Horst Sandfort has been a leader in moving U.S. semiconductor companies into Europe . Starting in 1968 with Texas Instruments, he introduced their calculators into central Europe . Next, he did the same with Litronix. In the late '70s, he initiated Fairchild Consumer Electronics to Central Europe, and later became Director of International Marketing at Fairchild in Mountain View . From 1984 to 1994, he managed LSI Logic European operations. First, establishing a design center in Munich , and then he became LSI's President in Europe , including the responsibility for manufacturing. Since that time he has held CEO positions with a variety of American electronic firms. Starting in 2007, he has initiated a series of European semiconductor pioneer oral histories in conjunction with Stanford University . The European Silicon Genesis interviews are available at this site.
RW: We're here in Atherton in 2007. And tell us a little bit about your family and growing up.
HS: Well, I was growing up in Germany at the Dutch border - actually, almost on the Dutch border in a little town called Gronau in Westphalia . My father, while I was growing up, came back out of World War II, and the time after World War II - I was born in 1942. And the time between 1948 and '52 were pretty difficult times in Germany , but we were lucky because my grandfather had a farm about thirty miles from where we lived, and he was maintaining his farm. He was in his mid-eighties at that time. And it was always great to go to just visit with him so we could get meat, we could get milk, and we could get food out of him, so our family was not really starving. And the great news about my grandfather was that he became a kind of a role model for me because he has never been out of his area for his lifetime more than about twenty-five to thirty miles around. That's what he knew. And when I met him first, and when he died at 99 when he was ninety-nine years old, he was still wearing the same type of shoes, not the same set of shoes, which were made out of wood. He did it all by himself, and he fitted those shoes to his feet, and it was an absolutely fascinating individual who would not be interested in anything that would change his life until he saw the first tractor. And he wanted one tractor, and he drove tractor. I think he was the third farmer in the entire area who was riding a tractor when he was ninety years old. So - I did not follow that model of a guy who was just getting the thirty miles out of home to visit to Grandpa. Very soon after I went to school, mid-term of my school term and I was about fifteen, I became not homesick, I became world-sick. I wanted to go out and discover the world. So my first school assignment was already forty-five miles out of my hometown. I stayed with a cousin of my father. And after I finished school in 1964, I already moved to Frankfurt , whereas the rest of my family, my two sisters, my parents, my mother's parents, all stayed in my hometown. So I was the bad kid on the block.
RW: Well, where did you go to college?
HS: I went to college in Frankfurt , and got a Bachelor's Degree in Business Administration. And I worked for a company called Hoechst AG, which is one of the three big chemical giants in Germany that came out of the IG Farben, which was destroyed after World War II finished. And there I was in the dye stuff and emulsifier department, got my degree, and was sent to Hamburg into a sales office to sell the products to pharmaceutical companies, cosmetics companies, oil companies, everybody who needed to mix oil and water. And in 1968, I had a very interesting experience, because I was going home, visit with my parents and my sister, and my sister was three years younger than I was, and she told me about a new job she just got with a funny American company which was called Texas Instruments. And this company had just bought metallurgical group in Holland , in Almelo , by the name of Klixon , which was bimetal devices that were used in refrigerators at that time, and TI's metallurgical department in Attleboro , Massachusetts had acquired the company. So she told me all about the great guys she was dealing with in the office. They were flying from Geneva to Dallas to Boston , and so she said these are great fellows. And so with that story, I went back to Hamburg to my job. And in 1968, it was about the April timeframe, the Hanover Fair, the famous German Hanover Fair, which was a demonstration that after World War II, the German industry was back in shape and could demonstrate new products, I was visiting, and came from Hamburg down to Hanover . And interesting enough, there was a big booth by a company called Texas Instruments. So this was my first exposure to American companies and to semiconductors at that time.
RW: Well, it must have been a different division of Texas .
HS: Well, this was the semiconductor division, actually, that was exhibiting there, and they had a small section of where the area that the system was dealing with, which was the bimetal devices. But I was interested all of a sudden in semiconductors because I had first of all heard that these American people were great people to deal with. Second, I have heard that semiconductors was something that was the next new thing that would change the world over. Now remember, I changed already the lifestyle of my family by going out to another school, going out to Frankfurt, being now on the road in an office in Hamburg , and so change started to attract me. So I was talking to the TI people, and I said, look, I got a little idea about chemical background, I got a little idea about business administration, I have been in sales, is there anything I could do for you? And they kind of laughed because they said, well, we have hired electric engineers, we have hired electronic engineers, we have hired all kind of scientists in our company, you would be the first type of fellow who really doesn't fit the scope. So I said that's bad. How can I fit? I mean can my chemical background fit, can my sales background fit? And finally one guy came and said, what do you think then? And he said, well, tell me what we are showing here? And I said, mmm, not really, but there's something that attracts my eye, and that is we have a series of things here that seem to be logical. It's called 1N-something. And there is another colume that you talk about which is called 2N-something. Well, that must be something different than the - the 2N must be something different than the 1N. And then you have an SN series of 74-some-00 devices with different letters behind it, and four digits. And then you have a five-digit segment where you have an SN that a four in front of it, but not 74 X 72 . So my logic tells me this should be something different. And the guy laughed and said you're right on. They are. These are diodes, these are transistors, these are TTL circuits, and these are linear devices. I said okay, give me a chance to sell those and I will do it. And they said, well, we can't really make that decision here. You need to visit with the big boss in Geneva . So I met with Dick Wood, the big boss of TI at that time in Geneva , and he said, Horst, you're crazy, but I like crazy people. And try it. If you don't mind being fired after six months, if you don't proceed and not be accepted by your customers, then we give you a chance. And that was my engagement in 1968 with Texas Instruments, my first job on semiconductors.
RW: Amazing. The first non-EE they hired, I guess. So how did you learn about semiconductors?
