История развития компьютеров (Silicon Valley, its history the best companies)

История развития компьютеров (Silicon Valley, its history the best companies)

Student’s report

On Economics

by Constantine Nikitin

Contents

Silicon Valley - what is that? 3

Stanford University 3

Hewlett Packard - the garage myth 5

HP: Foundation and first years 5

The rise of HP up to the present 6

The HP Way - an example of corporate culture for a whole industry 7

HP today. 7

The rise of Silicon Valley 10

Invention of the transistor 10

Shockley Semiconductor 11

Importance of military funding 12

Intel Corp. 13

Foundation in 1968 13

First products - Moore's Law 13

"Ted" Hoff's first microprocessor 14

Cooperation with IBM in the 1980s 15

Intel today 16

The emergence of the PC industry 17

Altair - the first PC 18

The first computer shops 19

Homebrew Computer Club 19

The Apple Story 19

"Woz" and Jobs - the two "Steves" 19

The first Apple 20

Building up the company 21

Apple II - starting the personal computer boom 22

Turbulences in the early 1980s 23

The Lisa project 23

The Macintosh revolution 24

John Sculley and Steve Jobs 25

Apple today. 27

Silicon Valley - what is that?

This question may have occurred to many people's minds when they came

across the term Silicon Valley. What hides behind it is mostly unknown to

them, although the revolutionary inventions and developments, which have

been made in this «Valley», affect everyone's daily life, and it is hard to

imagine our modern civilization without them. Silicon Valley is the

heartland of the microelectronics industry that is based on semiconductors.

Geographically, it is the northern part of the Santa Clara County, an area

stretching from the south end of the San Francisco Bay Area to San Jose,

limited by the Santa Cruz Mountains in the west and the northern part of

the Diablo Range in the east. It covers a thirty- by ten-mile strip

extending from Menlo Park and Palo Alto, through Los Altos, Mountain View,

Sunnyvale, Cupertino and Santa Clara, down to San Jose.)

The name Silicon Valley was coined in 1971 by Don C. Hoefler, editor of the

Microelectronics News, when he used this term in his magazine as the title

for a series of articles about the semiconductor industry in Santa Clara

County. "Silicon" was chosen because it is the material from which

semiconductor chips are made, which is "the fundamental product of the

local high-technology industries.")

Silicon Valley saw the "development of the integrated circuit, the

microprocessor, the personal computer and the video game") and has spawned

a lot of high-tech products such as pocket calculators, cordless

telephones, lasers or digital watches.

Looking at our high-tech society in which the PC has become indispensable -

both in business and at home, replacing the good old typewriter by word

processing - the crucial role of Silicon Valley as the birthplace of the

microelectronics and then the PC revolution becomes even more evident.

Silicon Valley is also seen as a place where many entrepreneurs backed by

venture capital have made the American Dream come true as "Overnight

Millionaires."

This makes Silicon Valley a philosophy saying that everything which seems

impossible is feasible and that improvements in our society can take place

daily, as Thomas McEnery, the mayor of San Jose, the capital of the Santa

Clara County, puts it.)

Thomas Mahon calls it the "economic and cultural frontier where successful

entrepreneurship and venture capitalism, innovative work rules and open

management styles provide the background" for the perhaps "most profound

[...] inquiry ever into the nature o f intelligence" which might, together

with "bioengineering and 'artificially intelligent' software, [...] affect

our very evolution.")

On the following pages I would like to convey the image of Silicon Valley

as the nucleus of modern computing, presenting the most important events,

which comprise the developments of the three major companies Hewlett-

Packard, Intel and Apple.

Stanford University

The story of the Silicon Valley starts with Stanford University in Palo

Alto, which has been of fundamental importance in the rise of the

electronics industry in Santa Clara County.

In the 19th century, Spanish settlers, who have been the first white

visitors to California, founded civilian communities and gave them Spanish

names such as San Francisco, Santa Clara or San Jose. They liked the

Mediterranean climate in the Santa Clara Valley, which was very hospitable.

This area came to be used by farmers and ranchers cultivating orchards, for

it provided "some of the world's finest farming soil.")

