouble.
RB: But you don’t hear the automotive industry talk about things that way for some reason. And yet the semiconductor industry, that was the first number you wanted to know.
TJ: Well see in the semiconductors—in cars, you’re comparing a bunch of companies doing this, right. So the book-to-bill’s 1.0. And 1.01 means you’re doing better than the guy who’s got 0.99. But in semiconductors, you had a bunch of companies growing like that. So if your book-to-bill was consistently 1.05, you were less good than a company with a book-to-bill of consistently 1.10. So it’s a primary metric comparing growth as opposed to a metric like revenues looks at size in a more static world. That’s what happened. I thought it was a good number. I was on the SIA Board, Semiconductor Industry Association Board, and I was there when they voted to stop reporting book-to-bill numbers. And I thought it was unfortunate. I kind of didn’t like being in a group that did government lobbying for their business. And I left the SIA and soon after that, they shut down offices in Silicon Valley and moved to Washington. Enter another lobbying group.
RB: Now over time T. J., you’ve got a lot of awards for various excellence events and which we probably won’t have time to go into. But you’ve also become or always have been, one of the more vocal voices of the semiconductor industry over time, you know, along with a few of your colleagues, including talking to congress about, you know, various things like stock option accounting and, you know, should the option value go to the P&L or not. We’ve all had strong opinions on that. So tell us a little bit about your interface with congress over the years.
TJ: Okay. Well, there’s a certain point in your career when you’re young, you’ve achieved your first business success. Say where a lot of the dot.com guys are right now, Zuckerberg, for example, and you equate that with being an expert on everything. And I had a little bit of that disease at that time. On the other hand, I never did go to congress and testify on things that I didn’t think were fundamentally important for my company and our industry. So I went to congress six times and five of the six times I testified there, I testified against corporate welfare. That cover right there—BusinessWeek—has me called the “Bad Boy of Silicon Valley” on the cover of BusinessWeek because I went and testified against government politics from semiconductors. And that was in line with my views. I’m a free market libertarian. And I believe that subsidies are unfair and unreasonable to take money from others and give it to rich companies like semiconductor companies are, point 1. And point 2, I believe the subsidies hurt the economy more than they help. I just wrote an article in the Wall Street Journal on that topic, where I was talking about money to create jobs. And the very simple point is that if you take the government’s own statistics, it takes a million dollars of capital investment to create a job. And I have two companies. I have a restaurant in Wisconsin where I invested a million point two and I created sixty-five jobs. That’s eighteen thousand dollars per job created. And I have Cypress Semiconductor which is much more expensive, where I had to build fabs and buy expensive equipment but even then, it cost me three hundred thousand dollars a job, 0.3 million versus a million for the government. So it’s very simple. If you take money from me or my company and say you’re going to create jobs with it, and then, of course, take credit for the jobs, what you don’t take account for is somewhere between three times more jobs destroyed to ten times more jobs destroyed in the private economy because the people from whom you’re taking the money would have created jobs more effectively than you did. I just—that’s my, in a nutshell, and I just wrote that editorial in the Wall Street Journal. So I went to congress and that, by the way, includes government “investment” in industry. So I’m not hypocritical if I don’t believe government should take money from private sector and put it in things the government thinks are good. That includes companies. So the concept of taxing people and giving it to companies is wrong. And I testified against that and my particular target was Sematech. So in 1986, Japanese have been beating us up for about six years and the industry, including even Gordon Moore, went to congress and said we had to have subsidy. Japanese have subsidies and we can’t be competitive without a subsidy. I said well that’s really stupid but okay, they said that. And then you get three or four semiconductor luminaries there and then you talk to a bunch of congressmen that have no clue about business at all. And then they eventually got a commitment for a billion dollars over several rounds of funding from congress which, in those days, was real money. And I went and testified against it. And I said that it wouldn’t help our industry and that we would still beat the Japanese because of the fundamental way Silicon Valley worked, which is