HS: I tell you, that was the toughest period of my life because I had to go engage with customers, not really knowing how they were doing, and having big books at night on my desk. So I was writing like a mad man. Everything my customer was saying I was writing down while we had the discussion of what he was doing and what his requirements were. Then I was going home, reading the books and studying it, and figuring out whether there was anything in the books that made sense to what you ask. And then I was calling the factory and ask the factory, look, here's what the customer says, here's what I find in our books, and here is what my answer would be. Does it make sense? So I asked the triple E's and all those fellows back in the factory, the part monitoring guys, the manufacturing guys, whether what I was doing was making sense. And they either corrected me or said go ahead. And they were serious. So I was lucky that I met with people who were serious and didn't try to get me on the wrong track by giving me bologna. So they told me really, when I was right, they said you're good, when I was wrong, they told me think about this, think about that. And I did it. So I succeeded. I didn't get fired. Actually, I got a job back in Munich after I was a sales - regional sales manager, I became marketing services manager at the headquarters in Munich .
RW: Now, did you visit the States during these periods?
HS: Immediately after I was approved after six months, they sent me to a sales meeting in the United States in Dallas , Texas . This was in the middle of 1969. And I had to learn an interesting lesson here from a gentleman at TI whose name is Jay Rodney Reese. He was Executive Vice President in charge of worldwide sales. And he asked the audience a question, and he said you all want to be salesman, and I can tell you, every single individual in the company, regardless whether he's the CEO or the man at the door, or the girl that cleans the factory, every person in the company has to be a salesperson, because that's what makes a company, ultimately. Now, what does a salesperson, however - a real salesperson that goes out to visit the customer have to do? And we were all sitting there, and we were getting into, well, you need to know your - you need to know your stuff, you need to understand the customer stuff. He said it's simpler than that. And we were all curious. And were sitting there and saying what could it be? How simple can it ever get? And he said none of you is right, here is the answer. All you have to do is separate people from their money, and you'll be the best salesperson in the world. And I never forget that statement from a six-foot-eight individual, a classical Texan in his, you know, very Texan language. It was absolutely a phenomenal experience.
RW: That certainly is a Texas way of doing business. In the case of Enron, they separated California from a lot of our money by not supplying electricity. So how - where did you end up at TI?
HS: At TI, in 19 - actually, I was, as I said, in the Marketing Services Department dealing between the factory and the customers, making sure that all the documentation was there. And in early 1972, TI decided, because of the crisis that was starting in the semiconductor industry in the '70s for the sales that they needed to go forward and use the semiconductor capability in their "end products." So TI developed the Datamath calculator line. And they looked around and said who - who is again around here of the crazy guys was willing to start something new from scratch. And so they started talking to me again and said, Horst, isn't this something that you would consider starting off the ground and running? And so in 1972, I took the responsibility for Central Europe for the Datamath calculator line for TI. So this got me into a total different field again of "sales and sales approach," and sales launches of a product that was, again, novel, because nobody at that time had used a calculator. The people in the accounting departments, in the engineering departments were using mathematical and mechanical devices. Like in Germany , the famous Walther mechanical adding machine. And I - in my own little mind, I said easy. We will sell this because it's obvious. This little machine where you punch the keys and you read the numbers, you know, why would anybody do this damn thing and fiddle around with it anymore? The truth is it wasn't that easy to separate these people from their bad habits of what they have done for thirty years and which they trusted to do something different. So this was the first big time for me that I had to deal with creating change in an established environment where the sales channels were established, the people that were using the machines were comfortable, and here came this crazy fellow with a name of Texas Instruments into an established market where a company like Walther , with a very good German name, had established the sales as a market leader. Was an interesting challenge. I hired four people out of the TI group of people that I knew were willing to accept change, and were creative people. And then we tried to convince, first of all, the organizations that were dealing with adding machines, the office supply chain, to accept Texas Instrument's calculators. And they wouldn't. They said no way. This will never make it. People don't trust punching keys and reading numbers. They know from digging two times, digging three times, dialing another thing, that the numbers are correct. How can they know that what they punched in comes out correct? I said, well, simple check. Two plus two equals four. You can do that in your head, you can do that on a machine. Now if you can do that several times and you see that all your multiplications and divisions of the simple numbers are correct, logically the complex numbers must be correct also. Still, people didn't want to buy it. So simply we had to come up with a grandiose idea, and the grandiose idea was where are the people that have the money? Remember what Jay Rodney Reese told - taught us? All it takes is separate people from their money. And we said, oh, there are dentists out there, there're opticians out there, there are people who have money and who are also kind of - a little bit advanced in their head over those bookkeepers. Maybe we address those. So we bought mailing lists. We went to department stores, and we talked to the department stores and said we will be putting a big mailing in the Frankfurt area and the Munich area, in the Hamburg area, in the Düsseldorf area, and we will have certain stores where we will have, on our responsibility, stock for you to sell. So you pay us whenever you sell. The guys in Dallas told us we were nuts. That's not the way to do it, because we were not supposed to be the bank. We said we have tried every other avenue, let's try it. Big success. We addressed the right people, they were curious, they came to the stores, they bought the product, and the from that time on, we had a breakthrough - now, the word got around, there is a new product, very successful, and if you want to participate in the sale of this new device, you need to get on, call Texas Instruments. So our business was growing from '72 to '74 in - in astronomic - in astronomical numbers really. And we had calculators coming out, the Datamath, the SR-10, and the follow-up products. Another great experience out of establishing change.
RW: So when did you leave TI?