In 1887, Leland Stanford, a wealthy railroad magnate who owned a large part

of the Pacific Railroad, decided to dedicate a university to his son's

memory who had died due to a severe disease shortly before he intended to

go to a university.

Leland Stanford and his wife built Leland Stanford Jr. University on 8,800

acres of farmland in Palo Alto and also donated 20 million dollars to it.

The university opened in 1891 and "would in time become one of the world's

great academic institutions.")

In 1912, Lee De Forest, who had invented the first vacuum tube, the three-

electrode audion, discovered the amplifying effect of his audion while

working in a Federal Telegraph laboratory in Palo Alto. This was the

beginning of the Electronics Age, and "amateur radio became an obsession")

at Stanford University.

Frederick Terman, who was the progenitor of the initial Silicon Valley

boom, changed the state of this university fundamentally. Today he is also

known as the "godfather of Silicon Valley.") Terman was born in 1900, and

as the son of a Stanford professor (who developed the Stanford-Binet IQ

tests) he had grown up on the campus. After his graduation from Stanford

University he decided to go East to the Massachusetts Institute of

Technology (MIT), which was the leading university in technology then. He

studied under Vannevar Bush, who was one of America's leading scientists,

and was offered a teaching position at MIT after receiving his doctorate in

1924.

He returned to Palo Alto to visit his family before he intended to start at

MIT, but he was caught by a severe case of tuberculosis, which forced him

to spend one year in bed. This made him finally to decide to stay in Palo

Alto and teach at Stanford University because of the better climate in

California.)

Terman became head of the department of engineering by 1937 and established

a stronger cooperation between Stanford and the surrounding electronics

industry to stop the brain drain caused by many students who went to the

East after graduation, as they did not find a job in California then.)

The Varian brothers are an example of such cooperation between university

and industry. After graduation they founded a company upon a product they

had developed at the Stanford laboratories. Their company, Varian

Associates, was settled 25 miles from the university and specialized on

radar technology.

After World War II, the Stanford Research Institute (SRI) was founded. Its

aim was to provide the industry with more skilled students and to increase

the number of companies in Santa Clara County.

Terman wanted companies to settle next to the university. In 1951, he

founded the first high-technology industrial park, the Stanford Research

Park, "where business, academic and government interests could come

together in a synergistic vision of the future.") Portions of this land

would be leased to companies, because the "original Stanford family land

gift forbade the sale of any of its 8,800 acres.") These companies were

offered close contacts to the SRI and could lease land for 99 years at a

fixed price, which they had to pay in advance. The first firm to settle in

this park was Varian Associates leasing land for $4,000 an acre, which was

a good deal as there was no inflation clause in the agreement making this

site today worth several hundred thousand dollars.

More and more firms - among them Hewlett-Packard as one of the first

residents - settled their Research and Development (R&D) departments in

this park, and they were to become the "core of the early explosive growth

of Silicon Valley.") Today, there are m ore than 90 firms employing over

25,000 people.

During the Korean War the US government placed Stanford with a great deal

of their projects, which made more, and more electronics companies (among

them IBM and Lockheed) open R&D departments in Santa Clara County.

Due to his prepaid leasing program Terman received more than $18 million

and, moreover, many companies endowed the university with gifts, which

Terman used to hire qualified professors from all over the USA. Thus, he

had created a mechanism which increased the settlement of the electronics

industry.

The successful Stanford Research Park has served as a worldwide model for a

lot of other high-technology parks.)

Hewlett Packard - the garage myth

Hewlett-Packard was one of the first companies to be founded in the Silicon

Valley and has today become the largest one to be seated there. Its story

is typical for this Valley and has had a great impact on many firms founded

later on.

HP: Foundation and first years

Bill Hewlett and David Packard met at Stanford University in 1934. Bill

Hewlett was the "son of the dean of the Stanford Medical School, while Dave

Packard had come to Stanford from Pueblo, Colorado,") and was an

enthusiastic radio ham.