free market capitalism would dominate over crony capitalism and government controlled capitalism that was practiced in Japan. That’s why we would win. That was the fundamental. That wasn’t going to change. And all you’re doing is messing up and distorting the economy in the United States and I didn’t want your money. Then I told a story where when the money got given by the government—this is beautiful—it got given to the people who asked for it. And they formed Sematech, this corporation. So there was a Board of Directors and they, in effect, controlled where the money went. And then they said well if you want to join Sematech, you got to pay. So, all of a sudden, the government was paying these guys and the other semiconductor companies would have to pay these guys in order to get into the Sematech. I refused to pay. It was expensive and we’re a small company at that time. Then what they did is they went to the equipment companies, the people that make equipment to make chips and they put out contracts and they made the contracts exclusive for a period of time to Sematech members. I remember going to a company in Arizona—I didn’t—our engineers were there and they said—Westech—and they said we can’t see the most modern piece of equipment. Why? (I’m on the phone with them.) They won’t let us in. It’s in a room and you have to be a Sematech member to go in that room. So I started raising hell about it. The president of Westech denied it. And I started raising hell and going to congress. And several congress people looked into it and there was enough noise they kind of hunkered down a little bit. But they actually were doing it. Fi—they called me a liar. They said that there was no exclusivity, that I was wrong, how many times do they have to say the same thing? I’m a crackpot, etc. About four years later, the county—I forget the name of the county—that has Austin in it, which is where Sematech was sued—Sematech. Sematech laid off a bunch of people because they weren’t successful and they couldn’t keep up with Moore’s Law and it was a waste of time. And they basically imploded. And all the promises Sematech made to that county weren’t coming true. So the county sued them and they asked me to be an expert witness. So I got subpoena power. And so I subpoenaed all the documents, including very clearly, all contracts between Sematech and its member companies. And they were asleep at the switch on the other side and they sent T. J. Rodgers this. So I dug through there and there it was—Westech contract exclusivity, signed by Castrucci who—Paul Castrucci—who was the IBM guy that ran Sematech and the president, Tom—I’ve forgotten his last name—who ran Westech. They absolutely were doing that. So I’m against government, you know, industry-government cooperation. What that means is the guys who are richest in the industry, who are the least competitive, can pay part of their profit back to elect people in congress who then can rig the game so that the big guys can win. And this is how General Motors gets created, you know, in our industry. So I always talked against that. The first time I went, I was thrilled to be invited. It was the subcommittee of the House. And it was the Economic Subcommittee and I knew Milton Friedman pretty well. I talked at some meetings he was at at Stanford and they invited me in because I was a free market Silicon Valley guy and they kept contact with me. And I called up Friedman and I bragged about going to congress. He said oh, I used to do that. He said it’s a total waste of time and I thought man, what a downer, you know. You know, I was saying—he was being too negative. So after my sixth and last trip to congress—this one is a senate committee, a Patrick Leahy and Howard Metzenbaum—of the eight people on the committee, two showed up. I fly six hours to Washington. I spend all six hours taking that much data and compacting it into two carts that I can give the points I want to make in six minutes. I walk in. There are two congressmen there. Metzenbaum looks at his watch and says we’re running kind of late for lunch and flips on the yellow light, which means I have one minute left. I talked for about two minutes then he cut me off. Leahy from the state of Vermont, also known as the state of IBM, was hostile to me, didn’t acknowledge that I walked into the room, didn’t look up once when I was talking, was doing his homework all the while he was there, didn’t thank me for testifying. Then I got in the airplane and flew six hours back. That was when I realized, you know, Milton Friedman’s right and I’m never going back there again. And that was like fifteen years ago and I won’t waste my time going back. They’ve made up their mind that the contributions and backroom deals are all done and testifying presumably to convince people in the congress that there’s a certain way that might be better, that’s irrelevant. They’re looking for sound bites where they will distort what you said and apply it to their side of the argument, which has already been made before you even show up.
