RW: KK Yawata is a respected Japanese semiconductor executive. In this 2007 interview, he tells of his grammar school introduction to the power of electronics, his decision in college to pursue the physics and manufacture of transistors and, later, integrated circuits. In his career at NEC, he rose to head up NEC Electronics, USA. There he did the unthinkable. In 1984, he left NEC to start LSI Logic KK, a Japanese ASIC manufacturer and partner of LSI Logic Corp of California. After ten years as CEO of the Japanese ASIC company and two years as head of Applied Materials Japan, he semi-retired to become an advisor and an angel to young Japanese entrepreneurs.
RW: KK, tell us about your childhood and your family.
KK: Okay. First of all, I would like to thank for this opportunity you put together and I feel very honored. I was born in Kobe, Japan and my father, after I was born, got assignment in Manchuria. So he took the whole family when I was about three months old on a boat to Dalian, Manchuria, which is the tip of the little peninsula and that's where I grew up until I was five years old. And that was pre-World War II and my father was working for Mitsui and Company, one of the largest trading companies in the world. And he was well paid and we lived a very happy life there. My sister was born there; my brother was born there so three of us in the family and parents lived in Dalian for about five years. And we transitioned for a short period of time in Chanchung, which is about two hundred miles north of Dalian. Very cold town but because the war almost breaking out in China, my father got reassigned back to Japan. So we came back to Japan in 1939, I think. Thirty-nine or forty, I don't remember exactly, just before the war broke out. And we spent a few years - I went to elementary school up to third grade in Tokyo and my father got a new assignment in Shanghai, China. So we moved to Shanghai. I went to school in the fourth grade in Shanghai, the Japanese school. But to make a long story short, he thought that Shanghai was going to be a war field and he sent his family off to Manchuria again, where Japan and Russia had a neutral treaty. And of course, Yalta meeting cancelled that neutral treaty, so Russia started to invade and our tough times started right then. When Japan was defeated, we lost all communications between Japan and Manchuria, so we heard nothing about Japan for about one and a half years. And we lost hope for the future. And my father was in Shanghai, my mother and four kids - another brother was born in Tokyo - so a mother and four of - kids and a maid, who we brought from Japan. Six of us lived very carefully because when Russians came to town, the security was extremely bad. They would break in, rape women. So my mother and a maid shaved their hair to look like a man. And every time Russian broke in, we fled to a backyard in the mountain, in the canyon, just to be safe. And they will take anything out of the house and that continued for about a month or so after the war. And when the main troop came in, I think the order was in place and it became a little more secure, but we didn't feel secure at all. And since my father got separated, or we got separated from my father, there was no income and my mother, who had never worked before, she didn't even work in the kitchen because she had a maid. And we couldn't pay for the maid, so she had to work her own life - living and my mother started to sell her jewelries, the accessories and everything she had. But that doesn't go very far and fortunately she had a piano, so she was taking a piano lesson before and that became her income. She went to that piano instructor and worked as a maid. And since I was the eldest son, I was old enough to remember all the things that she did. But for about a year and eight months after the war, she earned all foods and clothes all by herself, having had no experience in working. So our family tie, mother and the four kids, is still very strong bond and I had to earn some money by selling whatever I had. A half used notebook or half pencil or crayon, anything I had, I sold on the street to Chinese and Russians. And we were down to almost zero in January 1946. Sorry, '47, two years after the war. My father had written many letters, but it all got returned. So he found a clever way to deliver a letter to us by a repatriation boat. He asked the captain to deliver his letter to the address he remembered. Of course, we had to move out of that address, but somehow, the sailor who was asked by the captain to deliver my father's letter, traced us to where we were. And that was - I still remember - the seventh of January of 1947, we got the letter and he had described the life he was living. Actually he had returned from Shanghai to Japan almost a year before we did, so he told us about Japan's state of economy and state of living. And that gave us a hope again to live. We could live two more months and March 6 th of 1947, we started our journey back to Japan on a small boat, half passenger, half cargo boat. So we were safe home in 1947 and I feel that the hard life in Manchuria gave me the strength to stand up on my own feet and fight against any hardship. So probably I'm the only one in our family because I had to look after my brothers and sister while my mother was working, you know. Again, our family bond is very strong because of that experience and I said to myself, “I will never put my family in this condition. No matter what it takes, I am committed”. And I told a few years later, I told my wife, Yuko, that I won't marry her unless I feel confident about my career and my future. But that was the story about my childhood and when I was in sixth grade, after the war, I learned how electricity works and that was the start of my engineering education. My schoolteacher had a program to wind a coil and put DC current to activate the magnet, but you have to create an alternative current to vibrate the bell. And the subject was to make a bell, electrical - an electric bell, and I was fascinated by the electricity. What it does, how it does, how it works and that's how I was interested in electrical engineering. And when I was in high school, I designed a radio or amplifier, using vacuum tubes, of