HS: Well, success breeds success. In 1974, I got a call from a headhunter who said here is another exciting startup in Silicon Valley called Litronix. And they're looking for a general manager in Europe who can set up a business there making calculators. They are considering digital watches. And what's really unique about them is they are a semiconductor company like TI. They control the CMOS process, and they control an LED process. So all the guts of the device were more advanced than the bipolar devices that TI were using in the Datamath. So from a power utilization point of view, this was a big advantage. Plus they had a different design, and the design was extremely rugged. So I was invited to come out to the Valley, met with the management of Litronix at Homestead Road , was their worldwide headquarters. And after some chat of what I had done for TI, how I introduced the product, they said you are our man. Go back to Germany, tell us how much money you need, set up an organization - operation, and the lawyer you need to contact is - and I forgot the name by now - this gentleman in Frankfurt, but you have to move from Munich to Frankfurt because we want our headquarters in Frankfurt because due to the flights that we can use to get to you, and you can get to us. So that's how they - I started Litronix. We used a similar technique because I had the introduction to all the department stores, mail order business, etc., but now we needed to be better than TI in order to beat them. So what we did is, first of all, use the technology pitch, which was CMOS worked with bipolar, less power utilization, and second, because of the rigid device we said lifetime guarantee. Again, the American lawyers told us we were totally nuts. We couldn't do that. And we said, well, let's see. Let's start it and do some crazy ads. And they actually repeated the ads after the first six months when we had no returns. And that was a little puppy chewing on a calculator. And I don't know whether anybody in the States remembers having seen that ad of Litronix. If your puppy gets hold of your calculator while you're working and chews it up, send it in, we'll replace it free of charge. It's our lifetime guarantee. And the total returns we have ever received over a two-year period were in the below two percent area. So finally we got big applause from the board and from the management for having the guts of, again, introducing the big change to what was established so far.
RW: Did you ever consider re-branding the calculator with some local company? You know, some German company so it would have a German -
HS: It's a natural evolution that you're just asking for, Rob. And it' it happened, definitely. There is - actually, today still, the world's largest catalogue house called Quelle . And Quelle has private label. All the products are named “ Privileg ”. So they got jealous at all the department stores selling all these products. And they wanted to get into new products as well. So they said, hey, Horst, we want to talk to you. This was the next big novelty to, yes, American companies to consider private labeling a device. But when we talked about the volumes, it was easy to convince the people to collect the dollars in exchange for giving up a brand. And actually, them using the brand, and the products looked exactly the same except for the color, it helped the sales overall again, because it just grew the reputation for a phenomenally great product. Now, 1974, because of the technology Litronix was having, another German company was just getting fed up with TI in terms of the second source deal that they had going on a bipolar technology which was second sourcing TTL, and that company was Siemens Corporation. So Siemens had heard about the CMOS capability, the LED capability that Litronix was having, and they decided let's buy the company. So Siemens in 1974 bought the company. And I was just negotiating the next big product thing with the catalogue house, Quelle , which was digital watches. The minute the deal passed between Siemens and Litronix, the big hammer came from Siemens and they said consumer products, out. We won't touch those, we want the technology. So here was successful Horst saying, oh, man, time to look for another job. This is going away. But I had the negotiations on the big orders, and now, here came a company called Fairchild. Fairchild Semiconductor at the same time frame was getting into consumer products, actually into the digital watches. And so somehow the word got from Litronix to Fairchild, there is this crazy fellow running the European organization for Litronix, and it looks like he's becoming available. Do you want to talk to him? So, yes. Dick Bohnet came and talked to me, and I told him - I'm still paid by Litronix-Siemens for the next three months because the German requirements are three months separation from a job, but please go to Quelle to a gentleman whose name I'm writing down for you, the phone number I'm writing down for you, and go pick up the one thousand-five hundred unit watch order. Richard Bohnet looked at me and said you're crazy, Horst. You think that will work? I said, well, this is what I was negotiating. Litronix is never going to deliver. They will have it in the catalogue. If you have a product, they will be happy. It worked. Dick went to to Germany and picked up the order, and the watches were shipped on time, and we had, again, a happy relationship, plus I got the job. This is how I entered Fairchild Semiconductor, on the consumer level. Now, this lasted for about three years. And the exciting part was that in, I think second or third week after I was hired, I met the total top people, including Wilf Corrigan, Greg Reyes, Richard Bohnet at an event in London . I presented my plan for the company. They got excited, invited me back to California to meet the people there, and it was decided to put a watch assembly factory into Germany . I scratched my head and said, watch assembly factory in Frankfurt ? Well, can I get some help? And they said, yeah, we even have a German fellow here who has just returned, I think from Indonesia , and he's a manufacturing expert, and he has just been in the assembly of the watch assembly line of the watches here in California in Mountain View , his name is Horst Muenzenberg . And if you want, we will delegate him to you, and you and he will set up that watch assembly line. Okay, why not? So we went to Frankfurt - actually to Wiesbaden . Fairchild had a semiconductor factory in Wiesbaden . We talked to the people there and said we got the order to set up a watch factory. You got any space here in Wiesbaden where we could we could set up? Nobody in the semiconductor environment wanted to get engaged with these crazy consumer people, so they said, no, no, no. You go find a place somewhere else. We found an empty office building in Frankfurt in one of the new office centers called Niederrad , and we're the first tenants in the building. And the people that owned the building were very happy that a famous name like Fairchild was the first tenant, so they gave us a deal on it, even though we were not using the office space as office, we were using it as watch assembly line. Now how did we put up the watch assembly line? Starting from scratch. Actually, Muenzenberg and I, we went to a department store and bought green felt stuff, we bought the famous table set Germans used for beer halls, which are foldable and you can carry we, so we bought a bunch of those, put it in, and put benches and chairs around those tables, put the green felt on it, and went to a city called Pforzheim , which was a German, and still is, the German center of watch making, and watch case making. And we bought devices by which we could close watch cases and assemble watches. Got the tools of putting the straps onto the side, and got out and found people who made boxes into which we could put the watches so we could sell them. This whole process took us about two months to three months, including hiring the ladies of putting the things together. So we went out and got now orders from the famous company called Quelle. However, they pushed us immediately and said we don't want Fairchild watches. We have our own brand. And our brand in this case is not called Privileg, like in the calculator world, it's called Meister Anker . Can you put that logo on your the watches. We said okay, in principle, yes, because we have the watch factory right here. Nobody has told us we can't do that, but how many units are we talking about? They said, okay, what can you do? We have a whole range of products in the catalogue, and we want to get this new stuff called light emitting diode watches - LED watches, and we will give it a half a page. So tell us what price