RB: Interesting. T. J. let’s just talk about venture capital and funding briefly for a minute. Obviously the venture capital world has morphed over time from its, you know, classic style in the seventies to where we’re at today. And in many cases, corporations are playing somewhat of a role of the venture capital. And it seems like Cypress has been active in that area. The example that jumps out, of course, is SunPower, which is, you know, not a static RAM company, a quite different business. Tell us how you convinced yourself that SunPower was a good business for Cypress to be involved in.
TJ: Well, again, I can tell you the grand strategy of seeing green future and understanding being at the right place in the right time, all be bullshit, right. What happened was I was in the mode of SRAMs are dying and you’re going to die if you don’t do something new, other than SRAM. So we’d already launched PSoC. It was growing but not big enough to materially offset the top line yet. And I saw solar energy happening. The way I saw it is we built this building in 2000 during the boom and they asked me as sort of an option, you know, do you want draperies or blinds? What color carpet do you like? Do you want solar on your roof, right? And I went, why would I want solar on my roof? So they came in, a company called Power Light—Power Light—a Berkeley company I think called Power Light, came in and put a roof up, with Siemens I think solar cells. But they showed me an ROI. It was kind of riggy but they showed that basically the money we paid for—we have 300 kilowatts of solar now—would be offset in a seven-year period and after that, I’d enjoy thirteen years of free electricity. And that’s happening. And we’re thirteen years in and the thing’s still producing quite well for us. So what went into my mind during that interaction was solar is near economic relevance and it’s going to be a hot deal. Fast forward. One of the smartest guys I went to Stanford with was Dick Swanson. He was in my class. He worked for Meindl. Guy was a genius. I never minded competing for anything in any school, and in terms of you want to take a test, we’ll take a test, not a problem. And there are a few guys you met that you realized that they’re off the chart. He was one of them. Shockley was another. He was a teacher of mine. First day I met Swanson, I went in and he had drawn a sphere. This is the day—this just before the Hewlett Packard got invent—calculator got invented. So everything was done in the big math, simplifying equations. And if you wanted to use a computer, you had to take your card deck over to the computer center, which was a horribly inefficient exercise which I did a few times and said this is not for me. Swanson was doing big math. He was very good at it. And he had an equation drawn and he had a sphere drawn and he had angles and arrows on it. And I walked in and I looked over his shoulder and it looked exactly like the Schrödinger wave equation from five feet away, looking over a guy’s shoulder. So I asked him if he were working on a quantum mechanical problem and he said no. He was working on a green energy problem. And I said okay, how’s that work? He said well, you know how tops precess due to the Earth’s rotation. He said so basically if you could make a top where the rotor was tens of tons and you could run it and keep it running with a small engine, when that top precessed, it would do so at great force and if you hooked it up like a crankshaft in an automobile, you could get motion and you could create electricity with it or you could gear it up or down and run a dynamo with it. And I go okay. And then he explained to me how the tops would have to be arranged on the Arctic Circle. So I’m looking at it saying okay, this guy is like, you know, kind of like Elon Musk is today, what are we doing trains for? We need things in vacuum tubes zooming along, you know, just barely subsonic, right. So I’m going okay, this guy’s a big thinker. And then I was walking out and I thought now wait a minute. This is bullshit because I—one thing I’m really good at is applying fundamental laws of physics and chemistry to assertions in business and technology and finding some soft spot. So I turned around to him, I said, what about the conservation of energy. Where are you going to get all that power from? He says oh, the Earth would rotate a little bit slower but it would be such a small change, nobody would notice. [laughing] And I go, all right, I get it. Anyway, Dick Swanson—that was one of his green energy ideas—started SunPower. And like Shockley, who was a brilliant business man, enflamed as a—a brilliant technologist enflamed as a businessman, Swanson didn’t flame out but he ran a company that was twenty years old and doing less than two million a year. Fast forward many years, I bump into him in a coffee shop. How are things going—right at Christmas. Not so good. Why? This is a downturn of 2001...