course - vacuum tubes, standard size to miniature size over the years. And when I was in college - freshman in college - I first encountered with a small, little guy called transistor and I said “oh, my!, this little, tiny guy can replace the big vacuum tubes”. And I thought “this is it! This is going to be the future”. So I was committed in semiconductor when I was a freshman and I was wondering what company might be the best to develop semiconductors. And a friend of mine who was working for NEC said “well, come to NEC. We will pay the best for R&D”. He didn't say pay to you, but pay for the R&D and NEC is good at that. So I decided to work for NEC and when I graduated, I applied for a job in NEC. And when you joined, in Japan, a company, you just get an assignment. You don't ask for it. But I asked for a job in the semiconductor division - nothing else, because I was interested in the transistor. And I think that is a form of entrepreneurship, to pursue your own career, focused on certain subject. I didn't want to be just an engineer, but semiconductor engineer. And my boss said you don't have enough background in semiconductors, but you are an engineer so why don't you put the transistors into different types of applications. And I said no, I'm interested in the solid-state physics and I want to develop transistors, not in the application. And then I found an opportunity through Fulbright scholarship to come to the United States and get my master's degree or a PhD. So I applied for a Fulbright scholarship and, fortunately, I passed it because my father had taught me how to pronounce English when I was in the seventh grade and I had acquired English pretty well through a high school education. And I was able to hear the English sounds and respond to the interviewer and I passed Fulbright examination. And I came to Syracuse University in 1960 and started to major in the solid-state physics. And my thesis for a master's degree was germanium-gallium arsenide heterojunction diode and I didn't do very well, actually, because TI just had come up with, the tunnel diode, that had very high peak to valley ratio, but it quickly failed. The average life expectancy was a few hours and my thesis advisor, Dick Anderson, who was a research fellow at IBM and taught at Syracuse, said I think this is a good mechanism to pursue. You know, how - why it fails and how it fails. So I did a lot of experiments making germanium-gallium arsenide heterojunction and through some help from Dick Anderson, I was able to - to write a thesis on a tunnel diode, germanium-gallium arsenide diode. And I got my master's and came back to Japan. But while I was in Syracuse, I met many scientists, including Nick Holonyak , who was an expert on III-IV chemical compounds. And I think he first observed and analyzed the mechanism of avalanche light emission. And I think LED goes back to his invention or his discovery, but he said, KK, you are working for NEC and you're stuck with the company your life. And I am working for GE and he said I can quit GE anytime if I wanted to. You can't do that, can you? And I said no, I can't. And it wasn't common at all to quit a company in the middle of a career. It was a lifetime employment and everybody stayed through the career with - with one company. But I learned something about the - the career, you know. The career is my own and the company who employs me and I was at the same level. I don't belong to the company. I'm not owned by the company. So when I come - came back to Japan, I wanted to go back to the States, where more opportunities existed than in Japan. But because the company paid while I was gone, not a whole lot, but about one third of my wage had been kept in an account and when I came back, the company paid. So I thought I owed a little bit to the company so I ? and also, Fulbright scholarship makes it mandatory that the Fulbright grantee stays in his mother country for minimum two years. That was Senator Fulbright's vision, to educate someone in the United States for his mother country. So I fulfilled that duty and obligation, but two years later, I went to my boss. You know, I want to quit and go back to the United States. And he said you got to be kidding. You're crazy. And this boss died a few years ago, but he was very fond of me and he always tried to help me in R&D or my life. You know, he was my mentor and when I said I want to quit, he said well, I can't let you quit but I'll talk to my boss. And it went up, all up to the president of the company and I was called to his office and he said I knew you would say that because at your age, if you go to the States, you find a new world and so that's why I didn't want you to go to the States in the first place. So what can I do to make you stay with NEC? And he said well, I'll send you for thirty days to visit your vendors and friends and the universities so that you can continue to maintain your network with your friends in the US. And I said that was a very generous gesture and I felt very honored, so I decided to stay with NEC. So that went on for twenty-seven years and I stayed with NEC. But in the meantime, going back to Syracuse days, I had been engaged with Yuko and I saved enough for her airfare and I had a job as a graduate assistant with Syracuse University. And Syracuse paid a pretty generous remuneration for their graduate assistant. Was thirty-six hundred dollars. In 1961, that was enough to support two of us. So I felt comfortable marrying her in Syracuse. So I called for her - I sent for her and she joined me and we were married in Saint James Church in the little town called Skaneateles and people don't know how to spell it, but it was a lovely town of about twenty-thousand population. And when Yuko and I got married in an Episcopal Church, the priest had invited the whole town to come to the wedding and they all turned up. So it was- the chapel- was packed and we started our happy marriage life there on the lake of Skaneateles. And our son was born in Syracuse, in the Crouse Irving Hospital in Syracuse University. It's still used there. And Yuko and I came back to Japan when our son, Peter, was three months old, just like I went to Manchuria when I was three months old.
RW: So he's a US citizen.