They both were very interested in electronic engineering and spent a lot of

their free time experimenting in Terman's lab who supported them. After

graduation in 1934, Packard went to Schenectady, New York, where he worked

for General Electric (GE), while Hewlett went on studying at the MIT. In

1938, Terman called them back to Stanford where they would earn electrical

engineering degrees after their fifth year of study.

During this year they decided to work on a project professor Terman had

suggested to them in his course at university: In the garage next to their

rented apartment in Palo Alto they developed a variable frequency

oscillator, which was much better than existing products but cost only a

"fraction of the existing price ($55 instead of $500).") Terman was very

convinced by this product, so he encouraged them to try to sell it. He

himself loaned them $538 for the production and arranged an additional loan

from a bank in Palo Alto.

The new firm Hewlett-Packard (HP) was founded in 1939, and its first big

sale were eight audio oscillators to Walt Disney Studios, which used them

for the soundtrack of "Fantasia.")

From now on, they concentrated on highly qualified products and innovative

electronic instruments for engineers and scientists. This main product line

has been kept till today.

By 1942, five years after its foundation, HP already had 60 employees and

reached annual sales of about $1 million. So it became necessary to

construct the first HP-owned building in Palo Alto. The two Stanford

graduates had successfully built up their own company which had been

founded upon an idea during their studies and was to rise from a "garage-

headquartered firm") to a leading company in the world. This phenomenon was

typical for Silicon Valley and would be imitated by many following

companies such as Apple.

The rise of HP up to the present

During World War II the demand for electronic products brought HP many

orders, and the company could grow constantly in the subsequent years. HP

continued to invent new devices such as the high-speed frequency counter in

1951, which greatly reduced the time required (from 10 minutes to one or

two seconds only) to accurately measure high frequencies. Radio stations

used it, for example.

The net revenue went up to $5.5 million in 1951 and the HP workforce was at

215 employees. So, in 1957, the stocks were offered to the public for the

first time. The additional capital due to the stock offering was invested

to acquire other companies and t o expand globally such as into the

European market. As a consequence, in 1959, the first manufacturing plant

outside Palo Alto was built in Bцblingen, West Germany.

HP entered the Fortune magazine's list of the top 500 U.S. companies in

1962, and established the HP Laboratories in 1966, which were the

"company's central research facility") and became one of the world's

leading electronic research centers.

In the 1970s, the company's product line was shifted from "electronic

instruments to include computers"), and the world's first scientific hand-

held calculator (HP-35) was developed in 1972, making the "engineer's slide

rule obsolete.")

In the 1980s, HP introduced its LaserJet printer (1985), which became the

company's successful single product ever, and moved into the top 50 on

Fortune 500 listing with net revenues of more than $10 billion (1988).)

Today, HP has total orders of $16.7 billion and employs more than 92,000

people in the whole world.) Annually, The company spends over 10 percent of

its net revenues in R&D. These investments are fundamental to keep up with

the "state-of-the-art" technology, which uses the most modern inventions.

New products have always played a key role in HP's growth, therefore more

than half of 1992's orders were for products introduced in the past two

years.) HP's more than 18,000 products include "computers and peripheral

products, test and measurement instruments and computerized test systems,

networking products, electronic components, hand-held calculators, medical

electronic equipment, and instruments and systems for chemical analysis.")

Bill Hewlett and Dave Packard today rank with America's richest men ($1.7

and $0.85 billion) and are widely respected, especially in Silicon Valley

where they are viewed as the two "most successful entrepreneurs in

America.") They have spent millions of t heir profits for social welfare

and have established the Hewlett-Foundation.)

Hewlett and Packard have set a pattern of an outstanding company against

which every new high-technology firm "must be measured.")

The HP Way - an example of corporate culture for a whole industry

From the beginning the two founders have developed a management style,

which had never occurred in a large company before. They coined a new type

of corporate culture, which was to be called "the HP way."

HP always renounced the "hire and fire" mentality, which meant to employ

many workers for a single big order and to dismiss them afterwards.

Instead, the company offered its employees "almost perfect job security.")