RB: Big downturn.
TJ: Big downturn. What’s going to happen? Well, I can’t make payroll. I’m going to have to lay off half my people before Christmas. We’ve been together a long time. What are you making these days? Oh, solar cells. One thing you realize when you put solar on your roof is you’re either into solar or you’re not and if you’re in, this building gets thirty-three percent of its energy from the roof. And I had ever square foot of roof that didn’t have a shade on it, covered with solar. So one thing you realize right away, that you’re limited by watts per square meter, which is efficiency. And if you go in, you’re going to cover your entire roof and what you’d like your roof to do is not only power your building, but put power back on the grid and make some money as well. And it turns out you can’t get that. You can only—if you cover a roof, you can only pay for part of the building with power. So I said so what—what’s your deal? You know, what’s your edge? And he says high efficiency. Okay. Said so what efficiency? Said oh we make twenty, twenty-one percent cells and so twenty-one percent of the watts per square meter, the Earth could turn to electricity and the other guys make fourteen, if that. And I said okay, I’m interested. So we talked. He gave me a pitch—rudimentary pitch—in this office. And I said so how much do you need to not crater? He said well we got debt. I need $750,000. So I wrote him a check, tore it out and gave it to him. Unfortunately, that check disappeared. I don’t have the cancelled check that was the first check that started SunPower. I have a Xerox of it but I don’t have the check. So we saved SunPower. We, Cypress invested in it. I had trouble getting my board to go along with it. You’re a chip company; you’re not a solar company. They’re both made about silicon gentlemen. That’s what we do. We’re silicon engineers. Took me a year and a quarter to get my board to agree to acquire SunPower. I could have bought SunPower for three million bucks. When I finally bought them, after taking my board along, I had to pay fifty-seven million. Four years later, we spun them out and we spun out a billion and a half dollars, 1.6 billion dollars’ worth of SunPower stock to our shareholders. So the ROI was really good for it. My talk—famous in Cypress lore—so I had—the board voted twice against SunPower. It’s the only time the board ever voted against me, ever, in all my tenure. You know, when you’ve been there thirty years and your oldest board member has been there fourteen years, you kind of got some clout. I’m not the chairman. I don’t want to be the chairman. I want an independent board. I want them to be questioning and pushy. But when I want to make a strategic move, I want to—if it’s justified, I want to make a strategic move. So I walked in and one of our directors, Fred Bialek, who’s a founder of National Semiconductor, was sitting there and I held up a wafer and I said Fred, what’s this? He said it’s a wafer. And I said, do you know what’s on it? And I showed him the chips and he goes no. I said dual port RAMS. I said this is the most profitable product we make. And I said I will sell this—I make this wafer for a thousand bucks. I will sell it for ten thousand dollars. Then I brought in a scale from my winery and I laid it on the scale and I said how much does it weigh? And he said little over an ounce. I said okay, suppose it were gold. What’s it worth? He said 375 bucks. I said okay, so as Silicon, it’s worth ten thousand dollars and as gold, it’s worth 375 dollars. That’s what we do Fred. We’re alchemists. We turn silicon into gold, better than gold. Buy my fucking company is exactly what I said in the board meeting. So they’re all sitting there like that and they go this man’s not going to take no for an answer. So that’s when we bought SunPower. Disarray, foreign Silicon Valley fab, atrocious manufacturing technology, horrible quality. So I had to get—spin out a lot of guys. And basically what they had is the best R&D team in the world and then I brought in my guys to run the place and make the fab work right. We helped them with a technology we call autoline, which is basically lights out, automated a line which we have for assembly and tests. We got that in 2000. And I have the patent for that on my wall back there. And this one was to take a silicon wafer and turn it into a solar cell and automatic lights up. So we transferred autoline, we put them in our facility—next door to our facility in Manila, so they had automation and low costs so they had really good cost structure and they started producing twenty-one percent solar cells. And that was SunPower. And then our investors saw—well it turns out, if you did the analysis of Cypress stock and Sun Power stock, both publicly traded companies, and subtracted the number, Cypress Semiconductor is worth negative money. SunPower was worth more than Cypress yet Cypress owns SunPower. So our investors started pressuring me to spin out SunPower. I would have kept it today. We’d be a four billion dollar company today if I still kept SunPower. They’re one block from here. But we spun them out. Our investors made a bunch of money. Inside we all had our options multiplied up to accommodate the loss of the asset that we gave away to our shareholders. We made a lot of money and it was good. Today SunPower is 2.7 billion and from a revenue point of view, they’re the biggest solar company in the world. And they still run autolines in Manila and in Malaysia as well.