KK: He is US citizen. He has a US passport. Yeah. He can go in and out without a green card. And my experience in Syracuse University played a very important role in my career because Syracuse University EE Department was just building the lab, the semiconductor lab. So I took a part in that development. So I negotiated with a vendor for any chemicals or small equipment for the lab and I learned some, you know, management of a lab or a factory. And I'm very thankful that I was not just a scholar, but a part of developing something new. And I think that that gave me another entrepreneurship experience. So I'm very thankful to Syracuse and I'm on the Board of Advisors for the Dean of Electrical Engineering. Actually it's called Engineering and Computer Science today. Then it was just EE. And I advise the Dean of Electrical Engineering with six other advisors. And we meet once a year in Syracuse or somewhere else and I think this is a small token of appreciation from my side and I think giving to a university, I think, is very important. And that's why I'm being interviewed this afternoon by telephone for Syracuse Engineer Magazine . Now coming to my career, I continued with NEC, not in the application side but on the fabrication side, since I got a master's degree in solid-state physics. And 1964, NEC started developing integrated circuits and I was assigned, happily, to that project. So from germanium transistor to silicon transistor to IC, you know, all bipolar at that time. But I designed the circuit, made a mask all by myself. You know, cutting rubileth, you know, so that was a very interesting experience and I did from circuit design to peeling rubileth, making a mask and fabricating integrated circuits on silicon. The resolution then was about ten microns, so a transistor was just about the size of a thumbnail, with maybe twenty-five transistors, you know. So that was the first integrated circuits I ever made with a bipolar transistor. It was DTL, Diode Transistor Logic, and NEC was the most advanced semiconductor producer in Japan. But we all felt that Fairchild, TI and Motorola were about ten years ahead of us so we were in the catch up mode. And we worked very hard - for about ten year period, I spent a numerous number of hours developing integrated circuits and I didn't come home in many nights because I just wanted to complete my project. And that was the hard time for Yuko to bring up a family. We had Peter and a daughter, Masumi, who was born in Japan and I stayed with kids until they were three years old - or just about three years old, very closely. I bathed them in the little tub, because we didn't have a big bathroom while they were baby and read books when they went to bed. So I came home on time for them to go to bed for three years. And I think Yuko and I built very strong skinship and a bond with the kids in those three years. And after those three years, I got very busy and I spent seven days a week with my project and Yuko had to look after the family. But because we had built the bonds with the kids for the first three years, I think the kids were not isolated from me and I still have a very close relationship with both Peter and Masumi. When NEC decided to start overseas business with the semiconductor, they had done a lot in the broadcasting, you know, microwave communications, building telephone exchange stations, you know, in Taiwan and in the Middle East, but not semiconductors because, you know, we were about ten years behind. But I think that gap was less in about ten years. So in 1972, I was assigned to do overseas marketing for semiconductors. That's when my experience at Syracuse and my network with vendors and alliances. NEC was a partner of General Electric. Of course, General Electric abandoned integrated circuit business in about '71 or 2, so we were free to do anything in the United States, so far as licensing agreement was concerned. And we had an alliance contract with Fairchild and we were the licensee of Fairchild semiconductors in Japan. But that agreement also expired in about 1975. So NEC was free to market their semiconductor anywhere in the world and they wanted me to be in that position to market their products in the overseas. So my experience in Syracuse was the key for that job. And I got to know Wilf, Jerry Sanders and all those semiconductor executives in the Valley by about 1976. And as you might remember, NEC acquired the Electronic Arrays in 1979 - 8 or 9, I don't remember exactly. But when a semiconductor conflict between the United States and Japan started in about that period of time and Floyd Kvamme then the VP of National Semiconductor, was quoted on the paper that Japan was unfairly reengineering American semiconductor products. And my boss and I felt that this might escalate to a trade war. So we'd better be a citizen of the United States rather than exporting from Japan. So let's find an opportunity to make IC semiconductor firm or starting from scratch. And he and I thought we didn't have time to to start from scratch, so acquisition scenario might be better. And we asked a consulting firm, Arthur D Little, I think, to find an opportunity for acquisition. And the Electronic Arrays turned out. They were looking for a source of funds to make their own microprocessors. And so I was not involved in that negotiation for acquisition, but as soon as NEC completed acquisition, I was in charge of that project to build the relationship. And I got to know Chuck Wood, then VP of Electronic Arrays and he gave me a lot of new ideas about Silicon Valley culture. And he said now all the semiconductor executives look for an opportunity to retire at the age of fifty with financial independence and that's what I'm for in this career and you and I must make that happen. So I tried to convince NEC's headquarters, particularly the financial department, that American subsidiary - US subsidiaries must have different employment system. We should offer some incentive to those executives and directors who come to work for NEC. Then the Electronic Arrays had become part of NEC Electronics. And the headquarter guy s said that's impossible. We're not listed in the Wall Street and NEC is too big to offer a stock option. The stock option for semiconductor guys does not reflect the - the efforts made in semiconductor division. Semiconductor is a small part of whole NEC. No matter what we do in semiconductors, NEC's share price won't move up and down. And Chuck agreed, if our profit in the US business increased, their incentive is paid. So we came up with some formula to calculate the contribution of the US entity in the semiconductor division revenues. But in the end, again, the headquarter guy s said well, why should we pay just American employees the incentive? You know, how about UK staff members, how about other divisions? And that's unfair that NEC Electronics has pseudo stock option and others don't. And I had to give up at that point to fight with those guys. I felt that I was in about, you know, three feet by three feet wall around me. No matter which wall I hit, I get injured. My fist hurts and this is not the place I want to work for. And I had met Wilf before that, just before that, and he had offered an interesting and possibly lucrative position to acquire and he had just started LSI Logic. He talked to me about his doing business in the semiconductor industry and I thought he was just trying to be a friend with me. And later, after I joined LSI Logic, he said well, my recruiting effort had started three years ago. You didn't realize I was trying to, you know, influence you. And I was influenced by Wilf and he said you have experience in the Japanese culture and Japanese industry and your experience, the network in Japan and elsewhere is a great asset for you. And that asset can be turned around as a capital and if that capital grows, or might grow, and you might cash that. And I didn't understand that concept, but he said that's what the capitalism is about. Capital is not just money. All the resources you have can be capital and if you invest that capital in business and the business grows, the capital you put in