ranges you could achieve. We said okay. The first should be at forty-nine Deutschmarks at that time, and the highest we could probably get to was hundred forty-nine. So we were having, like, every thirty Deutschmarks, a step for a different type, a different style. The modules were all standard, the same. At that time they came out of Hong Kong . And then we were assembling watches for forty-nine Deutschmarks all the way to a retail price of hundred forty-nine. We bought the cases, the bands, and all the devices locally, we assembled them locally, and we were just getting the modules out of Hong Kong . The volumes moved in six months from something like the first order was for about ten thousand units a month. We went up to about fifty thousand units a month just for that one channel. Were the people in Mountain View happy? Nope. They wanted us to sell Fairchild watches, not Meister Anker watches. So we got a lot of pressure to change and so we decided to take the Fairchild brand watch to the jewelry channel, because they kind of were jealous of what Meister Anker was doing. They knew how many watches were sold because all these people talk in that industry, and so they wanted to have part of the piece of the cake. And they got the piece of the cake. We assembled Fairchild watches, and we created another low-grade brand, which was called Timeband. We did great until somebody decided that buying watch cases in Switzerland and France and in Germany was stupid because the Koreans could make it much cheaper. So we were ordered to now buy the cases from Korea . This was the end of a wonderful start because the quality we were getting from this country was not acceptable to our customers. We got big returns. And within nine months, in the middle of 1977, we felt the crunch. We were going from about a hundred-fifty thousand watches a month down to about fifteen thousand watches a month. And then one day the order - I think it was early 19'78, the order came out of the Mountain View the consumer product division would be closed. Hey, Horst, next time we have done a great job, and you're out of a job. Come on. Are you crazy?
RW: Fairchild management, through that whole period, went through such convolutions and blunders, I mean just incredible.
HS: Yeah. And again, as I said, here I was, had done a great job, and all of a sudden, boom, it was gone. So at this time, Wilf came back into the picture and said, Horst, I remember on your resume, you started out working at TI in the semiconductor field. Now would you mind coming to Mountain View and get an up-to-date and up-to-speed education on where we are in semiconductors so that you can make a contribution in that area? That was a big decision, but exactly on my line of way of life. A new challenge, moving to California in 1978, it was a dream coming true. So I decided before my wife was even told what I decided that it was going out - the next thing is California . So in '78 I moved to California first time in my life. And it was one of these things where you say I never regret having made that step because it was good for me. I was working with Andy Procassini in the sales department worldwide with a fellow by the name Bob Blair, who was my counterpart dealing with the rest of the world, and I was dealing with the interfacing with Europe . And in 1979 we were working on started working on a very big deal that several people may remember, as TI and Delco - Fairchild and Delco got into what was known as the first electronic ignition module for cars.
RW: Mmm - yes. Very big.
HS: And the largest parts manufacturer in the world for cars was at that time already Bosch in Germany . Now, we could demonstrate that we had great functional device. So we went to Bosch, we went to Volkswagen, we went to Mercedes, we went to General Motors, and what we learned is that the people liked the functionality but not the casing, the housing that we were using for the devices. They needed more stringent, more rigid housing. Semiconductor guys didn't know how to deal with that. So we ended up working closely with Bosch, and Bosch providing the housing, and Fairchild providing the chips. So as a kind of a joint operation, not a joint venture, but in a joint operation, we went to Volkswagen, Fairchild demonstrated the capability, Bosch demonstrated the housing, we signed an agreement with Bosch, and we started shipping, in 1979 or '80, the first devices in the Volkswagen, which was one of the big, big successes and success stories for Fairchild in dealing with Bosch, and ultimately with the automotive industry. I was in the middle of all of this, and in the later period of about '80, Wilf decided to sell the Fairchild Company, or the other way around, he was asked whether he was willing to sell the company. And in his effort to find a white knight, he ended up selling Fairchild to Schlumberger. This gave me personally another opportunity to change again, because Schlumberger had asked me whether I would be willing to come back to Europe to the European headquarters in Paris and help them to restructure the European organization within the Schlumberger organization. I decided to do that and went to live in Paris from 1981 to 1984, at which time I realized Schlumberger wasn't doing anything better with Fairchild than has been done before. Actually, they pumped billions of dollars into the company with no understanding of what the results should be. So in 1984, I get a phone call from another Fairchild associate from the time in Mountain View, Bob Blair, out of London, and he said, Horst, are you happy with what you're doing? I said, nah, not really. And he said, you know, I just joined another company called LSI Logic Corporation. We just went public, we got plenty of money, we got a nice European headquarters in Bracknell in England , I'm running it, and I need somebody to take care of Continental Europe. How about you? Well, what I have told you so far about me, I guess this was perfect, fitting my profile exactly. You know, nobody there? Okay, fine. I'll be the first guy going. So I took the challenge and I started LSI Logic in Germany , went to Munich , went through the whole scenario again. Actually, the first day of my employment, Bob Blair and I went to a local store buying pen and pencil, and phonebook, and everything we needed to take notes, start a business. Then we went to rent a place, an temporary place and a temporary office, and by the middle of 1985, we had a full design center established. We had hired about ten top engineers out of the German industry. We had established with, it was actually with our people in California , in particular, Jim Koford, who was in charge of all the design, what type design center equipment we should have. And when we called IBM that we wanted one of the big machines brought into the Munich design center, we couldn't find anybody who wanted to talk to us. LSI Logic who? IBM would not send anybody down. So we had to call Koford and said, Mr. Koford, IBM in Europe has no idea. He said, okay, I get my people going and you will get a machine. And for some reason, some ex-IBM guy had gone to Amdahl who had heard about us doing it. And Amdahl was in the next building to where we had established our design center. So here I am just trying to get IBM interested in selling us an IBM equipment, I get a visit from a sales guy from Amdahl who says, hey, we have an equivalent machine. We have one ready. We can ship it to you next week. And we have great payment conditions. Actually, you can lease it. All you need to do is get the Californians to approve it. So we went back, and the next thing we knew, we had an Amdahl V6 sitting in our design center, and our engineers could do ASIC design. The good news, we had already a customer. The first customer we had had - actually done the initial designs in California . It was a company by the name of Nixdorf, Nixdorf Computers. So we used that example and that experience of acquiring new customers. A very successful startup business. The company had just gone public. Wilf was coming over. We established a bank account. We got instant credit, an incredible amount. Actually, we could draw to a million Deutschmarks the a bank loan secured by the corporation. So we were worth leasing equipment and renting equipment we needed to grow the business. The business grew from hundred designs to about two hundred designs the following year, and the total revenue after two years was about hundred million - three years was about a hundred million dollars from Europe, out of which sixty percent came out of Germany . With that type of record, in 1990 about, I was asked whether I would be willing to consider running Europe - no, I'm wrong. I need to correct that. Can we go back? Can we go back?