Even in 1974, when the U.S. economy was in a profound crisis and many

people were unemployed, HP avoided layoffs by a four-day workweek, which

was a unique measure in corporate America.

The two founders trusted in the "individual's own motivation to work") and

treated their employees as family members; hence the custom to call each

other by the first name - even the two chiefs were only known as Bill and

Dave.

The HP workers were participated in the company with stock options and were

even paid additional premiums when HP was successful - today known as

profit sharing. These measures served to identify the employees with their

work and to encourage them.

Moreover, the HP way included extensive employment benefits such as

scholarships for the employee's children.

At the end of the 1950s Bill and Dave decided to write down the company's

objectives, which were to serve as guidelines for "all decision-making by

HP people,") since the company had grown ever larger. With some changes,

those objectives are still valid today. They cover as follows: "Profit,

Customers, Fields of Interest, Growth, Our People, Management, and

Citizenship.") And these objectives are to be achieved through teamwork.

HP's strategies nowadays comprise mainly the "Management by Objectives",

"Management by Wandering around" meaning informal communication within the

company, and "Total Quality Control" which aims at producing highly

qualified products.)

The HP way is seen as model for corporate culture in many countries.

The roots of many subsequent companies are located in HP, e.g. Steve

Wozniak, who worked at HP and later co-founded Apple. This has led to the

establishment of a new corporate culture in Silicon Valley and many firms

have tried to imitate the HP way and ad opted measures such as stock

options, innovative work rules, teamwork, and profit sharing.

HP today.

Business Summary PALO ALTO, Calif., Nov. 13, 2000 -- Hewlett-Packard

Company (NYSE: HWP) today reported 17% revenue growth (20% excluding

currency effects) in its fourth fiscal quarter ended Oct. 31, 2000.

Excluding extraordinary other income and restructuring expenses, diluted

earnings per share (EPS) was up 14% from the year-ago quarter.

During the quarter, HP completed its previously announced 2-for-1 split of

its common stock in the form of a stock dividend. Share and per-share

amounts have been adjusted to reflect this split.

Net revenue was $13.3 billion, compared with $11.4 billion in last year's

fourth quarter. EPS for the quarter was 41 cents on a diluted basis,(1)

excluding investment and divestiture gains and losses, the effects of stock

appreciation rights and balance sheet translation, and restructuring

expenses. Including these items, diluted EPS on a reported basis was 45

cents per share on approximately 2.05 billion shares of common stock and

equivalents outstanding. This compares with diluted EPS of 36 cents in the

same period last year(2).

"We are pleased that revenue growth is accelerating, but very disappointed

that we missed our EPS growth target this quarter due to the confluence of

a number of issues that we now understand and are urgently addressing. I

accept full responsibility for the shortfall," said Carly Fiorina, HP

chairman, president and chief executive officer.

"Issues that reduced profitability included margin pressures, adverse

currency effects, higher-than-expected expenses, and business mix. The good

news is that our business is healthy, demand is strong, and we are making

good progress against our strategic objectives as we continue the hard work

of reinventing hp. We are determined to succeed and are not backing away

from our growth targets," Fiorina said.

HP also announced it has terminated discussions with PricewaterhouseCoopers

(PwC) regarding the potential acquisition of its consulting business.

Fiorina said, "We are disappointed that we have not been able to reach a

mutually acceptable agreement to acquire PwC's consulting business. This is

a high-quality operation, and we believe the strategic logic underlying

this acquisition is compelling. However, given the current market

environment, we are no longer confident that we can satisfy our value

creation and employee retention objectives -- and I am unwilling to subject

the HP organization to the continuing distraction of pursuing this

acquisition any further. We remain committed to aggressively growing our

consulting capabilities, organically and possibly by acquisition, and are

open to other business arrangements to achieve our goals."

Business Summary

Net revenue in the United States was $6.0 billion, an increase of 13% from

the year-ago quarter. Revenue from outside the U.S. rose 20% (26% in local

currency) to $7.3 billion. In Europe, revenue was $4.5 billion, an increase

of 15% (27% in local currency). In Asia Pacific, revenue was $1.9 billion,

an increase of 36% (34% in local currency). In Latin America, revenue

increased 11% to $0.6 billion.