grows and you gain capital. And that was an eye opening education for me and I said well, that's interesting. I'm going to try and see if I can shift my gear from working for Japanese company for my lifetime to a new world. So I went to my boss again and he said you're crazy. You're still trying to get out. You gave it up twenty years ago. And I said no, I haven't. And again, I had to go all the way to the president, Mister Kobayashi, Koji Kobayashi then and he said well, I thought you grew since you came to me twenty years ago. You haven't grown. You're still in your youth and that was an eye opening statement, too, you know. I'm in youth. I can start all over again. So I said well, I have nothing to complain about the position I have acquired in NEC and the way you treated me, but I found something more interesting than what I can do in NEC, in my environment at NEC. And I have already committed and I'm sorry, but I'm leaving. And he said well, if you are that much determined, I'll let you go. And I saw him in tears and I almost could cry, you know, because he cared that much about me. So I left NEC in end of 1984, joined LSI Logic. I think I met you sometime in December, before I left NEC and I met all the other executives then and January 1 , I started my new career with LSI Logic. That was a kind of unheard of happening in the Japanese - history of Japanese companies, you know. I was offered - I had been offered a position on the Board of Directors in the subsequent fiscal year and I left that position and that was unheard of. And also I was very close to the strategic planning and development and NEC might have thought I was taking all that information with me. And I said to Mister Kobayashi, Doctor Kobayashi, I have nothing against NEC and I won't take any trade secrets or engineering secrets with me, I will start from scratch. And I signed a piece of paper that I won't recruit anyone from NEC unless they come to me. I can't stop that, but I will not actively recruit from NEC. And since I was, you know, in the semiconductor division and LSI Logic was a kind of competitor - you know, NEC was doing ASIC, that was, again, unheard of to switch your career from one to a competitor, you know. So I caused a big splash in the media and, I think you remember, I was interviewed by Newsweek , by Forbes , many press and journals in Japan. But for me, it was a matter of course because I felt that Wilf had offered a wonderful opportunity for me to grow into and starting up a firm in Japan for the parent company was pseudo startup position, you know. It wasn't my own idea, but it's a startup from scratch. And I committed to Wilf, I would do it over the ten year period, but I want to retire after ten years. And he said are you sure? I said yes, I want to be in some other position after ten years. So he offered me five percent equity of LSI Logic KK at one yen a share. So then it was almost like a - a stock option, you know, or founder's shares. And that was unheard of in Japan, to offer a share at one yen. It was called a junior stock to a, you know, preferred stock. It's the opposite of a preferred stock and it has no value unless the company goes public and the share becomes common, you know. And they, Mick Bohn and Wilf, had made that scheme in the whole capital structure, in the capital table, which all the shareholders had agreed. So while all the investors, Japanese investors, had paid one thousand and sixty yen per share or something like that for preferred shares, now I had junior shares. And LSI Logic grew from zero in 1985 to about one hundred million dollars in revenue in 1994, primarily because of the PlayStation development, you know. But LSI as a business in Japan grew nicely since 1988 through about five, six years to the point where PlayStation I came in. It was not easy. LSI Logic was not like LSI Logic in Silicon Valley. Nobody had heard of LSI Logic's design tools, but we proved that LSI's right the first time is better than ninety-seven percent, you know. And gradually Japanese engineers realized that LSI Logic's ASIC is very accurate in simulation, results and actual chip, you know, thanks to Jim Koford's EDA. And LSI Logic came to be known as right the first time company. So we marketed LSI Logic ASIC around that strategy, right the first time more than ninety-five - ninety-seven percent of the time. And also the metallurgical system was such that no matter how fast the silicon is, if the metal layers and the dielectric layers, insulation layers are not designed right, all the delays are in the wiring, you know, because of capacities and resistance. And LSI Logic's metal system was very cleverly designed and Japanese ASIC companies didn't know why until about three years later, they also found that it was the metal layer that was causing all the delays. And certainly Japanese silicon was fast, you know, because of the geometry and - and the performance of the transistors, but the metal system was poorly designed. And that's why we - LSI Logic was able to license the EDA to Toshiba and to Sharp. And as soon as they licensed and used LSI Logic's, you know, system, their ASIC performance went very fast. And we, LSI Logic, created a competitor for a few million dollars of license fee - and that's how the semiconductor war started. And I was in the middle of the trade conflict, but since I was a Japanese executive working for an American company, I thought I should position myself in the middle of Silicon Valley and Tokyo so we can build better relationship. And I worked very hard to increase the American and other foreign semiconductors penetrate the Japanese market by designing the right products for Japanese applications. Japanese application was mostly consumer electronics and up until about 1990, most of American products, with the exception of calculators and watches, were designed toward industrial applications, you know, computers and communications. And Japanese electronics were mostly - at least the quantity is anyway - in consumer type of application. And as you might remember, Wilf hated consumer business because of his experience in watches, right? So all the TTL's and CMOS were designed for industrial applications and in the middle of the trade war, U.S. Commerce Department - later USTR - trade representatives and Japanese Department of Commerce, or their equivalent, called MITI. Ministry of International Trade and Industry, I guess. And USTR worked very closely to build a relationship between American and Japanese semiconductor companies to give an opportunity from the Japanese users to American semiconductor vendors, you know, so that they can design for consumer applications. You know, they're integrated circuits for Japanese consumer electronics. And the first attempt was made for a higher vision then NHK had designed and that specification for integrated circuits was disclosed only to Japanese semiconductor manufacturers, not to foreign semiconductor manufacturers. And both government negotiated to disclose that specification of integrated circuits for high definition TV to all semiconductor vendors in the world. And we formed teams and re-competed with chip sets and LSI Logic and Sanyo had come up with a, I think, six chip set for Hivision. But it was too much power consumption and Sanyo said well, this television doesn't work without a fan and consumer products shall not have fan. So it didn't fly as a commercial product. But by then, both engineers worked together and good relationship was built. And I was on the committee and I co-chaired High Definition TV Semiconductor Development Committee, a long name, HDTV Semiconductor Development Committee, with Tatsuo Kawasaki of Matsushita , Panasonic semiconductors, and we built very close relationship among the engineers and semiconductor executives and I think in the end, the semiconductor conflict got settled. When I was a school kid, Keisuke is not an easy name to pronounce for Americans, particularly, and one friend of my father's said you have two K's in your first name and I see many companies called KK in Japan. Well, now, I'll call you KK. So that's how my nickname started.