RB: Interesting story.
TJ: And my guy, Tom Warner, that I—he was running one of our startups, we’ve started fourteen startups—I had him go over and run SunPower and he’s still running it today. He’s a very good CEO. He’s one of the fifty-five that came to that meeting.
RB: Interesting. Interesting. Okay. So what’s next T. J.? You’ve been thirty years with this industry and with this company. I happen to know that you are in the winemaking business, which is not like semiconductors at all. You and Steve Zelencik, by the way. So do you think winemaking’s going to take over your life or are you a good for another thirty years at Cypress?
TJ: Okay. Bunch of questions there. First of all, whenever anybody asks me are you thinking about retiring, I have a standard answer. I’m known as a fiery kind of intolerant of low quality work and bad thinking kind of guy that our—we have somewhat of a blue collar kind of tough reputation as a company but intellectually, we’re very rigorous. And so everybody knows that and with that as a background, when they ask me are you going to retire, I say I’m going to retire someday when I’m in the board room and I’m screaming at the top of my lungs at some engineer who’s done something really stupid and I roll over with a heart attack and they carry me first—feet first out of my board room. So that’s my standard answer and as I said earlier today, I’m sixty-five. That’s how I feel today. Don’t know I’ll change in the future. I’ve surprised myself many, many times. But there’s nothing else I do, wine included, where it doesn’t seem trivial relative to what I do. You know, it’s like you’re a grand master in chess and everything else is like checkers. You know, I got personality so I got prima donnas. I got sites all over the world. I got the government that’s bent on, you know, harming Silicon Valley by double taxing options, once on the P&L and once in the form of income. It’s about as foolish as you could get. It’s like if I were running the old Soviet Union and I could get the Amer—if I could, you know, undermine the American democracy and get double taxation on stock options in Silicon Valley, it would be a big victory for me as the head of the Soviet Union to get that done and yet, we did it to ourselves. There’s so much going on. Moore’s Law—the technology changing in ways you can’t even imagine. You know, I live in a world of book-to-bill, book-to-bill is a statement of exponential growth—exponential growth. I live in a world like that and it always amazes me how difficult it is to see, even a few years ahead to the future because you get surprised. Japanese got surprised big time. You know, I have books here by Washington luminaries saying oh, the American semiconductor industry is doomed because Japanese are going to take us over. Well gee, guess it didn’t happen. Guess free markets prevailed over managed economies. And they’re in their about second decade of depression where even the smartest guys in the world can’t possibly predict what’s going to happen. So you must let a free market—you must allow for mistakes. You must allow for companies to go broke. You must start ten companies and allow ten of them to go broke so one of them become Google. If you don’t do that, if you don’t have the courage to let people be free in the market, you’re going to suffer as a result. You’re going to—your dynamic range, the amount of upside you could have is going to be compressed by the vision of the politburo. And we’re starting to have one of our own. It’s gotten worst in the last sixteen years. So I look at all that. I look at politics. I look at technology and when you get anywhere else, I—winemaking’s very interesting. It’s very cross-functional and actually it’s quite a bit like semiconductors where you have to know agriculture, a little bit about plant biology. You have to know about organic chemistry that’s got—what got me back into organic chemistry later in my life. Reread my chemistry book, this time enjoying it because it meant something to me because it was attached to what I was doing. You got business. You’ve got marketing of sex appeal associated with it. So that’s a lot of fun but what do you do after noon on Monday. You sit in your office. I mean, what do you do? I’m used to a fire hose where I have to ration my time and work on only the things that are the most important. What do you do when all of a sudden, if you wanted to, you could work a half a day a week and run your business? So no. I’m not doing that. No, my wife runs our winery and I got a lot of money in it. And it’s a cool winery. It’s high tech. But it’s not what I want to do.