Imaging and Printing Systems

The imaging and printing systems segment -- laser and inkjet printing, and

imaging devices and associated supplies -- grew 6% in revenue year over

year (9% in local currency) against a very strong quarter last year.

Internet printing and a migration to color are driving strategy and growth.

Strong sales of supplies, scanners, all-in-one (AiO) products, and consumer

imaging devices, as well as overall strength in Europe and Asia, partially

offset softness in the U.S. business printing market and continuing price

erosion in inkjet printers.

Nearly 12 million printing and scanning devices were shipped during the

quarter. HP's color LaserJet market share continues to grow and new

products began shipping in October. Imaging revenues grew 31% over the year-

ago period, driven by strong performances in all product lines: AiOs up

31%, scanners up 12% and digital cameras and printers up 137%. AiO units

were up 53% and PhotoSmart printer units were up 208%. Supplies revenues

grew 15% against a strong quarter last year.

Operating margin was 13.4%, up from 13.2% last year.

Computing Systems

The computing systems segment -- a broad range of Internet infrastructure

systems and solutions for businesses and consumers, including workstations,

desktops, notebooks, mobile devices, UNIX(R) and PC servers, storage and

software solutions -- grew 29% in revenue year over year (32% in local

currency) with strong performances across all product categories.

UNIX server revenues rose 23% year over year, with orders up 43%, driven by

excellent performance in low- and mid-range servers. Superdome, HP's new

high-end server introduced this quarter, is achieving stronger-than-

expected market acceptance, and volume shipments remain on schedule for

January. NetServer revenues were up 20%. Enterprise storage revenues were

up 40% with the HP Surestore E Disk Array XP512, HP's flagship enterprise

storage product, up 90% in revenues with strong backlog. Software revenues

(excluding VeriFone) were up 18%, but down sequentially with strong order

backlog at the end of the quarter. OpenView revenues were up 29% with

orders up 60%. PC revenues were up 40%, with home PC revenues up 62%,

notebooks up 164%, workstations up 11%, and commercial desktops up 8%.

Operating margin was 3.7%, up from 3.2% last year, but down sequentially

from 7.3% in the third quarter primarily due to margin pressures, higher

expenses and mix changes.

IT Services

The IT services segment -- hardware and software services, along with

mission-critical, outsourcing, consulting and customer financing services --

grew 15% in revenue year over year (18% in local currency). HP's

consulting business achieved in 46% revenue growth, with substantial new

hires broadening and deepening the organization's capabilities.

Operating margin was 7.4%, essentially flat with 7.5% last year.

Costs and Expenses

Cost of goods sold this quarter was 72.5% of net revenue, up from 71.3% in

the year-ago period. Expenses grew 15%. After adjusting for currency,

expense growth was 17%. Operating expenses, as reported, were 20.3% of net

revenue. This compares with 20.7% in the comparable period last year.

Asset Management

Return on assets for the quarter was 10.5% compared with 9.8% in the

comparable quarter last year. Inventory was 11.7% of revenue compared with

11.5% in last year's fourth fiscal quarter. Trade receivables were 13.1% of

revenue compared with 14.1% in the prior year period. Net property, plant

and equipment was 9.2% of revenue compared with 10.2% in the year-ago

quarter.

Full-year Review

Net revenue increased 15% to $48.8 billion. Net revenue in the United

States rose 14% to $21.6 billion, while revenue from outside the United

States increased 16% to $27.2 billion.

Net earnings from continuing operations were $3.6 billion, an increase of

15%, compared with $3.1 billion in fiscal 1999. Net earnings per share were

$1.73 on a diluted basis, up 16% from $1.49 last year.

Outlook for FY 2001

For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve

revenue growth in the range of 15 to 17%, compared to 15% in FY 2000. Gross

margin percentage in FY 2001 is expected to be in the range of 27.5 to

28.5%, compared to 28.5% in FY 2000, with improvements beginning in the 2nd

quarter. Total operating expenses in FY 2001 are expected to be

approximately 10 to 12% above FY 2000. Tax rate is expected to remain

constant at approximately 23%.

