RW: George Scalise, President of the Semiconductor Industry Association, the SIA, has a distinguished thirty-year industry career. He has worked in senior positions at Motorola, Fairchild, AMD, Apple, and MacStore. In the 2003 interview, George discusses the early days of semiconductors and the issues of Japanese DRAM dumping. Well George, tell me about your parents and your family.
GS: Well, my parents come from Italy. My father was born there and came over here when he was, I guess late teens, early 20's. My mother, all of her family was born in the same area, in the south of Italy in Calabria and she was the only one that was born right after they came over here. It turns out my dad started as a gardener at the Cornell University and then came down into Pennsylvania, worked on the railroad and then got into the steel working industry and spent the rest of his career there. Wonderful parents, very interested in having all their children have the benefits that they didn't have, clearly having never gotten beyond seventh or eighth grade in school and it turns out that of the six children that we had in the family then four of us went through college, two of them did not. Well my sister really went to a business school, so I guess in a sense you could say that she did as well. So, it was a success story for them and I think they achieved a great deal as far as they were concerned and had a good time doing it.
RW: So where did you fit in as the children?
GS: I was the fifth of the six children. I was the fifth boy and then my sister was born following me. So, it was a wonderful family. We all played a lot of sports as you did in those little steel towns in western Pennsylvania where I grew up. It was a time I think that where those of us that grew up during that period were very fortunate in that there were a lot of things to do and yet the community, the sense of community was so great that you had a chance to really grow up, learn about life, live life, and do it in an environment that allowed for I guess the small mistakes to be made and for that to not be very much of an issue and you learned from it and you went on to the next level. So it was just a wonderful time to grow up and enjoyed it a great deal.
RW: So how about schooling?
GS: Well, yeah I went to school there in Warren, Pennsylvania where I grew up. I worked all the time, I mean I think from the time I was eight years old, I either had a paper route or I worked in a fruit store or I became a baker actually when I was in junior high school and high school and I would work at night. On the weekends I would start at four o'clock in the morning and I would work as a baker until about noon time and then I would, was a scrub boy the rest of the day and did all the pots and pans and cleaned the bake shop up so that it was ready for the next day's work. As I was going through school, you began to think about what it is that you were going to do with your life and how it was all going to work out. And it became very clear to me that engineering was a very good way to make a living and to do some things that would be of interest. And I was good in math and science so I thought well that's what I'm going to go do, I'll go become an engineer. And I did, I went on to Purdue University. Turns out my brother, older brother, one of my older brothers, had gone to Purdue, not as an engineer but in the business and economic school there. And given that it had a very good reputation as an engineering school, I thought well that's a good place to go. So, that's where I went and spent four years there again working all the way through in a clothing store and various places, making enough money so you could keep things going and make ends meet and get through school in four years. And it worked out really well. Got a degree in mechanical engineering of all things and again I selected mechanical engineering primarily because as I was going through the process of selection, I asked which school had the most job opportunities because I was most interested in getting a job and doing something that would make for a better life. And I was told mechanical engineering was the best. So I thought well then, I will go and become a mechanical engineer. But I think, as you know, as we went through our careers, why the basic engineering was really just a learning experience that helped you to solve problems as I look at it. When I give lectures at universities today, I talk about that the engineering training is really a problem solving training and then all of the disciplines you get and whatever one you focused on is a good foundation, but in reality why you can become any kind of engineer as time goes on. I think most of us did. We became semiconductor engineers, electronic engineers. We had to, well again, going back to the earliest days of the industry as you recall, we had to do everything. We didn't have an equipment industry, we didn't have the infrastructure, so we were not only developing processes and products, but we were also designing and building equipment that allowed us to make all of our products, whether it was a furnace or a crystal puller or a welding system, it didn't matter, we were designing and building everything at that time, so you became a pretty good engineer over time and you had a lot of experience in a lot of different disciplines.
RW: So when did you graduate?
GS: I graduated from Purdue in 1956 and immediately went to work in the television industry as I came out of school. Television was a pretty good place to be at that time. I figured that was a growing industry, a good place to go and get involved right away. But at that stage, there was a lull in the demand for young men to go into the service at that point and yet you still had to go take your physical. And I got my call to go take a physical within a month of the time I got out of school and while I was in Philadelphia taking the physical, I decided I think I should just volunteer for the draft and go into the Army for a couple of years and do what my brothers had done. All four of my brothers had gone into the military. They were all in the Navy it turns out, but I decided to volunteer so I went into the Army and became, actually an engineer in the Army of all things making chemical weapons at the Army chemical center is Edgewood, Maryland and got very much involved in that whole process and realized just how difficult and terrible this stuff is. And finally why I got to the point where I was not only making the chemical weapons, but white phosphorous and all kinds of things. So it was really quite an experience in dealing with emissions that we never heard of or thought about before and thankfully were never used. They were always kept as a defensive mechanism and stored away and I think they've all been destroyed by now. But it was quite a period there.
RW: So you were in the weapons of mass destructive biz?
GS: Well I guess given today's terminology, that's where we were at that time, yeah. It's kind of interesting that because it was so much a part of the business at that point of military, although I'm quite certain that U.S. has never, never used any of those weapons either before that time or since that time. It was always a defensive mechanism and so it was, but it was one of things that they did have as a part of the defensive arsenal for sure.
RW: So then what did you do?