RB: Okay. Now the best Pinot Noir in the world is your objective as...
TJ: That’s right.
RB: Is it there yet or is it around the corner?
TJ: No, the wine is there and I call it the best Pinot Noir in the New World. It’s a very—it’s a mission statement and no mission statement should just be said. It’s crafted. I say New World to mean all but France. So Australia, America, New Zealand and I say Pinot Noir instead of burgundy because I realize that Pinot Noir that grows in Burgundy makes a wine which is different and unique. And Romanée-Conti, the Lafite-Rothschild of burgundy, the number one wine, you know, it’s been in the record since 1232. Okay. And even if you have a slow rate of learning, when you can learn for 800 years, you’ve learned a lot. So they make a great wine. Their latitude goes through Vancouver, Canada, their cold weather. They’re about—they have good and bad years. Bad years simple. Grapes didn’t get right. So they’re right on the edge and then they’ve learned to cultivate. They’ve learned how to grow the grapes. They’ve learned what clones of grapes to grow for, you know, deca—excuse me, centuries. And that’s a great wine. But outside that, best Pinot Noir in the New World and I do the tastings all the time. I have them at my house. My wine is sold mostly by mail order to CEO types in Silicon Valley. I have dinners at my house and I will bring out the finest Pinot Noirs in the world, including—I don’t bring out Romanée-Conti because that’s like two thousand dollars a bottle, but I bring out other wines made by that group, the Domaine de la Romanée -Conti. I’ll bring out Echezeaux Romanée, some of the really good wines and people will say yep, your wine deserves to be on the table. And that’s as far as you’re going to get in one lifetime. You know, Aubert de Villaine who runs Romanée-Conti is, you know, generations into the business.
RB: Yeah. I saw a nice recommendation on the wall up here for—from ISV on the wine. So...
TJ: Yeah, that I got in the early years. The wine’s quite a bit better now. We made our first grapes—I planted in ’94. I shipped my first wine, gave it away free as samples in Silicon Valley in ’96. We sold our first wine in 2000. It was good. The 2000—we released two to three—three to four years in arrears because we make wine in the French style where it’s got more in it. It makes it needing time to drink as opposed to, you know, drink it two years old, which means you can’t ever make the wine to its potential. You have to take stuff out of the wine to make it drinkable at age two. So we release four years out. And our 2008, which is the last wine we introduced—we’ll introduce our ’09 this year. It’s a killer wine. I’m very proud of it.
RB: Okay. I’ll look forward to trying that one. So T. J., in summarizing then maybe, the semiconductor industry, which of course is vital for the world and everything runs on chips, it’s become somewhat of a commoditized business. It’s still high tech but a lot of people are doing it very well these days. How do you see the U.S. role in semiconductors going forward, vis-à-vis Europe, of course, but maybe more importantly, China and other worlds? Ten years from now, will it still be—will the world still look at the U.S. in awe in the semiconductor industry?
TJ: I think so. First of all, the maturing of the industry. It was my old boss Jerry Sanders who called chips the crude oil of electronics.
RB: Remember it well, yeah.