The forward-looking statements in this Outlook are based on current

expectations and are subject to risks, uncertainties and assumptions

described under the sub-heading "Forward-Looking Statements." Actual

results may differ materially from the expectations expressed above. These

statements do not include the potential impact of any mergers, acquisitions

or other business combinations that may be completed after Oct. 31, 2000.

HP will be discussing its fourth quarter results and its 2001 outlook on a

conference call today, beginning at 6 a.m. (PST). A live Webcast of the

conference call will be available at

http://www.hp.com/hpinfo/investor/quarters/2000/q4webcast.html. A replay of

the Webcast will be available at the same Web site shortly after the call

and will remain available through 4:30 p.m. PST on Nov. 22, 2000.

The rise of Silicon Valley

Hewlett-Packard was Silicon Valley's first large firm and due to its

success one of the area's most admired electronics firms.

While HP was important for the initial growth of the area and at first was

based on electronic devices, the actual Silicon Valley fever was launched

in the mid-1950s with Shockley and Fairchild, and other semiconductor

firms, and went on to the microelectronics revolution and the development

of the first PCs in the mid-1970s, continuing till today.

Invention of the transistor

One major event was crucial for this whole development. It was the

invention of the transistor that revolutionized the world of electronics.

By the 1940s, the switching units in computers were mechanical relays,

which were then replaced by vacuum tubes. But these vacuum tubes soon

turned out to have some critical disadvantages, which impeded the further

progress in computing technology. In contrast, transistors were much

better. They could perform everything the vacuum tubes did, but "required

much less current, did not generate as much heat, and were much smaller")

than vacuum tubes.

The use of vacuum tubes, which could not be made as small as transistors,

had meant that the computers were very large and drew a lot of power. For

example the famous American ENIAC, built in 1946 and consisting of more

than 18,000 vacuum tubes, had a total weight of 30 tons, filled a whole

room of 500 square meters and consumed 150 KW per hour. The breathtaking

development in computers can be seen, when comparing the ENIAC with today's

laptops which are portable with about 5 kg, are battery driven and run some

100,000 times faster.)

This development was launched by the transistor (short for "transfer

resistance") invention in 1947 by William Shockley and his colleagues John

Bardeen and Walter Brattain. This "major invention of the century") was

made at the Bell Labs in Murray Hill, New Jersey, which are the "R&D arm of

the American Telephone and Telegraph Company (AT&T).") And in 1956, the

three scientists received the Nobel Prize in Physics for their invention

that had "more significance than the mere obsolescence of another bit of

technology.")

The transistor is a "switch - or, more precisely, an electronic "gate,"

opening and closing to allow the passage of current.") Transistors are

solid-state and are based on semiconductors such as silicon. The crystals

of these elements show properties, which are between those of conductors

and insulators, so they are called semiconductors. The peculiarity of

semiconductor crystals is that they can be made "to act as a conductor for

electrical current passing through it in one direction") only, by adding

impurities or "doping" them - for instance, "adding small amounts of boron

of phosphorus.")

Shockley Semiconductor

In 1955, William Shockley, co-inventor of the transistor, decided to start

his own company, Shockley Semiconductor, to build transistors, after

leaving the Bell Labs. The new firm was seated in Palo Alto in Santa Clara

County, California, where he had grown up. Shockley man aged to hire eight

of the best scientists from the East Coast, who were attracted by his

scientific reputation. These talented young men - "the cream of electronics

research" - represented the "greatest collection of electronics genius ever

assembled". Their names were: Julius Blank, Victor Grinich, Eugene Kleiner,

Jean Hoerni, Jay Last, Gordon Moore, Robert Noyce and Sheldon Roberts.)

But however brilliant Shockley was, who was called a "marvelous intuitive

problem solver" and a "tremendous generator of ideas" by Robert Noyce, it

soon turned out that he was "hard as hell to work with", as his style was

"oppressive" and he "didn't have trust and faith in other individuals.")