RW: No - no going back
HS: '84-'87, LSI had a European dream of taking the European company public. So the company engaged with a Swiss investor called SULZER to establish an independent European company which was supposed to go public on the London Stock Exchange all on its own. Once we started that avenue, we were learning from the London Stock Exchange and the British Empire that a design company would not be flying on the Stock Exchange. So we would need a local manufacturers. So it was decided by the board and the corporation, go find out how we establish local manufacturing. ITT was running a semiconductor factory in Sidcup in Kent . They couldn't make their factory work, and they decided to sell it to whoever wanted to buy a semiconductor company in England . This was the opportunity for LSI. So LSI went out and I think negotiated a phenomenal deal on that facility and moved 1.3 micron CMOS and BICMOS process capability into that factory. At the same time, the Germans were jealous at the British. So the German government said, no, you don't need to just have a factory in Britain , we need - you need a factory in Germany , which is a wider scope, better scope. We have incentives - if you go to an area that is close to the formal, at that time, Eastern German border where you get big incentives and the plant is delivered to you on very low cost grounds, you can build a factory, you can do all this, and we take care, we give you grants for hiring employees in that area, etc., etc. So the story sounded so good that the board made the decision, we will have a second factory for assembly first, then followed by silicon processing in Braunschweig , Germany . Total European revenue at that time, as I said before, was around hundred million. Now to feed two factories out of a hundred million, sorry, didn't make sense to me. But when we made our plans and discussed our plans that we should push the business to the two hundred million level, and then double it again in another five years, maybe it would be worthwhile. Unfortunately, that time never matured. The factories were there, and then the European company started losing money, making everybody along the lines very unhappy because of big dream, having factories that finally support the idea of being a real company that could go to the Stock Exchange never came through. This fell apart. So decision was made, close the factories. And I think the board was thinking about who can do that. And somebody remembered this crazy fellow that is there in Germany who has done crazy things all his life, maybe he can do this. So I got a call from Wilf and George Wells, and they said, Horst, we had to make the sad decision to close Braunschweig - first to close Sidcup, and second to close Braunschweig. Can you do it? I said I can do anything as long as I have the tools and the means to do it, and they said, okay. You'll be the president of Europe for LSI Logic Corporation, and your task is to close the damn things down. Okay. This was the first time in my life that I wasn't starting from scratch building something up to something s - reasonable and sizable. This was the first time that I had to step in and say it's all over, everybody need to go home, and we need to figure out what we do with the remains. So we closed down Sidcup, no rioting, no problems, because we were lucky. Why were we lucky? Because we were now close to 1989 where the political scenario in Europe changed completely. If we remember right, Communism broke down. Actually, the Berlin Wall came down. And there were semiconductor corporations - companies in Eastern Germany who either needed to be closed, or getting access to newer technology. So one of my associates by the name of Claudio Loddo , and I, we were scratching our head and say is there anything that we should be doing with closing Sidcup down, and the potential opportunity in Eastern Germany where big government money is spent again, and potentially license that factory with the stuff that we had generated so far in Sidcup. And we called Wilf, and we said Wilf, what about this idea? And he said if you guys can do it, go do it. So we found the people that were in charge, and we had meetings, and they got excited that an American company would just sell its latest equipment and technology to an formerly East German company, and we got a pretty good recovery on the investment. We got fifteen million dollars for a company that we were willing to write off, or equipment that we were willing to write off. So from being the sad guy who had done bad things, switching that over again of being the little hero who has got money that nobody expected, was happening in a couple of months, and then we had to work with the guys in East Germany to change the factory environment so that the material could come in. I got a board seat on the new established company called Thesys in Eastern Germany . We were stressed, of course, because of the closing of Sidcup, the closing of Braunschweig, to use people that we could move, instead of on the street, into this East German fab , and in the east factory. So the person that helped me, Claudio Lodddo , I said, Claudio , how about being the CEO over there? Would that be intriguing to you? He said, well, if that can be managed, hey, why not? It's great. I wanted to be a CEO in my life one time anyway. So Claudio got together with an East German fellow by the name of Juergen Straub to run the factory, and it was a very, very successful transition. In hindsight, I'm very happy today to say that this company, changed its name from Thesys to X-FAB . But X-FAB today is a two hundred-fifty million Euro company with about fifteen percent before tax profitability. So at least something that did bear fruit that was sustainable until today.
RW: Well, the European computer business - manufacturing, that went to hell, didn't it? And they were the customers, the LSI Logic customers.