RW: Okay. And I think it should be pointed out that - that the Japanese company was funded by Japanese investors, right?
KK: LSI Logic KK you mean?
KK: Yes. Got funded.
RW: So, and the employees were mostly Japanese.
KK: One hundred percent Japanese.
RW: So why isn't it a Japanese company?
KK: Well, the semiconductor industry is a funny industry. It doesn't go by the location, goes by the origin. So although NEC had a factory in Roseville, the output, the revenue of that factory is Japanese revenue. And, you know, Singapore, Malaysia, a lot of these places have American factories, but they're all U.S. production. So it goes by the origin of the technology.
RW: Well, tell us more about that.
KK: Okay. When Wilf said he wanted me to run the Japanese company for LSI Logic, I said yes, I'm interested. You know, after all these years, he convinced me and, first, I talked to Yuko and said - this was when we were in Mountain View or in Hillsborough. We had a house in Hillsborough when I was working for NEC as president of NEC Electronics and we had a daughter going to San Mateo College. And I when I talked to Yuko, she said, reluctantly, well, I don't know LSI Logic that well and nobody knows LSI Logic in Japan and I would like you to be a plain VP of NEC rather than a top executive or CEO of an unknown company. You know, she - was also establishment oriented then. So I explained why I was interested in taking this opportunity and she finally said well, I think you have worked so hard all your life for NEC and most of the mortgage has been paid off and you can do anything you would like to and I support you. Then our daughter said Dad, that's an interesting thing, I support you. And I also talked to my son, who was in Japan with Kyoto University, he said well, I don't care. So I decided to talk to NEC because, you know, changing a job needs to be supported by the family. You know, I can't do it against my family's wish. So I got support so I went to NEC. But NEC didn't support it. But as I said earlier, I finally said I'm determined and I left at the end of 1984. And the first three years of LSI Logic KK was very difficult. And LSI Logic had raised twenty-six million dollars from Japanese investors. There were about twelve or thirteen investor institutions, including some funds, and Wilf and Mick had the idea of making this KK a public company. So that was my scenario, though, to do IPO in Japan. And the first three years were at a loss and Wilf said at the end of the first three years, KK, are you okay? We're losing so much. We have already lost five million dollars. And I said well, give me one more quarter. I think KK will turn around. And surely, it turned around in the first quarter of 1988. Yeah, I think in '88. And grew quite fast to ten million dollars or so in 1988 - '1989 and all the cumulative loss has been wiped out. So I think LSI Logic overall did pretty well in Japan considering, you know, from scratch, to build confidence among the customers, you know. I think about 1989, LSI Logic got to be known as a right the first time ASIC company.
RW: But you - you'd also built a fab?
KK: Yes. That was something else I wanted to talk about. When I joined LSI Logic, I told Wilf that we've got to make ASICs in Japan, build ASICs in Japan; otherwise, you will not be considered a serious vendor. And funny thing is right after I joined LSI Logic in 1985, I think it was March or April, NHK, the public television, ran a panel discussion inviting Japanese and American semiconductor executives with semiconductor trade war as a theme and Doctor O uchi, then vice-pres - a senior executive vice president of NEC, in charge of semiconductor group. And someone from Fujitsu and someone from Hitachi and analyst and I were invited to be the panelists and I asked the NHK coordinator whether Doctor Ouchi knew that I was participating because he was my boss. And he said yeah, he knows that you're one of the panelists. And I went into the studio and Doctor Ouchi said - whispered to me, you know, before the panel starts, I will call you as I used to call you at NEC. But as soon as the program starts, I will call you as if I didn't know you, you know, addressed to you. In Japan, there are certain ways to call people, you know, and it depends on the hierarchy. And I thought that he was a very warm person, very thoughtful. While - before I left, he said in Japanese society, it is not so difficult to kill one's career by spreading words. Are you sure you want to do it? And I challenged him, you know. Yes, I do. But when I saw him in the studio, I got the idea that he cared about me so much that he used those words, but he didn't mean it. And the panel went very well. I said in order to be successful in Japan, we need to fabricate our semiconductors in Japan and vice versa for Japanese companies. And NEC had built a factory in Roseville and acquired U.S. citizenship as a semiconductor vendor and that was the right strategy. I was in that strategy myself, but I didn't even mention that. And Doctor Ouchi said well, likewise, you are building a factory in Japan and that's the right thing to do. So we, you know, exchanged appreciation with each other. And LSI Logic's strategy to build that factory with Kawasaki Steel as a partner, I think, was a very creative idea. LSI Logic had fifty-five percent and Kawasaki had forty-five percent equity, while financially, Kawasaki Steel invested a hundred ninety million, LSI Logic, ten million. So only, you know, five percent equity from monetary point of view, financial point of view, but LSI Logic invested their technology to fabricate LSI and design tool to make that balance to fifty-five, forty-five. I think that was a very creative financing scheme and I think LSI Logic was the first doing that. And Kawasaki Steel acquired semiconductor technology to build their own fab and it was in a few year time. You know, they wouldn't have been able to do that without LSI Logic's support, or supply of technology. They have not been so successful with semiconductor business like all the other steel companies. You know, I think they all abandoned semiconductor technology. Kobe Steel sold it to TI, Nippon Steel gave it up. Kawasaki Steel sold it back to LSI Logic. So that factory in Tsukuba, became one hundred percent LSI Logic in a few years time. And two fabs were built. One was one micron to start with down to .8 or .7-micron geometry and the second fab was built for .5 down to .35. And the output of Tsukuba, NSI , Nihon Semiconductor, Inc. was best in quality and I think Joe Zelayeta transferred the process from Milpitas to Tsukuba but manufacturing quality was excellent. With the quality control management that Kawasaki brought from steel manufacturing to the semiconductor factory, you know, the quality control concept is the same for all manufacturing. And I think we offered a very good quality to customers all over