TJ: And he’s right. And it was Carver Mead at CalTech, professor, who taught first about a foundry, meaning the making of a chip becoming a commodity that you buy at a foundry. And the art of the chip being the design of the chip and then the foundry hammers it out. And the word foundry felt highly derogatory because I’m a process guy. But it happened. And now those foundries aren’t low tech. They’re very high tech. But what’s happened is the island of Taiwan has decided to be the center of the world and China mainland is going to challenge them. And China and China are going to be the places where you buy chips. And they are foundries. We have only one fab left. We used to have three fabs. We have one now in Minnesota. It’s still economic, still makes money, it still competes with the Chinese head on, but ten years from now, we won’t have that fab. We’ll be fabless. So then we’re focusing on something smaller. Now you can argue in a way sort of like when RCA gave up televisions in the seventies and they started making them in Japan and the TV’s went to Japan first for manufacture, then the art of making televisions, designing them went to Japan. And then the former great companies in America, electronics companies, shriveled up. I don’t see that. What’s happening is everybody has a paradigm of a chip in Moore’s Law. So you get more transistors on a chip and they’re smaller and they burn less power and they’re faster. But that simple paradigm really doesn’t describe what’s happening. What—and the reason all these companies have gone out of business, if you don’t understand what’s happening in the industry, you continue to do what you’ve done before. You continue to be called Kodak and you continue to sell your film and everybody else is putting images on silicon and you go out of business. Okay. So you have to understand if you’re selling film, you’re in the image business and you have to understand where imaging is going and be there. So what’s happening today is if—a typical Intel processor today will have a billion transistors on it. There will be more transistors on one chip than were in a DEC minicomputer when we started the business and sold static RAMS to DEC, by a lot.
TJ: Okay, so therefore, when you design a chip, you’re no longer a chip guy. When you design a chip, you’re a systems guy. So the architect of the DEC VAX computer would have been an architect today of a chip and he would be worrying about putting that entire computer on a chip. And instead of worrying about problems like cooling and air flow or water flow, he’d be worried about problems like thermal cooling with packages and heat syncs and stuff like that. And therefore, what you understand is that the value-added part of the chip industry’s about systems, not about making chips anymore. And there you’ve got companies like Qualcomm, Broadcom, us in the future. PSoC is in that category where you are solving customer problems and it happens to be on silicon. Twenty years ago, it would have been on forty pieces of silicon put together in a printed circuit board. Today it’s on one chip. So our industry will still be here and we will still be systems people. But in terms of consumption, used to be sixty-five percent America when we started, thirty-five percent rest of world. Today it’s fifteen percent America—Americas and eighty-five percent rest of world. And most of the rest of world is China and Japan. Fifteen percent America, fifteen percent Europe, seventy percent Japan and China. Okay. So that’s where you’re going to sell your chips but if you look where those designs came from, they came from Silicon Valley. So you look at the companies that are systems level companies and understand how to move data on the internet, then understand how to encrypt data, that understand how to store data, that understand how to retrieve data, Google, they’re the ones that will drive the value. And, you know, the co—and companies that change their paradigm are companies that prosper. So look at Apple. I mean, good example of a company that changes its paradigm to match the time. If they were still back trying to compete against Dell to make a cheaper laptop, you know, they would be like Dell. They’d be in deep trouble right now. But they’re not. They’ve invented things. They’ve looked at what function their products perform for customers and they’ve envisioned what the customer will want in the future and intercepted them with new hardware, which is made out of chips.
RB: Yeah. Well it goes back to your, you know, PSoC because you said, you know, it’s basically saved Cypress. Today it’s, you know, forty-odd percent of your business and without that, the company would be different. So...