GS: Well when I came out of the Army in 1958, it was at the time that semiconductors were really just beginning to get underway and I went to Massachusetts and if you recall at that stage, why the semiconductor industry was really centered in the Northeast. All of the old tube companies, RCA and GE and Philco and Tungsal and the whole bunch of them were all in the semiconductor business mostly making power transistors at that time. A few of them had some LA diffused devises, but not too many for switching and things. So I went to work for, actually CBS electronics, the Columbia Broadcasting had gotten into the tube business during the war and then branched out into semiconductors as it began to emerge. So we had an operation in Lowell, Massachusetts in an old mill building. You know, again, there was no air conditioning. In the summer you had the windows open so it was a pretty dusty environment, but, you know, at that stage why you could still make semiconductors reasonably well because of the kind of processes we were using and the size of the junctions and all those things, contamination was a problem, but it wasn't devastating like it is today in the clean rooms that we have to have available to us to build our products of today. It's kind of interesting when you think about the contrasts of what that work environment was like and then you think about the clean rooms that we have today. It's one of the many contrasts I think that are so vivid in the history of this industry. You can, you know, you can take that same thing and you go to the first germanium mesa wafers before we became focused on silicon entirely and germanium largely went away. I think that our first wafers were half inch if I recall. I think that's what they were. And now you think about, we're now producing on twelve inch wafers and the geometries and that stage, well we didn't think about geometries so much in terms, we were just really figuring out how to get that junction to work and then doing the alloy diffusion and so on. But, and thinking now today, why we have all of these clean room environments, we can do, today I guess we're putting about two hundred and fifty million transistors on a chip and before the end of the decade, as you well know, they're going to be over a billion transitions on that same piece of real estate. So it's just remarkable the contrast from the early days when we were getting started to what we're able to do today.
RW: Yeah, one to a billion.
GS: One to a billion.
RW: Quite a contrast.
GS: And in fact, I'm sure the billion will be on a piece of real estate smaller, smaller than that, even the diodes that we were making at that time. In fact, I kind of kid about how we were making diodes with a hammer at that stage because before we had the glass encapsulation process, we did the, we made a diode with a plastic sleeve and we would solder the die with the PN junction on it on to one post and then we would put an S bend and we would weld it to the other post. We would shove them into the sleeve of plastic and then we would connect it to a curve tray, so we would tap it until we got the right forward characteristic then we'd stop and we had our diode. Well clearly when the temperature changed or someone bumped it, why it was going to have slightly different characteristics, but that was the best diode we could make at that stage before we got to the glass encapsulation process and all that followed that.
RW: Amazing, so how long did you stay with CBS?
GS: I was with CBS for three years and then they realized that that really wasn't their kind of business. They were really a broadcasting company and records, they were very successful in records at that time and that the electronics world and the investment that was involved in the research and development funding that was necessary, all of those things really were not a part of the culture of that company. And so they decided to get out of the business and, you know, it's like so many things in life as you look back there are some critical turning points, and this was one for me because I was doing my MBA at night at Boston University at that time and I was about half way through getting my degree and decided that well there was six of us of the, maybe there were four hundred in the whole organization at the time, that were selected to stay and go with Raytheon who was buying this operation out away from CBS. And so over a three-month period we were kind of shutting this thing down and getting ready for the transition over to Raytheon. And I said on the last day that it was still CBS, Monday it was going to be Raytheon, I was leaving the office at about four o'clock and said I'm going to go home, I got to get ready, I want to get back here on Monday, we got to get something going here. And as I was walking in my apartment, the phone was ringing. Now it turns out I would never go home at four o'clock, it was always five thirty, six, seven o'clock, but this one Friday, the phone was ringing and it was a guy by the name of Harry Knowles from Motorola who was in charge of research and development there and he had heard about me and he wanted me to come out for an interview. And I said Harry, you know, I've been shutting this place down for three months, I got to get back to work, I don't want to waste any more time. He said, if I get you out here tonight, will you come? And I said yeah, if you can get me out there tonight, I'll come. So, hang up, the phone rang in another few minutes, you're on a plane at five thirty or whatever the time was, and so I ran down to the airport, Logan airport, got on the plane, next thing I knew I was out in Phoenix, Arizona, out in the middle of the desert. And Motorola was just moving from the power transistors and the early alloy diffused devices into germanium mesa and Harry was a guy that came out of Bell Labs and did a lot of the original work on the germanium mesa and he headed that group up as well as research and development. So we went into the factory and we just talked and walked and we spent until four o'clock in the morning just going over everything that was going on there and it was really exciting. And so I went back to the motel, slept for a few hours and we were meeting again about ten o'clock in morning. Got together, decided this had to be the place to be. I mean I just, there was no way that I was going to find the excitement and the challenge and the opportunity at Raytheon that I was going to see here at Motorola. So by noontime, we made a deal, I flew back home, picked up what few things I had and was back to work on Tuesday in Phoenix at Motorola. And I think that transition, that particular opportunity coming when it did was critical to the rest of my career.
RW: Well how about that?
GS: Yeah, it's just one of those things that, you know, had I not gone home that day at that time, you didn't have an answering system, so you never would have gotten the phone call, and chances are come Monday, I was going to be working and I wouldn't have been tempted at that stage because I was onto my next challenge. But it worked out.
RW: So what did you do at Motorola?
GS: Well I went into the R and D area and at first Harry was a wonderful engineer, just a brilliant engineer, not one of the better managers around. And so my first task was to go to work with him and to help get the R&D effort really organized because we wanted to get our integrated circuit operation really into a solid development program and then bring it out into manufacturing. So once I got the whole R&D effort organized and running well, then I took over the task of running the integrated circuit operation in the assembly and test site. We had a couple of other guys that were doing all of the front end work at that point, so I took over the assembly and test part of it and together we began to develop the integrated circuit operation at Motorola. And once we put the whole thing together, then I took it from research and development out into production and actually put the first meckle circuits together at Motorola back in, gosh I would guess that must have been about '63 or '64, I've kind of lost track now, but it was around that time anyway.
RW: So these were digital circuits?
GS: Yes. Yeah, yeah, the old emitter couple logic. You know, the emitter couple logic really came out of that period, although it never gained much momentum as you well know until much later T squared L came out in, well first we had the DTL and the RTL and all of that earlier, and then we came out with the emitter couple logic, which was much faster and lower power, but most systems really weren't ready for it yet and then T squared really took over for quite a while and then emitter couple came back in later and has had an important role since that time. But it was really kind of interesting going through that whole process because again, you've developing all of the process technology. Early on you were trying to figure out how to make hybrid circuits and then once the planar technology began to evolve, then we realized that we could follow the lead of Bob Noyce and the guys that developed the integrated circuit technology here at Fairchild. So we were right on that path following them.