the world. You know, they exported wafers to Milpitas and they did the metallurgical, or metalization on top for ASIC. But the base wafers were very high quality and I was the president of both LSI Logic KK and NSI for about three years and then I recruited Hiromitsu Takeuchi, who passed away a few years ago, as my successor. And then Terada-san, a - a guy I recruited from IBM Semiconductor Division, became the president of NSI subsequently. So there were three generations of management change over their life. And when LSI Logic decided to sell the factory, I had already left LSI Logic but I helped Chinese semiconductor company, SMBC, acquire the equipment for their factory in China. And the second fab was sold to Rohm and now it is Rhom Fab in Tsukuba. And I think they took all the workers of the factory, so the workers did not lose their job and I think that was a good transition. And LSI Logic got out of fabricating wafers subsequently and now they have more foundry supply of wafers, I understand. But the joint venture with Kawasaki Steel, I think was the best relationship that American semiconductor company had with Japanese companies, in TI, Motorola, you know, every major semiconductor house had partnership. But I think of all the relationships, LSI Logic - Kawasaki relationship was probably the best.
RW: Well, whatever became of the concept of going public on the Japanese exchange?
KK: Okay. Okay. Let me - let me go back to LSI Logic KK, which was a separate entity from NSI. I reorganized LSI Logic KK to become a public company. In Japan - I think it's true elsewhere, but in order to become a public company, you must have internal control, the corporate governance and accounting all transparent. And also, in order to be a public company, you must have the control of marketing and supply of products. Since LSI Logic's sole supplier, KK's sole supplier of products that KK sells, is LSI Logic - there is only one supplier. We - LSI Logic KK have the control of the market, customers, which customers we sell is LSI Logic KK's control, but their supply was limited to LSI Logic, Inc. And the Japanese equivalent to SEC said you must have a control of the vendors and Wilf said that is not good for our shareholders, that LSI Logic KK has too much control over the relationship. Let's change the strategy. And Sanders and Wilf said it is a corporate decision to change the position of LSI Logic KK, make it one hundred percent subsidiary of LSI Logic Corp, not as an independent public company. So they bought all the shares back from the investors at the same price the investors paid. But that was also creative. The investment contract was in dollars, U.S. dollars, so Japanese investors paid, for example, one million dollars for approximately one thousand shares. The exchange rate has changed over the ten-year course, it was about one half. What was about two hundred thirty yen to a dollar became hundred twenty yen to a dollar. So the Japanese investors received just about one half of what they paid in yen. In dollars, the same amount, but in yen, just about fifty percent. So they were at a loss, but so was everything else. The bubble had burst and their investment went below fifty percent. So getting back fifty percent was not so bad. So the Japanese investors were not so unhappy. I'm not sure if they were happy but they were not as unhappy. Not so unhappy as in other investments. So that - that's how LSI Logic bought the shares back from the investors and they bought my junior shares also, at the same price. So I have a huge capital gain and that became my risk asset to invest in startup companies. That comes a little later, but as I left LSI Logic, they bought all of my junior shares and I had distributed junior shares to other employees for their incentive. So they got also capital gains. And I made key employees very happy. And as I left LSI Logic, I was going to support startup companies in the field of semiconductor related industries as a business angel, like many American startup entrepreneurs become later. And just then, Applied Materials Japan, or KK , had lost their president of a cancer and they didn't have a successor. And Jim Morgan, who I had known for about ten, fifteen years, said you've got to come help us. And I said I am willing to help but I decided not going back to an operational chief. So I can be an advisor or a mentor or anything for a younger executive to become a CEO, but I won't take CEO myself. And he and his counterpart in Japan, Ted Iwasaki, had many dinners with me and finally they convinced me and I said okay. I will extend my retirement for two years and take the position. And Jim said no, you have to commit five years, so I said well, anywhere between two and five and I took the job as president of Applied Materials Japan. And 1996 - '95 and '96, while I was with Applied were the two best years of Applied Materials. You know, those are two good years for semiconductor companies and they split four times - I mean, at - two times to - one to two - or one to four and within the two years. And I had some stock option and that got split four times. So that was a pretty lucrative period of time for me and that also became my risk asset. Of course, the bubble burst, caused all the asset to shrink but still I had some risk asset to invest from. So when I found my replacement, my successor in two years and one month, I said well, I'm ready to go and this is the guy and they all agreed. And Yoichi Akasaka became my successor and I happily left Applied and became a business angel. And the reason I wanted to become an angel was because, you know, I felt that all the support from Wilf, from all the executives of LSI Logic and my employees, engineers, FAE's, and customers, you know, made my capital turn around and become an asset - financial asset. So it's not just mine, you know. It belongs to many people and I don't want to pay for them - pay to them but I use this asset for the new generation of entrepreneurs and people who want to start up. So I started to be an angel and it was a very fun position to take. You have less responsibility than running a - an operation of a company, but you can be influential, you know. And no matter what happens to me, I have no direct responsibility for an operation so this is a good position to be in after retirement. And one of my friends said retirement is not to go away from the active scene where everything happens, you just change the tire of a car. You re-tire your automobile. I thought that was very funny but very interesting, you know. I probably was driving a sports vehicle, now I drive a sedan. I changed my tires, but I'm still driving, you know. And it was so interesting that I wanted to share this experience with other people. So I launched a nonprofit organization called International Angel Investors Japan. Hal Nissley had launched International Angel