TJ: I mix PSoC and wine. The winemaking process is fairly complicated and if you want to study it, you’re studying multiple temperatures and other parameters, viscosity, density of the must, the grape juice, as it ferments. And I was approached by U. C. Davis to gift them the money to put a hundred and fifty fermenters in their new Mondavi Center, Robert Mondavi Foundation gave them a gift of forty million and they built this spectacular winery, best university winery in the world. And they kind of didn’t have the money for the fermenters. And I thought about giving professors a check for a million bucks and hoping for the best and I said no. But I said what I will do is I will build scientific instrument fermenters that will allow you to do your work and give them to you. So they were, interestingly enough, reluctant in the beginning. They just wanted the check and go off and buy some stuff commercially available. They even had drawn their own fermenter. Turns out I made all the equipment in our winery, all of it. I make the stainless steel, I made the presses. There is no commercial equipment other than small tools in our winery because I copied the winemaking technology of Romanée-Conti, when Romanée-Conti became famous, big time famous in the 1830s, and they had a winemaker who actually recorded this winemaking process and I’ve studied that. And I’ve studied how they grew grapes at that time. And even though I’m high tech, I make wine the way it was made in 1830 in Romanée-Conti. For example, I use native yeast. I don’t put any yeast in the wine. I let the native yeast on the grape ferment it, which if you read the journals, which I do in winemaking. I’ve read more winemaking Ph.D. level journals to date than I had read electronic journals at the time I got my Ph.D. So I understand how to make wine. That’s the reinvigoration on chemistry. And I make my own equipment. So I told them I’d make equipment. So we set a spec about what do you want to make wine in? Well we want something we can move around. Great. We want something that’ll make twenty to thirty gallons of wine so we can analyze the wine and we can put it in containers and store it. We want something that if we combine our triplicate experiments, three—whenever they do an experiment, one leg of the experiment, they use three fermenters to get rid of variations, that where we can combine the triplicate and make a barrel of wine. So I put all that together and I hand drew their fermenter the same as I did for the business plan and for LJ Sevin in 1979. I drew it on quadrille paper and we made fermenters for them. Really nice. And we put in instrumentation and we put on—we make a radio chip. So we put on a high interference immunity radio chip to make the fermenter connect to a computer which in turn connects to the internet. So there’s all these data and curves that come off a fermenter. And then they can study and they get more information that any fermenters in the world. There are individual fermenters with more information of a given type but there is no group of large number of fermenters where you can get all the mass information they get and get it all into a computer and on the internet. So I can go out here and I can go like this and I can go look at U. C. Davis’ internet site and I can watch their hundred fifty-two fermenters they actually have and see what’s going on in their fermenters.
RB: This could be a whole new business for you. I mean, fermenters all over France….
TJ: These I gave away. And they cost me 3.6 million, not one. But no, we—of course, I had engineers working on this project and it was a PSoC project. That’s really where I was going. All of the things I did, communication, running the Brix Meter, running the hub center that looks at all the instruments, putting it all in packets, moving it into PC, are all made with Cypress chips and the brains of every subunit is a PSoC chip, typically less than a buck. And that was my project where I learned a lot about system development. I hadn’t worked on systems for a long time and this was a lot of fun, especially in a practical, electronics hostile environment like a winery. Guys are spraying water with one inch hoses and, you know, they spray water directly on electronics and if you don’t have it waterproofed, it shorts out. We went through that. So that’s how I crossed over electronics and that’s what’s in my winery. But it’s only to look. It’s not to change it. So I look and know what’s happening to the wine but the instructions are—we foot crush. We don’t use machines, to crush more heavily and more lightly for the rest of the fermentation because there’s too little or too much tannin in the wine, which you can measure real time. Our current project is we’re putting in an inline spectrophotometer in the wine that’ll actually measure the components of the wine while the wine is being made and report them every fifteen minutes to the computer. So you’ll have a huge amount of detail of what’s going on but the grapes being foot crushed and not de-stemmed, and fermented on native yeast, which is what we do—Davis doesn’t—we do—won’t know the difference but the time between the—the only thing the grapes would notice is I’m in stainless steel, not wood.
RB: Well I look forward to checking that out, you know, in the near future. So T. J., as a Silicon Valley, entrepreneur, engineer, CEO, award winner, philanthropist, thank you for taking the time and this Silicon Genesis interview will be up on the Stanford website and I look forward to seeing it and thank you for your time.
TJ: You’re welcome.