RW: Well now who else was at Motorola? Was Hogan there?
GS: Hogan was there when I got there, yeah. And he was there throughout the entire time I was there. Guys that you know well, Wilf Corrigan was there. Wilf ran the transistor, silicon transistor operation. We had a germanium transistor operation as well, but Wilf had the silicon transistor operation at that time. I think he also may have run materials at one stage. I think he might have, I've forgotten now, but I know he was involved with the wafer production because again we had our own crystal pullers and all of that at that stage making all of our own wafers. And then beyond that, why there were guys like John Welty, Leo Dwark, Tom Hinkelman, Bill Laner was the equipment guy. Bill was a marvelous equipment engineer and did a lot of work on developing a lot of the high speed bonding equipment and things of that nature. He was quite remarkable in his ability to, you know, see a problem and be able to design, build a machine that was going to do the job very, very cost effectively with good quality, good reliability. So it was really quite a team that we had there.
RW: Motorola was a leader in automation.
GS: Oh yeah -
GS: We were really good. We were really good. In fact, the old TL92, which I'm sure is still in production, when we put those lines together, as you may recall, the old globtop transistor that was being done at Fairchild first of all didn't have the quality and reliability we had, but it didn't have anything resembling our cost structure. We had just phenomenal manufacturing capability, low cost, high quality, very reliable and, yeah, we just went on from there. And then we took that same technology and modified it to build our integrated circuits as well as we got into the old, well the original packaging techniques with the lead frames and the ceramic and all the things we had to do at that stage.
RW: Well Fairchild took a different tact and went overseas, low-cost labor.
GS: Well, yeah, that's right. It was really interesting. That's a very good point Rob because Les Hogan and I, well first of all, going back, Western Electric as you well know was the genesis of an awful lot of our technology and the licensing arrangement was very, very gracious and we were able to take advantage of that technology at very low cost. They had announced a stitch bonder technology that was going to allow us to stitch bond the dye to the lead frames and Les Hogan and I were back East looking at this equipment at Western Electric when we read in the paper about Fairchild going to Hong Kong at that stage. And I remember us having this conversation. Geez, you know, are they going to really beat us in cost, should we go over there now, what should we do? And we talked about it at some length and finally what we concluded was no we aren't going to go over there now. What we better do is we'll take this technology that we see here today, we'll modify it, we'll improve on it, we'll make it very cost effective, very reliable, and then once we get to that point, we'll take that overseas and then we'll have the best capability of anyone. And we did. So we didn't go to Hong Kong, we went to Korea. We did that in 1967 and sure enough, we had by far the best cost structure, the best capability as far as manufacturing concerns and it really gave us a huge advantage in the competitive marketplace out there. So it was really, it was an important decision as far as we were concerned in making that move at that point because our feeling was if we got over there and we didn't have to do all the work to develop this equipment and the process technology and all, we weren't going to do it. We had the cost structure, why bother, we're competitive. This just gave us a huge margin in our favor.
RW: Well, did Hogan then go to Fairchild?
GS: Well what happened was I went to Europe. I went over to take over our European operation in '68 and it was while I was over there that Les got this opportunity to go to Fairchild. It was in August of '68. And again, I had been very close friends with him, worked with him for seven or eight years at this stage. And when he decided to go, I decided that that had to be another good challenge to go and see what we could do with the Fairchild operation, given that it had a lot of good process technology and capabilities that I think genuinely was ahead of us. We were better at manufacturing by far I think but as far as process technology and product technology, they were probably ahead of us. So that was in August of '68 and so I came from, we were living in Geneva, Switzerland at time and we came back here to California. Now it's interesting because I haven't made a lot of moves in my career geographically, so as I went from Massachusetts to Phoenix and then over to Geneva, Switzerland, then we came here and you know we lived over the other hill just across the way here for the first year while we built this home and we've lived in this home ever since. So our children all grew up here and it's been our home now thirty-four years, thirty-five years.
RW: That's great. Well now were you recruited to Fairchild or did you volunteer?
GS: I really volunteered. I really volunteered because I just saw the challenge. I saw the opportunity that was unique. Again I think it's one of those things that's really fortunate that, it was one of those things you just said, that has to be a really opportunity because again as I said, they had something that we didn't have I felt, process technology and all that. And by that time I think it was also becoming clear, although we were by that stage, if we weren't number one in the country, we were very close. TI was very much larger than us when I first got there, but we gained ground on TI very quickly and on Fairchild as well and especially once the team left Fairchild, why we at that stage, were going for about two hundred and fifty million dollars a year, which was a very big semiconductor operation at that point. And I think in '68, we either were equal to or just past TI and Fairchild was quite a bit smaller than us at that state. I think they were maybe hundred and seventy five, hundred eighty million dollars, something in that range.
RW: Well there was a lawsuit from Motorola, what were the merits on that case?
GS: I don't think there were any merits. It turned out that we won the case, although it took five years for it to go through the courts. And again, I think it was one of those things that it was so important to work your way through and get it behind you. I remember, as Dot and I and our three children got on the plane to come back from Geneva to start here in California, the Herald Tribune, you know, the International Herald Tribune, which has been the paper of international travelers for many, many years, picked it up at the airport and there was an article in the business page saying, I think it said seven semiconductor executives sued by Motorola or something to that effect. And I remember showing it to Dot and I said well honey, this is what we're going home to. And certainly it was upsetting because it wasn't what you expected to have happen and all of a sudden, you were looking forward to something and now you had to deal with this as well. And it wasn't commonplace at that stage for lawsuits of this kind, so it was a very, very unique thing to have happen. But again I give Les a lot of credit, I give Sherman Fairchild a lot of credit because Sherman was a very strong and honest and supportive guy and he said hey we've done nothing wrong, we'll just fight this thing and we're going to win because, you know, the facts are going to be on our side. And that's what we did. We went through the process for five years and we won on every count so that it was a case where it just didn't merit the litigation that did take place, but it was a very interesting and challenging time to go through. I think once we got through the first two or three weeks where you knew that there was not going to be an injunction that would prevent you from working, which was our great concern, once we got that behind us and we got that ruling, then we just put our heads down and went to work.