Investors.org about six months before and he wanted to see IAI all over the world. And he said well, why don't you start a branch of IAI in Japan. I said that's perfect. I was just about to do something like that so I will start a Japan chapter. And I got about sixty retired executives who shared my vision that the economy can be activated if more startup companies came into the picture and compete with the large established companies. Because these established companies are so huge, their mobility is very limited while startup companies can move much faster and there are some things that a startup company can do better than established companies. And many people shared that. And I call that the tropical rainforest model. In the rainforest, tree grows so large and tall that it can no longer sustain the the heavy weight and fall, leaving a large open space. There comes all the seeds and buds start to grow and compete with each other and who survives to become another big tree. You know, that's the model of industry also and NEC, Toshiba, Hitachi, and all them - all the big companies are stuck with DRAMs. And when they gave up DRAMs, they had very little to continue with. So I consider that to be the big tree falling and young startup companies can find a niche market. So about sixty guys shared that view and we launched a few teams to study what of their career experience and the human network in the business can be beneficial for startup companies. You know, their experience is with a large organization with a lot of people, support in different functions. Entrepreneur is a single person, or maybe a partner or two, and they have to do everything by themselves. They have no organization to depend on or to get support from. So you have to extract from your long career experience what can be used in the startup model. And each team had, oh, about eight to ten people and they spent the first year just researching. Once a month for three hours, they developed a manual for startup executives to look at. And in the second year, we invited venture business executives and had a sort of panel discussion with our International Angel Investors members and the venture business executive to see whether they liked the idea of us supporting him in the area where he does not have expertise. If he is an engineering type, we can help in financial or accounting or, you know, human resources and even marketing, and most importantly, corporate governance. You know, he has to have the right corporate governance attitude so anybody who joins him will share the same governance. Otherwise, it will not be easy to go public, you know. Unless you have a good corporate governance within the organization, you cannot go public. So from day one, you must have control of all the behavior or conduct of employees, according to what you think is a good governance. So you put corporate governance on your back and then march, so that all the partners and employees and supporting guys can follow your governance. And if you carry that, everybody in your organization will all conduct the same governance. So our organization puts a heavy focus on corporate governance from day one. And there are a few other angel organizations, but none puts focus on corporate governance. They want the venture business to be profitable no matter what. That's not what the venture business is about. You know, if venture business wants to be a public company, they have to have good compliance. It's not a huge, you know, manual. Just a single page, do's and don'ts. So we support those entrepreneurs who agree with our philosophy of business conduct and corporate governance. It's been about six, six and a half years since we launched this idea and the membership has grown to about one hundred and there are about thirty companies - thirty startup companies that one or a few members of International Angel Investors Japan are on the Board of Directors or independent directors or advisors or some other function, like auditor or internal auditor. And no one has gone public yet, but I think there are a couple that have seen the light on the other side of the tunnel. So within the next two or three years, we should see those companies go public. Then IAI - International Angel Investors Japan - has proven its belief and its philosophy, working with startup entrepreneurs. And we are offering entrepreneur training program. It's a fifteen-hour course. We teach - well, we don't teach, we coach those who want to startup for business model, business plan and capital structure. Those are the three elements that they must have a good plan on in - before day 1. If they startup a company without plan, you know, they start to drift and many investors recommend that they first startup and then think about business. That's reverse so far as we're concerned. So we're emphasizing that philosophy of good corporate governance with good plan be mandatory in a business startup. And I think we are getting that words around and we have had ten entrepreneurs in our class so far and we're announcing the third round. And it's a, you know, hands on training. Five of us IAI Japan give a lecture in a small group, interactively, so we make sure that they understand what we are talking about. And in the end, they can bring their own business plan, based on what they have learned, and the five lecturers try to improve or rewrite the plan so that they can take it to angel investors or even venture capitalists later. You know, and they said this is great program. I have never had this training before. And in the U.S., in Silicon Valley, there are so many universities or angels who can be the mentor or coach for the entrepreneurs who want to startup. But in Japan, business angels are very hard to find. I give you one example. A magazine called Venture Club tried to run a story about one hundred and one angels. They couldn't find them, so they had to change the program to one hundred and one consultants. And angels are totally different, you know. So angels are very hard to come by in Japan and I think International Angel Investors Japan, which is now an independent entity from Hal Nissley's. It carries the same name and the same logo, but we're totally independent and it's no longer a chapter. It's a government certified, nonprofit organization and our membership is not increasing so rapidly, but the activity level is growing so we're very happy. Venture capitals have identified our value, so they bring portfolios to us for evaluation or for due diligence. And we give them our report and some of the analysts said this is unheard of. This is very valuable because, you know, it's based on the angel's own experience and expertise - different expertise. Japanese venture capitals are all run by financial guys, not business experienced executives, so our view, our analysis based on the governance, plans and models is very rare to come.