When Shockley refused the suggestions of his eight engineers who wanted to

concentrate on silicon transistors, while their boss pursued research on

four-layer diodes, they decided to quit and start their own firm in 1957.

Within several months Shockley had to shut down his firm, since he had lost

his engineers, whom he called traitors and they are now known as "the

Traitorous Eight".

Although Shockley was not very successful with his firm in Palo Alto, he

"deserves credit for starting the entrepreneurial chain-reaction that

launched the semiconductor industry in Silicon Valley,") since he had

brought together excellent scientists there like Robert Noyce without whom

there might never have been a Silicon Valley on the San Francisco Peninsula

at all. Or as M. Malone calls it, "Shockley put the last stone in place in

the construction of Silicon Valley.")

The father of one of those young men who left Shockley had contacts to a

New York investment firm, which sent a young executive named Arthur Rock to

secure financing for their new enterprise. Rock asked a lot of companies,

if they were interested in backing this project, but has not been

successful so far. The concept of investing money in new technology

ventures was largely unknown then, and indeed the term "venture capital"

itself wouldn't be coined until 1965") - by Arthur Rock, who should become

Silicon Valley's first and most famous venture capitalist later on.

Finally, due to Rock's efforts, the "Traitorous Eight" managed to obtain

financial support from industrialist Sherman Fairchild to start Fairchild

Semiconductor in 1957.

Fairchild Semiconductor was developed by Shockley's firm, and as the "still

existing granddaddy of them all") has itself spawned scores of other

companies in Silicon Valley: Most semiconductor firms' roots can be traced

back to Fairchild. The most famous ones of them are National Semiconductor,

Intel, Advanced Micro Devices (AMD); and many well-known Valley leaders

have worked at Fairchild, e.g. Charlie Sporck (National Semiconductor),

Jerry Sanders (AMD's founder), Jean Hoerni, and last but not least Robert

Noyce, who is considered the "Mayor of Silicon Valley") due to his

overwhelming success.

Robert Noyce was born in southwestern Iowa in 1927. His father was a

preacher in the Congregational Church and thus was "perpetually on the move

to new congregations, his family in tow.") When the Noyces decided to stay

at the college town of Grinnell, Iowa, for a longer period of time after

many years of moving, this place meant stability in young Bob's life and

thus would become his first and only real home, which he would later regard

as important for his eventual success.

After high school, Robert studied at Grinnell College. His physics

professor had been in contact with John Bardeen (one of the three inventors

of the transistor) and obtained two of the first transistors in 1948, which

he presented his students, including Bob Noyce. This aroused young Robert's

interest in semiconductors and transistors, which made him try to learn

everything he could get about this fascinating field of solid-state

physics.

Having graduated from Grinnell College he continued his studies at "the

premier school of science on the East Coast, MIT,") where he met famous

scientists like Shockley. He received his doctorate, and decided to work at

Philco until 1955, when he was invited by William Shockley to join a new

firm named "Shockley Semiconductor" in Santa Clara County - together with

seven other splendid scientists.

When the so-called "Shockley Eight" started a new venture with Fairchild

Semiconductor, Robert Noyce began "his own transformation from engineer to

business manager:") He was chosen to lead the new company as he seemed the

best to do this job.

Fairchild Semiconductor focused on building a marketable silicon transistor

applying a new manufacturing process called "mesa". Despite being the

smallest company in electronics business then, it attracted public

attention, particularly in 1958, when "Big Blue" - as dominant IBM is

nicknamed - ordered the "first-ever mesa silicon transistors") for memory

drivers in its computers.

This order contributed to the early success of Fairchild Semiconductor, and

indicated the beginning of a long relationship between IBM and Silicon

Valley.

Importance of military funding

Before switching over to the events at Intel, the aspect of military

funding is to be dealt with, since it has played an important role in the

early days of Silicon Valley.

During World War II, after the Japanese attack at Pearl Harbor in 1942, a

great deal of the U.S. military forces and of the military production was

moved to California. Within a few years, California - formerly an

agricultural state - became a booming industrial state and the military

center of the USA.)