RW: What did you find when you got to Fairchild?
GS: Well first of all, you know, there was still a lot of really good capable people there, that's the one thing. You could also then say that there were a lot of very good capable people that had left. And so there were a lot of gaps, but I think what I found more than anything else, it was the need for improving the management and the business structure and that side of it. And that's the part of the job I was given to really, I had finance, I had all the administrative side of the business to get that organized and the other guys went to work, you know, Wilf and Gene Blanchett and some of the others, went to work in the product areas to make sure that we took advantage of all of those strengths that were there. And so I think that it was a lot what I expected it to be with the exception of the business side, I think it had a lot of work to be done then maybe that was because so many folks that had left had left a lot of holes in the organization. But I was always one to think in terms of how good things were and not how bad things were. And if I could think in terms of how good things were, I could build on that and make something good come out of it and I think we did a pretty good job of that.
RW: Between Fairchild and Motorola, the Wagon Wheel, the Jerry Sanders - that was different, wasn't it?
GS: Yeah, culturally it truly was very different, there's no question about it. Going back to Motorola and Phoenix, it was a very benign culture in many ways where it was more of a classic pattern, although there was a bar across from where the Motorola headquarters was there, but it wasn't a place that had the kind of atmosphere and all that went along with the Wagon Wheel. There wasn't anything that resembled the Wagon Wheel at that stage as far as Motorola was concerned. So yeah, that was a big change, that was a very big change.
RW: Well all the competitors were there and Motorola was kind of a one - company town.
GS: We were on an island by ourselves down there, that's right, so we didn't have the competition, we didn't have a lot of that switching back and forth of engineers. No, there was none of that. It was very, very different. And I think that it was something we had to adjust to, but I don't think that it made a great difference in terms of how we operated and what you did. I'm a great believer that people are people and as long as you treat them well and you try to understand what it is that they're doing and you try and communicate what it is that you need to get done and you work together, most folks are pretty good to work with and I found the same thing here. So there may have been a little bit of a cultural thing, but it wasn't anything you couldn't overcome.
RW: What did you think of Jerry Sanders when you first met him?
GS: Well, you know, Jerry, I had known of him, although he was not at Fairchild while, he was not at Motorola while I was there. I think he might have been a salesman in the field for a short time because I arrived there in '61. And I think he might have left just ahead of that, but I was aware of Jerry. And I, as I've always said, the thing that impressed me about Jerry from the first time and still does today is how smart the guy is. Yes, he's very colorful, there's no question, but he's also, he's very articulate, he's very caring, he's one of these people that you can trust. I mean, he is someone that I would trust with anything because that's the kind of guy he is. He's a marvelous, marvelous individual. And to me, that came across rather quickly. And, yeah the fact he was colorful that just added another dimension to what was clearly a truly outstanding capable guy.
RW: But Les Hogan fired him.
GS: Well, they somehow didn't quite hit it off the way they could have and should have and probably made a difference to Fairchild as a consequence of Jerry not being there. But, you know, those are decisions that get made along the way and sometimes people make decisions that they go back and look at and say, well why did I do that? That probably was not the better decision of the options that were available to me. I would consider that to be one of those.
RW: So as you continued at Fairchild, what was happening?
GS: Well at that stage, we were going through the getting things back on track
as far as the operation. Again, we focused on the management side and the automation
side. We did a lot of that work. Bill Laner did come here as well and did take
over the equipment development manufacturing side of things. And that worked
out I think quite well. Now, I know that as we moved along, why there was a
lot of change that took place because of the valley and I think that, going
back to your question of a minute ago, might have had an impact that maybe we
weren't as well equipped or prepared to deal with the amount of change that
took place because of all the competitors around and things didn't fit together,
stay together, as well as they did down in Phoenix because we didn't have that
as an issue to contend with. So, perhaps that was something that made a difference
in the level of success and the rate of success that we enjoyed here at Fairchild.
Yeah, so I was there about five years and then, and I was handling all of the manufacturing overseas. In fact, it was kind of split between Wilf was handling all the wafer FAB and stuff here, and I was handling all the manufacturing tests and everything that was overseas and that worked out really quite well. And then after five years, I had had an opportunity to go take over the old ITT operation and almost did that and decided not to. But about that time then, that was in January of '74, decided the time had come to move on, do something else. And the opportunity came to go to work with Jerry at AMD and again AMD was doing quite well. You know, John Carey was a great engineer and the team that was there did a lot of good things, but they needed someone who was, the guy that could pull together all the business activities and things of that nature, the purchasing and all the rest of it. And so I went with Jerry to take that part of it on. And then before long, again I took over all of the assembly and test operations and all the international business and ran that at AMD for a number of years. And then eventually went on to become the Chief Administrative Officer for Jerry, we handled legal and everything else. And that was a great run. We had a good time at AMD. I remember in I guess it was January of '75, I went there in '74, in the middle of that terrible depression, downturn that we had in the industry at that point, Jerry and I sat down one day and looked at everything and said you know, we really have three months left. By that time we're going to be out of backlog, we'll be out of cash, we're going to be out of inventory, we've got to do something. And so Jerry in his creative and innovative ways developed a marketing program with the distributors. And there are incentives and spiffs and all the things that we used to get our fair share and little more than fair share of the attention of the distributors. We put that into place and in February there wasn't any improvement and in March there really wasn't much and in April we began to see just a glimmer and you know, we were kind of like boy if we can just get this going for another few months, we're going to be okay. And then we just hit that period where it just took off and we had a seven-year run that was just a huge success and made AMD what it is today. So it was from '75 then up to '82, whatever it was before we really hit another serious bump in the road, although there were some bumps, but nothing to speak of.