HS: That's correct. This was a parallel situation that we had to close the factories at some of the computer business went to hell. Nixdorf, for example, was really going down the tubes, and this was I think the number two - not the number one customer, but the number two customer. Olivetti in Italy went down the tubes. In England , the computer guys went down the tubes. So the computer business broke away. However, we saw this coming. So we put all our design resources into the telecommunications business. So while we were seeing this business dying, we were seeing the telecommunication business coming off the ground. So we were holding revenues at the hundred-fifty million, hundred-sixty million dollar level for quite some time, and not going down, but still, we didn't make it to the two hundred, we didn't make it to the four hundred, and therefore, sustaining the factories would have been a pipe dream. So closing them down was the right thing to do. This was the early '90s. And then after I did all this, I received another phone call from Wilf Corrigan in 1992, and he said, Horst, I'm restructuring the management in Milpitas, and would you consider coming back to California? My answer was why not? I've done it before. I know California , and here I am, I'm willing to go again. So in 1992, I was back in California , and was assigned the Executive Vice President - I think it was Executive Vice President Worldwide Markets or something like that. And was working with Brian Halla, who was in charge of all the worldwide marketing, and Cy Hannon who was in charge of all the worldwide production and I was, in principle, in charge of all the worldwide sales and design center facilities. Big job, a fun job, and I really enjoyed being back in California .
RW: You know, it's interesting because you pronounce California just like our governor does. Governor Schwarzenegger. He says California with a "K" like you do.
HS: Well, that's a little Germanistic thing, I guess, Schwarzenegger being Austrian. Probably there's something that is pretty similar. So things with LSI Logic and me moving to California was another period of my life that I really enjoyed. My family was moving - actually, my wife was moving over, my daughter and my son, who were with me at my first round - interfacing with California now stayed in Europe . And I personally enjoyed working with Brian, working with Cy. I think we were a great team that was respecting each other. We were making great progress in the company, and - so I had had exposures to the board prior to being assigned in this job because some of the board members were frequently coming to Europe when I was president of Europe . They were participating in the board meetings over there, and I felt I had mutual respect with them also. And there came the time, and I can't exactly say what year, where Wilf started to have health problems with his heart. And interesting discussion started at the board level with regards to succession planning. And some of the board members, you know, while we were going into 1993, and a board meeting in 1994, actually, I think it was in the May timeframe of 1994, we had a great gathering at the Saratoga in the winery up there with the board, and couple wines drinking, and two board members asked what my future plans were. And I indicated that I was open. I enjoyed California , I enjoyed the company, and if ever needed, I would be willing to step up to a new task. That would be a real challenge, but I would accept the challenge like I always accepted challenges in my life. And it's my interpretation now what I'm telling is that I think that Wilf did not like my answer, because indirectly I was challenging him in succession discussions. And what I underestimated is how sick Wilf would feel and how much he was really planning succession discussions. So after this board meeting I started a tour around my "world." Went to Japan , to Europe, came back to America , gave a summary of the meetings, and
at about eleven a.m., can't remember the exact date - I think it was in July - June or July, after that May board meeting, and he said, Horst, I decided we should separate our ways. And I said, Wilf, why? What's wrong? It's - are you unhappy with me? He said no more discussion, you go to Lou Wallbridge , who was the head of HR, and you figure out how you get out of here. I want you out as quickly as possible. I was stunned. I - I didn't understand, he didn't want to discuss with me. I left his room. The discussion was less than, I think, five to ten minutes. And I went to Lou's office, and it looked like he was totally prepared. So he had paperwork sitting on his desk, and sign here, sign there. I said, no. I'm not going to sign. I mean I just came over here to do a big job, and now you're putting me on the street. I - I don't know how to get back to Europe . I don't know what to do next. I want to know what's in there, really, and I need legal advice. So unfortunately, this legal advice, like in California , I had no experience with lawyers, no experience with how deals were, you know, get done in a situation like this because I never was in a situation like that before. So I engaged lawyers, Wilf engaged lawyers, and we went through a one year about of fighting each other until my cash available was gone, and Wilf could still fight, and he had a better team together to fight against me, and I lost the case. I lost almost everything that I had assembled for myself privately because I spent it all with lawyers, and the lawsuit, and I finally scratched my head and said, that's it, I'm done, I'm done with LSI, I'm done with Wilf, it's all over, I need to just get myself back in order and think about my own future. And my own future started then in 1995, where a small company in the Valley, Zycad Corporation had started a division called GateField , which was making nonvolatile reprogrammable devices at that time, or was trying to make these devices. We're still in an R&D situation. And they didn't make much progress, so the chairman of the company asked me to come in as the president of that division, and help them to figure out whether they should continue, or whether they should sell the company. Decision was made two years later to sell the company because we didn't make the progress we wanted to make. And while that was winding down, I get a call from an old Fairchild acquaintance, Bill O'Meara, who had retired in Florida and was on the board of a small company that was making communication devices for the electric wires to do automatic meter reading. And the company's name is Intellon Corporation in Ocala , Florida . And this company had funding by that time of about eighty million dollars, but had gotten nowhere. No sales, great technology, and Bill said, Horst, the board wants you to look into this, whether there's any future, or whether we should really consider shutting it down. Took me four months to get to all the potential customers, the electric utilities, to find out that they wanted it, but wanted somebody else to pay for it. So this somebody else was the meter companies. So I went to all the meter companies, and the meter companies said we got great mechanical devices that do the job as far as you can think back. If you can get us a less expensive device, electronically, doing what we do mechanically, we will talk. But funding, spending money on it now, no way. So here I was, four months in my new job, scratching my head and saying, oh, Lord, what am I into now, moving from California to Florida , and no business situation. So I took all the people that I knew were somewhat creative and were able to think outside the box, and said, guys, this ain't going anywhere. Does anybody have an idea of where we could take that technology and apply it? And somebody said, well, there is just a law passed in the United States that trucks and trailers need to communicate with each other about the functionality of the anti-lock brake system in the trailer. And it's becoming mandatory. But all the manufacturers have pained in making those trucks and trailers communicate because they only got seven wires between truck and trailer, and all seven wires are used by now, so we would need another wire and another plug. And that's a fifteen dollar event.