RW: Well, I'm guessing now that, in retrospect, you were happy that you left NEC.
KK: Very happy.
RW: Because you could've been, perhaps, president of NEC.
KK: Could have.
RW: You were on a track. But you like it better this way.
KK: Yes. Yes. I am very happy for myself and for Yuko, for our kids. Not just because I acquired wealth but the experience working with, you know, so many entrepreneurs. If I was with NEC, I knew only NEC and its customers. But working with those entrepreneurs, my life is so much enriched because of the new relationship with younger generation and that makes me feel young, too. And the responsibility goes only indirect for his operation, so I don't carry a heavy duty on my back. But the entrepreneurs appreciate the mentoring and coaching from us and that's the very important part.
RW: Well, in a sense, you're giving back.
KK: Yes. Exactly.
RW: Well, what's your relationship with Wilf today?
RW: There was some disagreements in there in the past.
KK: Well, I think we always have disagreement with something and the biggest disagreement was when he decided not to let LSI Logic KK go public because I had my shareholders in my back and I was responsible to fulfill their dreams, you know. So I tried very hard to push the IPO scenario, but as a businessman, you know, we have to have an agreement on one thing and that is for all shareholders. And LSI Logic KK owed so much to the Corp, the LSI Logic Corporation, for its technology and for financial support. And if, you know, public company - LSI Logic Corp, as a public company, have to protect the interest of their shareholders, we have to choose the right strategy. So in the end, I agreed. And that's not the - the reason I left LSI Logic KK. That is because ten years has expired when I left. So it was exactly ten years. January 1 1985 to December 31 st , 1994. And Brian came, Wilf came, I think Joe Zelayeta also came for the farewell party. So we had - I had a very happy departure from LSI Logic. And Wilf invited Yuko and me to his ship, The World last year in April to spend an evening in his cabin. And I took him to a Japanese barbeque restaurant and we had such a fun time, yeah. So.
RW: That's great.
RW: Well, I wonder if we ought to ask your wife.
KK: I didn't talk much about how - how we met and how we got married. You remember when we met for the first time? Where was it? In Camp Yoshima, which is run by Kobe YMCA. I was a camp counselor for four years when I was in college. And one of the camper group was her college and they came every year to the camp. And one summer, I think it was 1956, yeah, when you were senior of college, right?
YK: Yes, yes.
KK: And we met and she had been a classmate of my sister's, right?
YK: Yes. That's right.
KK: And so we had some common subject to talk about and I think we dated for about two years after that.
YK: Hmm mmm.
KK: And I graduated, came to Tokyo. So we got separated but we exchanged many letters and finally, in 1950 - no, '60 - 1959, I think, I proposed to her and I said exactly the things I said earlier about my supporting my family, the philosophy of supporting my family. And I think she - she agreed and accepted my proposal.
RW: How did you…?
KK: Well, and I came to the U.S. after we were engaged and she had never been outside of Japan. And I wrote to her many times, but - how did you feel when you were leaving Japan to get married with me in Syracuse?
YK: How do…?
KK: It was the first time for you to travel internationally, right?
YK: I was scared to go out from Japan at that time. That's new experiences and so, but…
KK: So you followed me.
YK: Yeah, yes, so.
KK: And you learned a lot from our friends in Skaneateles, you know, after you were married. Why don't you tell us about your friend, the Birchenough's and the Gillespies and people you know?
YK: We met very nice family in Skaneateles and we had a very good time, yeah.
KK: No one from either her family or my family came to the wedding. So the wedding party was all our friends, you know. A good friend of mine, Bill Birchenough, who is about eighty-five now, acted as a father of the bride and he gave her away. And his wife was maiden of honor and their daughter and the priest's, who married us, daughter was a flower girl. So two little girls, flower girls, and a father of the bride's wife, maiden of honor - so it was an interesting wedding party. But everyone in church, particularly women of Saint James, were very thoughtful and helpful and they gave us a bridal shower - or her a bridal shower. And we were at student's housing of Syracuse University, the army barracks. And we had no - no furnitures, no bed, no utensils, no nothing to start our life. And bridal shower was very carefully coordinated. We had everything in a big trashcan, all nicely arranged, ribboned, wrapped when we came back from our honeymoon.
RW: Well, America, United States, is a nation of immigrants. We are all immigrants here and so it is very easy for us to accept other people, other cultures, other nationalities. And we're also not shy.
RW: Americans aren't shy.
KK: She was shy.
KK: And we're still very close friends, almost family relationship with the wedding party families. And David and Jo Gillespie, who are retired priests, and she plays the very good organ and she played for us. The Wedding March not the Mendelssohn's, you know, Wedding March, but Bach Prelude. And we still have a tape of that wedding. We almost go into tears when we remember that. And the other family, Gwen and Bill Birchenough, Bill lives in Florida. David and JoAnna live in Vermont. We visit them quite often. They came to Japan, so we're still very close friends. And I think all these experiences, you know, from the wedding, from the our tie with the American culture makes difference. And I have not seen so many Japanese who came to the United States either to study or to work, you know, get acquaintance that much with the local community. And I think the two countries or few countries have more people who are acquainted with the culture and the community, I think the world can be different.
RW: All right. Well, thank you, you two. It's been very interesting.
KK: Thank you for interviewing me.