RW: Well, what I observed from a design engineer standpoint was that the, AMD was able to nurture good engineers even though they were a little eccentric, where at Fairchild it became kind of the suits, the MBA's were in there and doing their thing and, so that the engineering at AMD really was superior.
GS: It was good engineering, but, you know, if you think about it Rob, remember our strength, our success at that stage was as a second source company. I mean that's what we built that business on. We were a fast second source and we were determined to have better quality and reliability and better manufacturing so our costs were lower. We did those things, but there were truly guys out there ahead of us with products at that point. And then we went on that campaign if you recall of a product a week, we did some of those and we began to then, as you point out, take advantage of the strengths that were building in that organization with the engineering team.
RW: Well the 2900 series was -
GS: Right, 2900 series -
RW: Big winner and in fact beat out Intel, which had another bipolar solution.
GS: Yeah, yeah, so that once we got past that early phase and we got some success going, then the real engineering capability began to take hold and there was a lot of good innovation, a lot of good products that were designed and brought into production.
RW: Well during this period, Fairchild started to decline.
GS: Yeah. I think Fairchild at that stage, there was so many good companies beginning to evolve that the challenge for Fairchild to hold onto the talent that they had there was becoming increasingly difficult, whether it was at Intel or in AMD or Monolithic Memories, AMI, I mean you know all the ones that were around at that stage and they were all picking off this good one and that good one because they had all been there and they knew who the good players were. And again I think going back to what I said earlier about the time that I was at Fairchild, we probably weren't as successful as we might have been had we been in a more stable environment or had we been more adept at handling this challenge of keeping our good talent as opposed to letting them all get picked off by guys that knew them from past experience. And I think that they continued to suffer from that to the point where finally the best opportunity, the best alternative to them was to sell it to Schlumberger.
RW: Yeah, well Les Hogan told me that he'd had a, some surgery just prior to going to Fairchild and they had botched it and he was not well the whole, his whole tenure there.
GS: You know that's true Rob. He had a stomach problem and the surgery that was done, and I don't recall exactly what the problem was, but it certainly did not come out well, and I don't know that Les was ever well after that because he was always a strong, big, gregarious kind of guy that, and very, very bright. I mean, you know, as you know he had a lot of patents dealing with the technology for core memory and things of that nature. He had great intellect and was very, very capable and I think during his years at Motorola clearly demonstrated this in every aspect of the business. It was not true; it was not true at Fairchild. And looking back I think that that operation and whatever it was that didn't go right had an impact on him the rest of his life.
RW: Well and so Wilf Corrigan took over in kind of a palace coup.
GS: Right, right. Yeah. Yeah that was after I left and exactly what happened and how that all came together I'm not really sure because I wasn't there at the time and yet, but as you point out, yeah Wilf did end up on top, there was no question about it and took it to the next level.
RW: Which was Schlumberger.
GS: Which was Schlumberger, yeah.
RW: And Tom Roberts.
GS: Tom Roberts, yeah, yeah.
RW: Now whatever became of Tom Roberts?
GS: You know, I don't know. When you mentioned him earlier, I was trying to think where did he go. I've never heard of him any longer, I don't know what happened to the guy. There was Tom, and there was another guy, the finance guy and I can't think of his name either. He came from back East. He came from back East, he was I think someone that Walter Burke put in as I remember it. Remember Walter was the Chairman once, after Sherman Fairchild died and I don't recall what happened to that guy either. I think that they were kind of short termers in the industry or in the business at Fairchild and then disappeared.
RW: Well Roberts was a unbelievably bad influence and that really destroyed things and then Don Brooks came on and Don tried to save it and obviously he's a good guy because of what he later went on to such great success. But it was too late.
GS: It was a little bit late by the time Don got there I think. But you're right, I think Don Brooks was a very capable guy, is a very capable guy, did a lot of good work in following on that, yeah.
RW: Well one of the things that I now see about Fairchild was the lack of intellectual property protection for architectures. Obviously people did whatever they could on the process that was patented, that was trade secret, so on, but when it came to architecture like when we did MSI at Fairchild, today those are the same pin-outs, same functions. They're in a different process, but, and TI just copied those, then AMD and everybody else, and same for Intel and the microprocessor, never patented it.