HS: We said great. This is it. If we can find a chip and a protocol that does the job with the technology we know on the existing wires, we are safe. We have at least a marketplace. Cut a long story short, this worked. But it didn't only work, we got all the people engaged in the business of Freightliners and what have you to contribute to the development of the chip. So instead of going back to the shareholders, we got the customers - remember, LSI Logic Corporation charged design dollars? So here we get - got back and we charged on design dollars. Got about six hundred thousand dollars for the development, and it paid for the job, and we got that business. This business is still running today. It's a unique product, it does the job. Nobody has ever challenged it because the market "is too small" with about five to six million dollars per year. But it was a savior of Intellon Corporation at that time. We knew this wouldn't be enough for the shareholders over time, so now we needed to figure out what else could we do with the technology. Again, creative team was coming together, and the discussion was all about how can we use electric wire, and how much can we put data over that line. And I asked the question, for what purpose? What's the real purpose of that? Automatic meter reading is out. Now the data on the trucks is okay. And then at the same time, in the United States , the wireless communication things took off. And that had to do with Internet. So we said, hey, if the Internet is the real thing that we should target, maybe we should consider using in-home communications with inputs from the Internet as our real market opportunity. However, if we do that, then the hundred twenty-eight Kilobits that we are managing right now is not good enough. We need to go to put one giga in ten hundred - one mega - ten mega - hundred mega - one gigabit capability as our roadmap. How comfortable are the engineers with such type of a roadmap? And well, as you all know, everybody says, well, what we know can be done, what we don't know cannot be done. However, we said this would be our life, or we will be dead. So the next thing we need to address is one megabit capability over the line. And we were lucky. We demonstrated the capability. We had great help from the University of Florida in Gainesville . A group of scientists joined us, wrote the algorithms, and we were doing what we were supposed to be doing, delivering one Megabit. And I said we were lucky. Why? Because Microsoft heard about our ability. And their hardware division was so hot on getting access to that technology that they came out with eight people to Ocala , Florida . Anybody knows where Ocala , Florida is, it's in the middle of nowhere. And Microsoft coming out with eight people to Ocala sets a signal. So we all got happy. We were very keen of demonstrating the capability we did. Two weeks later, a bunch of lawyers were flying in, we were signing an agreement, and we saved the company. Microsoft was paying six million dollars to get second-source rights to the chip development. Now we know, again, in hindsight, in the interims time while we were developing the thing for one Megabit, our engineers discovered a ten Megabit capability. We formed an organization called HomePlug in order to get members into the team of acceptance of that technology. And as we all know today, the hundred Megabits are broken, two hundred Megabit devices are out, and today we can send video, audio, voice over the electric wires in any environment in the home or in a multi-dwelling unit, and the technology has proven itself to be successful. And the company, hopefully, will be able to go public soon. Because it was my charter, after we had the ten Megabit devices out, to take the company public. Come December 2001, if I recall right - I got on the twenty-eighth the NASDAQ - of December, the NASDAQ letter saying here is your symbol, anytime after December 28, you are authorized to take the company to the stock market. Anybody remember what happened? The stock market tanked at that time. So I was sitting on this letter and had all these people around me expecting the company to go out at twelve - fourteen, later on at twelve bucks a share. Everybody was already counting their money. And the stock market didn't cooperate. Come 31 st of March, 2002, we were deciding times will get better next quarter. That was the advice of the bankers, that was the advice to the board, and the management had to comply. I was advocating we should go out at the lower number. If we could get eight, we should get eight, because we needed the cash in order to create a worldwide market for the devices. Next quarter, June 30 th , the market has tanked further. You wouldn't even be able to get eight bucks for the shares anymore. So the board decided to withdraw the public offering and not to go out. And at this point, I was at an end of my dream of taking my first company public. And a guy who had told the people that ten to twelve bucks would be a reasonable thing to go out, could not go back and say now your stock is worth pennies. So I resigned from the CEO job, and the chairman took over, and he is still in charge of Intellon Corporation . And as I said earlier, hopefully, the business is now as worthy so the company will go public one day. I retired with that job and started my own business as a consultant, and I'm still helping companies in the United States to establish themselves in Europe, or the other way around, helping European companies to establish themselves in United States .
RW: Well, going back to LSI Logic in Europe , how did that progress after you left?
HS: LSI Logic in Europe as long as I was there, we were still growing. And after I left, two years later, it started winding down. And ever since LSI Logic has lived from cutting back expenses, "firing people," consolidating operations in Europe to a degree where I would say today it's totally insignificant of what LSI Logic is doing in Europe .
RW: But it's pretty big in India now. I think there's eight design centers in India .
HS: That's okay. But the ASIC business, as we all know, is secondary fiddle in LSI Logic -
HS: - and no longer the prime target for growth in that company.
RW: Okay. Well tell me about Silicon Genesis-Europe.
HS: Well, it's your baby, Rob. It's - Silicon Genesis in the United States . So when I came on one of my assignments to the United States in - I think it's a year and a half ago, you and I had dinner and you told me about your activities of Silicon Genesis in the United States . We shared the idea of maybe we should have a contribution from Europe, and we should have a contribution from Asia . So I went back to Europe committing to you that I would study the opportunity in figuring out whether I could assemble a couple of the "old guys," older than me, who were there before my time, actually in the '50s - I joined, remember, in the - in '68, and whether I could get them to tell their stories. Fortu - I was fortunate. I got a few investors to help, and sponsors to help, and use the Electronica 2006 in November with the first gathering of six senior guys out of the industry, and followed by two individual interviews which will be soon followed by more individual interviews about the development of the European semiconductor industry. And by now, the first interviews and the Round Table is available at Stanford - at silicongenesis.stanford.edu.