After the war, in the time of the Cold War and the arms race, the Korean

conflict, the "missile gap" and the space program, the Pentagon kept

ordering high-technology products from the armament factories in

California. Many companies established R&D departments and production

facilities in Santa Clara County near Stanford University, which provided

them with bright engineers and scientists, and were largely supported by

the Pentagon's demand for electronic high-tech products.

Examples for such firms are FMC, GTE, Varian Associates, Westinghouse, and

finally Lockheed, which opened its R&D department in the Stanford Research

Park in 1956, and started Lockheed Missiles and Space Company (LMSC) in

Sunnyvale. Lockheed's move to Northern California was crucial for the

developments in Santa Clara County; today the company is Silicon Valley's

largest employer with more than 24,000 people.)

Military funding for high-tech products was responsible for the early

growth of Silicon Valley in the 1950s and 1960s. The U.S. Department of

Defense was the biggest buyer of these products, e.g. its purchases

represented about 70 percent of the total production of ICs in 1965.)

While this share in chip demands has dropped to 8 percent today, the

Pentagon remains the biggest supporter of new technologies and accounts for

most of the purchases of the latest developments.

Intel Corp.

After the transistor and the integrated circuit, the invention of the

microprocessor in the early 1970s represents the next step towards the

modern way of computing, providing the basis for the subsequent personal

computer revolution.

It was at Intel where the first microprocessor was designed - representing

the key to modern personal computers. With its logic and memory chips, the

company provides the basic components for microcomputers. Intel is regarded

as Silicon Valley's flagship and its most successful semiconductor company,

owing its worldwide leading role to a perpetually high spending on research

and development (R&D).

Foundation in 1968

It all started in 1968, when Bob Noyce resigned as head of Fairchild

Semiconductor taking along Gordon Moore and Andy Grove, to embark on a new

venture. They had decided to leave the company, because they wanted "to

regain the satisfaction of research and development in a small, growing

company,") since Fairchild had become big with lots of bureaucracy work to

be done. Gordon Moore had belonged to the famous Shockley Eight and was in

charge of the R&D team at Fairchild. Andy Grove, a young Hungarian йmigrй,

who had earned a doctorate in chemical engineering at U.C. Berkeley, had

joined Fairchild in the early 1960s.

Intel (short for Integrated Electronics), a typical Fairchild spin-off, was

financially backed by venture capital from Arthur Rock, who had been in

contact with Noyce since 1957. The company was founded upon the idea of

integrating many transistors on a chip of silicon, after Noyce had

developed a new photochemical process. The three engineers initially

focused on building the first semiconductor chips used for computer memory,

which should replace the dominant memory storage technology at the time,

called "magnetic core". Intel's task was to drive down the cost per bit by

increasing the capacity of memory chips dramatically.

First products - Moore's Law

Within a year, Intel developed its first product - the 3101 Schottky

bipolar 64-bit static random access memory (SRAM), which was followed soon

after by the 1101. This chip (1101) was a 256-bit SRAM and had been

developed on Intel's new "silicon gate metal -oxide semiconductor (MOS)

process," which should become the "industry's process technology of

choice.") With the first two products, the young company started with 12

employees and net revenues of $2,672 in 1968, had already gained the

technological lead in the field of memory chips.

Intel's first really successful product was the 1103 dynamic random access

memory (DRAM), which was manufactured in the MOS process. Introduced in

1970, this chip was the "first merchant market LSI (large-scale integrated)

DRAM," and received broad acceptance because it was superior to magnetic

core memories. So, by the end of 1971, the 1103 became "the world's largest-

selling semiconductor device" and provided the capital for Intel's early

growth.)

Until today, semiconductors have "adhered to Moore's Law," which has been

framed by the "cofounder of Fairchild and Intel" when the first commercial

DRAMs appeared in the early 1970s. This law predicts that the price per bit

(the smallest unit of memory) drops by 30 percent every year. It implies

that you will receive 30 percent more power (speed/capacity) at the same

price, or that the "price of a certain power is 30 percent less.")

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