GS: Right. But if you remember though Rob, there wasn't a way of dealing with that very well. A design, a mast set kind of fell between copyright and conventional patents. There wasn't anything that dealt with it and that's why we came up with the Chip Protection Act in 1984 as I recall. And in fact, I think one of the great things that came out of that era after the heyday, the best days of Fairchild, when the other companies began to emerge, Intel, AMD, and the others, when we formed this Semiconductor Industry Association in 1977 to begin to deal with some of these issues that were impacting us. And as I look back over that period, sort of the Chip Protection Act was one of the most important ones and that really stopped that copying. And in fact I remember when I was first responsible for sales in Japan at AMD, and even in the Fairchild days, and every time you would get something designed in over there and you start to see your sales grow in about three to four or five months, next thing you know, one of those guys over there had it, your sales would go to zero and they had all the business and you would start all over again getting something else designed in. And it was never-never land. You just became their product laboratory until we got the Chip Protection Act in and we followed that, if you recall, with the two trade actions that we took, one to stop the dumping, selling below cost, and the second one was denial of market access in Japan, the 301 case. And at that stage I was Chairman of the Public Policy Committee of the SIA and I kept pushing the board to allow us to do this. And in the early '80's they wouldn't let us do it because they felt they were our customers, they didn't want to alienate the customer and so on. And even though they were taken advantage of what they shouldn't been allowed to do, once we got the Chip Protection Act then that helped, but then the, out of the dumping and the denial of access still kept us as a limited player in Japan. And when we filed those two actions and then we won them both. And I think this is really important because we had an option at that stage. We could have gone with a solution that would have denied them access to the U.S. market or could have put tariffs on it that would have raised the costs and things of that nature. And our answer was no, we don't want to do any of those things. All we want to do is open the Japanese market and we want to eliminate predatory practices such as dumping because we were small company, they were big companies, there was no way we could live with their deep pockets. They could beat us hands down, plus it was illegal to dump. I mean well at that stage, the GAT didn't allow dumping and we were just going by the rules and we expected them to go by the rules. So we won those cases, we insisted that there be no denial of market access and there would be no third market dumping. And, the most critical thing was that in the event that they didn't live up to that agreement, that there would be sanctions and that's one thing that I insisted on that they had to understand that there was a price to be paid for violating the agreement. And, as you may recall after about six months, they were violating the agreement, so we went to the Reagan Administration and laid out the case and said we want to have sanctions put in place. And the trade agreement went in place as I recall in July of '86 and we went to the Reagan Administration in March of '87 and we got them to agree to put the sanction on three hundred million dollars worth of products coming in from Japan. That got their attention and they started to then comply. By June we went back to the government and said, start taking these sanctions off because they're beginning to apply because we don't want sanctions, we want to get the lowest cost market out there to create the largest possible market. And that agreement made all the difference in the world. It got the whole business environment aligned with the rules that everyone had to live by and those were the most innovative, the most cost effective, the highest quality, were the ones that were the winners. And I think that's what moved us, if you recall, we had gone from having a market share greater than fifty percent, we were down in the low thirties, and Japan had gone up nearly to fifty percent. Once that trade agreement was put into place and unfolded over a few years, we're back up over fifty-two percent and Japan is down to about twenty-five or so. So that was a very important turning point and I remember, you know, once the SIA got started, Bob Noyce was very, very much involved with the whole thing and he was the first Chair of the Public Policy Committee and I worked very closely with him on how we should go about a lot of this stuff. But as you well know, Bob would get something like this going and he always looked for someone to hand it off to that he felt could really take care of it. So he said to me, George you take over the Public Policy now and start driving this thing. And I did for the next many, many years. I think it worked out well and it was one of the important things that happened in the '80's to get this industry really competing on a fair and level playing field for everyone.
RW: But it did destroy the U.S. DRAM.
GS: Yeah, that was too late, you're right. Now, we had one left, Micron today, but you're absolutely right because we filed those dumping cases on DRAM's and EPROM's and our view was the DRAM, if we could get it back would be great, but we really wanted to save the EPROM before they destroyed the EPROM business. And as you well know, why not only the EPROM business but to follow on to the flash, we're the dominant players in that market and it made a huge difference. And even Micron has been able to survive and be an important player in the DRAM business today.
RW: Well, tell me about the SIA, how was that founded?
GS: Well, the SIA was founded originally, again I remember we were a part of the AEA at that time, the semiconductor companies, and we decided that the AEA was just too big, it didn't really have our interests in mind, it was not a part of their agenda. And I remember Jerry and I were given the task because he was not only the AMD representative the AEA but he was representing the semiconductor industry in some informal way. And we went to Chicago to the AEA board meeting and talked to them about this issue and concluded that there was nothing they were going to do about it. So we told them we were going to resign from the AEA and we were going to do something that would focus on semiconductors. And it was at that stage that we decided that we would start the SIA and it was Jerry and Bob Noyce and Wilf and John Welty and Charlie Sporck got together over at Ming's and came up with the framework for the SIA. And originally it was really to deal with statistics, make sure because we didn't have any good statistics program at that stage on what the market was and all those things, but also to begin to look at, one of the things that we thought of at the time, as we looked over our shoulder we could see what happened to the consumer industry, how once Japan got a hold of it, we were just decimated and there was never a consumer industry here in the U.S. ever again. And we were determined we weren't going to let that happen. So that was the second focus of the SIA when it was first started. And I think that's really, again, another key point because it wasn't but another couple, three years when Japan came out with their DRAMs and being a commodity product, it was very easy to sell and as we have to admit they also used the leverage of a very high quality part, a very reliable part to come to market. But it was also underpinned by a dumping system that gave them access to the market in a very important way. And we were just in time to deal with that when it began to unfold around 1980 and beyond.
RW: So one has to say that with Japan that has been a success.
GS: Yeah very much so, very much so.
RW: But some of that I think is also due to Intel and their monopoly position in microprocessors. If you strip Intel out of the numbers, don't you get a different penetration?
GS: Well you would sure. But again, if you go back to the '80's where the microprocessor was not that big a deal and we were broad based, we still had the lion's share of the market once we got things sorted out. Now Intel has helped us keep it as more of the consumer products have, well first of all, consumer products began to fall off from roughly twenty-five percent of the market down to about fifteen. Not it's begun to climb back up again around twenty or so. But there were shifts in the market that had an impact. The microprocessor had an impact, flash and EPROMs were big, but then you had the ASICs that you guys came together with and formed LSI with. There were a number of things that we still led the parade and were important contributors to that fifty plus percent of the market, but clearly could not have been done without the microprocessor, but let's face it, that's been the heart of the business. I mean if you look at the markets for our products today, about twenty-five percent of the product goes into PCs and about another twenty-five percent of our product goes into the cell phone and that sort of activity. So, information technology's taken up about seventy-odd percent of our product today and we're very good there.
RW: Well one of the questions as fab's have reached the billion dollar level and above and their lifetime is five or seven or eight or ten years, there are fewer and fewer people that actually manufacture their own semiconductors. So, what's going to happen in ten years from now? I mean, who's going to be making silicon?