RW: Commercial message. Well, what is the story of European semiconductor? It seems as though it's a disastrous story to me. I can't imagine that overall they've made any money. All the people, all the governments involved.
HS: Well, the European situation has been completely different to the U.S. situation. And there were many, many reasons for it, and I'll just lead into those reasons. First of all, the European companies just were all involved in two World Wars. So after World War II, they all needed to figure out how to make use of all the technology for anything else but the weapon industry. So lots of them then got involved in addressing the consumer industry and the communications industry, which means radios, television, early computers. Remember, the first computer was done by Mr. Zuse based on relays. And so the older technologies, like tubes for radios, tubes for television, all inventions from Europe , were bringing the companies new revenues and income. And these were big companies. It was Philips , it was General Electric in England , it was Siemens in Germany , it was AEG Telefunken, it was Thompson brand in France . So all these old companies that were engaged in military activities before, now jumped into the consumer business. And because they controlled the technology, and they controlled the manufacturing capability, they stuck to it. And that was guiding the management's vision. At the same time, the U.S. semiconductors, diodes and transistors, transistors 1947, got developed and invented, the Europeans were tinkering around with those technologies in their R&D departments but with no purpose other than doing scientific exercises. They didn't see the market for those devices. So there were great scientists in Europe that understood what the semiconductor industry was all about, the potential of the semiconductor industry was all about, but they were tinkering around with germanium first. And silicon was kind of not good enough for the purity of the Ingots , etc. Lots of reasons that they brought up of this is not the important thing, we need to go and deal with the germanium. Again, the corporations that were allowing the scientists to do this were all big corporations. And these were efforts that were negligible. No were really funded well, nor purposefully applied. So even though Europe was continuing finding good technological advancements on the technology side, it never industrialized. Now came 1949 and until 1952 about, it came also a ban from the American government on the Europeans to stop all developments in this area because there was a fear that the crazy Europeans would again rebuild the war engine. So that set the Europeans back against the developments in the United States . So all these facts kind of created not a real movement in favor of accepting semiconductor industry - a semiconductor industry as a future that would be great. So at the same time, the talent that saw the opportunity left Europe and moved to the United States . So if you just check from your Silicon Genesis exercise, where those guys that made it in were born, most of them came out of Europe .
HS: So the brain drain - you know, instead of having the big companies accepting that there is a big change in technology emerging, they accepted the drain to take place. Dr. Faggin and Dr. Noyce. You take all the names. They all – actually Wilf Corrigan even, all the names of the Europeans. So the people that were left were good scientists, were excellent people. But if you look at their history, they were at Siemens, they were at Philips , they were at GE, they were at Thompson, they were at SGS, until they retired.
RW: And there were no startups.
HS: And there was no support for any startup. No venture capital ever emerged in Europe . So while this was kind of bogged down, the United States took a total different approach, entrepreneurial approach, and this is why the big delta occurred between the success of the U.S. companies versus the nonsuccess of the European companies. In the '60s, the European companies kind of tried to recover because Fairchild had set up shop in Europe, Texas Instruments has set up shop in Europe, National Semiconductor, all the U.S. companies were now entering Europe, and the Europeans were waking up and say, oh, my God, what's going on here? We're missing the boat. So they took second source agreements with these companies, believing that they could outsmart these American companies by signing second source agreements because of the power of the marketing and the brands that they had established with their older products in the marketplace. Didn't work. Again, a big failure. So now they pounded on the doors of the government and said we cannot allow all these American companies being so successful in here, we need support on catching up. So in the '70s - starting in the '70s, the governments in France, in England, and also Germany put big amounts of money into Siemens, Philips , Thompson, SVS, and tried to develop a catch-up. But again, because this money was administered by administrators following projects that had really no real business purpose other than R&D - art for the sake of art, I would say, they never caught on. So the European semiconductor industry never became a semiconductor industry until recently because ultimately, the people realized being part of a big conglomerate is wrong, because it gives you an internal market which seems to be big, but in no means can compete on a world standard basis. So now we have seen all the spinouts of Siemens, of Philips are becoming NXT . And even some of the American big ones that were not built as independent corporations, like Motorola Semiconductor spun out Freescale. So ultimately, after thirty years, the people realized what we were doing is completely wrong, and in order to compete, we need to put these people on their own feet, and accept "outside capital" to come in to help. Now. It's no longer venture capital that comes in. It's a different setup of hedge fund managers and things who come in. But it's ultimately thirty years too late for the Europeans what has been started in American in the '60s and in the '70s. So this is the total scenario, and I think the reasoning for the ups and downs in Europe . However, right now, we look at the statistics and Europe isn't doing too bad. In the top ten, therefore, Europeans are there, ST Microelectronics is there, and Infineon , NXT is there. And who is number four? Just missed - I just missed it. I think it's the only the three and the ten right now. So three out of ten in Europe is not too bad. But if you'd see the larger Europe now, five hundred million people versus two hundred fifty million people in the United States , it's still a shame.
RW: Yeah. It wasn't for lack of scientific brainpower. It was a different culture, I think.
HS: That's absolutely correct. The as I described, the environment of a big corporation safety net where the real business objective of the people was on a different scale than semiconductor business was hindering it, whereas here, the people were set free. Sherman Fairchild gave them money, the guys were set free. When they didn't like what Wilf was doing, or Les Hogan was doing, whatever happened, they went out. You know, Shockley, the boys that left Shockley to start Fairchild. You have done all that historic stuff.
HS: None of that happened in Europe . None.
RW: Well, any final words here, Horst, as we end this interview?
HS: Well, I really thank you for the opportunity of giving my story, combined with a little history of why Europe has not caught on as it should have been. And I really do hope that the Europeans get their act together and allow entrepreneurs to do their thing so Europe becomes on the global scale of business, where it should be, particularly in the advanced technology businesses. Thank you.
RW: Well, thank you, Horst.