GS: You know that's a really good question. There's quite a debate going on about that right today. It's my view that the heyday of the fabless foundry business model may have passed already. Certainly it has been a good way to get into the business for the last ten or so years. All you had to do is have a workstation, have a good design idea, and someone that could do the job and away you went. But if you think about it, not many of those companies are very large or very successful. I mean there, I understand there are like three hundred fabless companies. Well, I don't think there are three hundred fabless companies that are making very much product and making much of an impact on the industry. The ones that are making the impact are the big ones, nVidia, Broadcom, Altera, Xilinx, the ones that have focused on an area and have become an important player in that area. Now I do think that the need to tie the process technology to the manufacturing and the design is becoming greater once again. And therefore, the integrated device manufacturers that are really focused on process technology and making certain that it's tied very closely so that those designs are going to function that much better than everyone else, going to be that much more cost effective and so on, are going to make the real difference going forward. So that, I think that although the foundry fabless business model will continue, I think it will diminish in importance and we're going to see some very tightly coupled relationships with a few key players in that part of the arena, and then the IBMs, the Intels, the IBMs, Motorolas, TI, are going to have the greatest advantage as far as taking their products to market in the future. We're going to another phase of this transition. What I'm worried about is that we not be too late in executing on this. We have got to make certain that we keep the manufacturing capability here at home, we can't let it all go to China, we have to make certain that that basic research in our universities continues so that we have those students and that next generation technology flowing to us. And if we have those two things in place, then we're going to continue to have the IBMs located here doing that whole ecosystem and as a consequent, we'll maintain our technology leadership because I'm convinced that without the manufacturing capability, we will eventually erode our technology leadership and we can't let that happen and we're not going to let that happen.
RW: Yeah, now I understand what you're saying about it, but the fact remains that you need such a tremendous volume of product, eight or ten billion dollars to justify putting in that new manufacturing, who could afford that?
GS: Well again, I think that perhaps the next phase of the business model will be a combination of the IBM and foundry so that they can drive the technology, but also fill in the FAB as quickly as necessary so that the depreciation doesn't overwhelm the cost structure and allows them to be very competitive. And you are seeing a lot of that going on today with companies like IBM. IBM is picking off some of the very best of the fabless companies and they're having their foundry work done there now. And it's because of that, first of all that close relationship and it's also the fact that the system, the ecosystem here at home becomes a part of that and therefore it allows that fabless company to get that next generation of technology flowing to them earlier. You know, at the SIA now we have, well first of all, let me step back. If you recall, back in the early '80's we put together the Semiconductor Research Corporation and again Bob Noyce was at the heart of that thing and I worked closely with him for two reasons: one to get more engineers that were trained in our disciplines and the second was to get the technology developed in the university so that we had that flow. We also have, and that's still going today, we fund that to the level of about thirty-five, forty million dollars a year. About three or four years ago, we started the Focus Center Program and there what we're doing is we're taking the technology roadmap that we began to publish back in 1992, I think it was, in fact I remember the meeting that a few of us had along with Gordon Moore. And Gordon came up with the idea of this, we need a roadmap to show us where we're going with this technology and where we have the gaps and what we need to do to make certain that we solve those problems so we can continue to implement Moore's law. And so we evolved the roadmap, which is an incredible document today and now it's worked on internationally as well as here at home. But the focus centers now looks at that roadmap and sees where, as we call them, the red brick walls are, and we then define these development programs that we then fund. And that's a program now where we have four projects, one on design and test, another one on layout, another one on systems and software, and the fourth one is on devices and structures. And with that, we now have the work being done four or five generations back in the pipeline that we're going to be using in five, seven, eight years, but we'll be ready. And hence it's our belief as a consequence of all of this, that combination of the roadmap and the focus centers and so on, that we can continue to implement Moore's law for the next ten to fifteen years as we get it down to five nanometers, wherever we're going to end up it's going to be pretty low.
RW: Well tell me about these focus centers, you know, cite an example.
GS: Well, the way we have them set up, the design and test is headquartered out of Berkeley, UC Berkeley. Layout is headquartered out in Georgia Tech. And then the system software is at Carnegie Mellon and device of the structure is at MIT. But in addition to those four outstanding research universities, we have about another twenty-five, Stanford and University of Illinois and a whole list of others that collaborate on these projects and we fund that to the tune of about twenty-five million dollars a year and it's making a huge difference on getting us prepared for the next generations as we begin to run into some of these problems, whether it's on Locay or a whole host of things that are constantly popping up that we have to address.
RW: Well, yes of course, as you visit those universities and you see the students that are involved, they're almost all foreign born.
GS: Well that's a problem, there's no question about it and in the past that's been a strength. It is something now that we have to be concerned with. Roughly, it's probably fifty-fifty right now, or maybe it's sixty-forty foreign born to U.S. based. But they all wanted to stay here in the past. That's beginning to change. A lot of them want to go back home now, whether it's India or China, wherever. And as a consequence, why the challenge that we have is greater that it was in the past. But again, one of the critical things is making certain that the opportunity for those folks that have worked so hard on developing this technology and learning all of this have a challenge when they come out of school here at home, as opposed to having to go to either Taiwan or China to work in a state of the art fab. So, we're working very hard on that program right now to make certain that we find ways for states in the, cause I think this is not a federal issue, I think this is largely a state government issue that decides that we're going to have an opportunity for wafer fabs in our state and we're going to look at the incentives that either Taiwan or Shanghai, or wherever it turns out to be that is attracting them, what is it that they're doing and how can we compete with that? Now one of the things that's important about that, the cost structure is such that labor is not the dominant issue, or it's not even the issue that is going to make the difference in the final analysis because again depreciation as you point out, there's so much cost in the equipment and building and that's the same for everyone. So we just need to figure out how they're dealing with other things. The way they handle stock options is far more advantageous than it is here. They have a negative tax in Taiwan that works to their advantage. There are ways that they fund development programs that are in a very oblique way and you can go on down the list of things. They have a value-added tax where they make it far more attractive to be inside of China than outside of China, on and on. And we just have to find ways to make certain we can combat every one of those and have a competitive environment here and let our young students go to work here as opposed to have to go somewhere else. Or, worst of all, not take the courses and have none of that development take place here. For sure if that would ever occur, we're going to lose our technology lead.
RW: Well people are already going to India for design and I guess the venture capitalists are starting to say that they're not going to fund a U.S. detail design, layout, that sort of thing, that they want the American company to go to India and outsource it.
GS: I don't buy that. I think that we have to continue to develop those EDA tools that will put us at the lead as far as our ability to design the most complex circuits that are going to work the first time around, all of the things, you know, the synthesis and all of the things that you have been so much a part of, that still has to be one of our lead efforts and we have to be very good at it. And I think we can and then with that, yeah, the cost of a design engineer in India is less, there's no question about it, but we can use them as part of that puzzle to solve the problem, the whole twenty-four hour idea. So I think there are ways of developing a business model that allows us to take advantage of all the important pieces. They don't all exist in any one place perhaps any longer as they did here, but they don't all exist in India either, or China, or anywhere else. We've got to be creative, innovative, in dealing with that issue.
RW: Well George, both of us have been in the business a long time and we both met our wives in business and our wives are engineers. So tell us about yours.
GS: Yeah, that's right. I guess we're, Rob, you and I are unique in that regard that we both are engineers and we have wives that are engineers. It's kind of interesting, when I left Massachusetts, CBS, I had on a few occasions, heard of a young lady engineer that had worked there prior to my getting to CBS. And her name was Dot McDonald and it didn't mean anything to me, I had just heard of her. And never thought that much about it because it didn't make any difference. I went to Phoenix as I told you and got started there at Motorola and within the first twenty-four hours of being there, I had to find an apartment to live in clearly. And the personnel people took me to meet this young lady by the name of Dot McDonald because she had moved in sometime back and she was single and she had an apartment and she probably knew about where good apartments were. So, well that's fine, so I met her and I asked her, you know, where she lived and she told me and I thought well if she lives there, it must be a pretty good place. So, I went to this same apartment complex. They weren't very big and they weren't very elegant, but they were very adequate, very adequate. And so they had a couple of places available. It turns out one of them was right above her apartment, it was a two story place and it was right above her. So I negotiated with this, the landlord there about the price that I thought it was too high, I don't know, it was sixty-five dollars a month or something, but wasn't making very much money. And I negotiated him down and I got the apartment. Well, she came home later, I was gone because I wasn't living there yet, and this guy that owned the place came over and he was cussing and swearing that this new guy came into town and he came over here and he negotiated me down and he was mad about it, but he couldn't cheat her out of that same thing, so he offered to give her the same benefit, that she could have the lower rent as well. So that wasn't a bad start. So I, then as we got to, you know, I started working there within a day or so of that then and became more familiar, I kept hearing people talking about this Dot McDonald, and we eventually, why within a week I would guess, why we probably got together for either lunch or dinner, I'm not sure what the first was, but at any rate, decided that gee, she's a pretty smart lady. She's a mathematician, she's a physicist, she's a good engineer, she runs the in-process quality control, a very attractive lady, and, you know, I looked at this a little bit more seriously I guess. And I was single as well and it was about that time we were both in our late twenties. So we started dating right away and within a couple of months why we decided to get engaged, it was three months I guess it was, three months I think, we got engaged and within six months we got married. And we came back East to get married because we were both, she was from Massachusetts, I was from Pennsylvania. So we met on middle ground and we got married just outside of New York City in White Plains, New York where her brother lived. And for the first time, why we met each other's parents, we had never met anyone in the family before, we only met them for one of two days I guess before we headed off on our honeymoon and headed back to Arizona. So, that was forty-two years ago and three children and a wonderful life later, why it's been a wonderful marriage. So it's great to have an engineer as a wife and a family all come together.
RW: I think that's one of the lamest pick up lines I think I've ever heard.
GS: What's that?
RW: Well honey, I can save you money on your apartment.
GS: I didn't, I was not necessarily prepared at that stage to make that the entrée. Now it turned out to be the entrée, but it wasn't necessarily my plan. I probably could have planned it better. But nonetheless, it worked. And forty-two years now I guess we can say it's worked, it's just fine, it's good. So yeah, it's been a wonderful life in the industry and certainly here at home with my wife and the three children and all the experiences we've had since. The other thing that I think has been good about this experience in the industry and again as you recall, when we first got involved and even here in the valley, the industry wasn't well known. I mean when you talked about semiconductors, no one outside the industry knew much about it and as far as here was concerned, you know San Francisco was the place and down here in the valley why it didn't matter. It's been fun to see how that has changed now where we have now become the real center of this whole area and San Francisco now is certainly as important as it is in some other ways, now it sees the valley as the real driving force around here. And again I think that's underscored by the fact that information technology represents what eight percent of the GDP but thirty percent of the growth and affects the overall economy in such an important way. And again, I think the thing that happened as a result of that, the recognition that has come to the industry and to a lot of the individuals is one of the other really satisfying parts of what has happened here over these years that we've been involved to the point now where, I mean in my case I happen to be the Vice Chairman of the Federal Reserve Bank in San Francisco. I'm the first technology guy that has ever been on the Board of Directors of the Federal Reserve Bank. Now, one would think that that should have happened perhaps fifteen or twenty years ago when we were beginning to become an important part of the economy, but it wasn't seen that way at that stage. But to the extent that it's important to have arrived as an industry, I think that has happened and we're now recognized for that in so many ways, whether it's in the political arena or in the financial or whatever it turns out to be, people know semiconductors are important in the contribution they're making and I think that's one of the real satisfying parts of having had the opportunity to be in with this from the very early days in the late '50's all the way up through today. So, I think it's also a tribute to you to put this program together to record all of these thoughts of the many of us that have been around the industry for a long time because as you pointed out, we had a unique opportunity. Fortunately many of us were able to take advantage of that and perhaps make a contribution to the better life, the standard of living improvement for people, not just here in the valley, but around the world. And I think that's one of the great things that has come out of this industry.
RW: Well thank you George.
GS: Thank you Rob, I really appreciate the opportunity to be a part of this