How Semiconductors Ruined East Germany
in the late 1980s the German Democratic Republic or East Germany went all in on the Monumental task of domestic semiconductor production this semiconductor Obsession failed and the billions of marks spent on it eventually bankrupted the country's failing economy how did this happen the East Germans enjoyed the benefit of perhaps the best technology anyone can possibly steal yet they still failed in this video I want to take a look at East Germany's semiconductor industry from beginning to end throughout the 1950s the East German State sought to rebuild from the damage of the war while inherited a strong industrial base from Old Germany its population was just a third of its Western sibling the ruling party the Socialist Unity party of Germany or SED introduced centralized State planning in the high quotas to the economy these high perhaps unrealistic work quotas were unpopular in 1953 workers across the country struck leading the Soviets to send in tanks and soldiers to violently suppress the protests the East German uprising of 1953 kicked off what would be a persistent and ultimately existential problem for the gdr immigration throughout its history its best and smartest people consistently sought away out to the West to convince its people to stay the SED promised a better future through the use of Technology more than the Soviets East Germany leaned on Information Technology as a pathway towards economic vitality and a glorious socialist future the party's Elite saw themselves locked in a technology race with the capitalists to see who can build a better Society leader Walter ubrecht called for an industrial transformation with the ultimate aim of catching up with and surpassing capitalism in terms of Technology a thriving computer industry was crucial towards making this ideology work and in order to produce the superior computers East Germany needed to learn and master microelectronics technology less than four years after the Americans invented the germanium transistor East Germany moved quickly to build their own line of first generation semiconductors in 1952 development work began at the veb works for electronic components for communications technology or wbn in the town of telto near the city of Berlin this puts them about even with West Germany the frg's first semiconductor Factory came about in 1952 built by Siemens a small team of about 74 quickly grew to 625 by the 1960s led by the physicist Matthias falter falter might have been a fine solid state physicist but he was apparently a poor leader and manager wbn suffered from a lack of cooperation between its industrial and academic sides the production teams lacked discipline hands-on experience and did not appreciate scale and difficulty of the task they were facing in one incident the team dumped hot ashes right outside a factory window where they were producing a pilot run of semiconductors the ashes ruined the semiconductors themselves and made it so that the team had no idea what to expect for the subsequent high volume run perhaps more significantly the state failed to give their young semiconductor team the resources it should have gotten Administration their Chief accountant in particular seemed to care very little for semiconductors when the team asked for money to purchase felt slippers to prevent static charge buildup in the clean room their Chief accountant denied the request this lack of support would be a consistent theme throughout the early days of the East German microelectronics industry ideally the gdr needed some form of Technology transfer to find a stable footing luckily the Soviet Union happened to be one of the world's Computing leaders yet despite being the gdr's primary political backer the Soviets were strangely wary in 1958 two wbn staff members traveled to the Soviet Union to do technical exchanges a year later they came back complaining of limited cooperation much of what the Soviets had developed was created for military use thusly the Soviets were concerned that transferring that to the east Germans would leak via scientists defecting to the West in 1959 Walter ubreck wrote directly to Soviet leader Nikita Khrushchev asking to send a Soviet advisor the Soviets sent three those advisers toured the areas and wrote a report but the country continued to Stonewall with the Soviets being the Frenemies they were the gdr turned to the West this means pursuing licensing Arrangements purchasing equipment and quote-unquote borrowing whatever else they might need to know to learn how to make semiconductors the United States the world leader in semiconductor technology would have been the obvious choice but there was a problem semiconductor technologies have obvious military applications so the Western Bloc placed an export ban to soviet-aligned countries an arrangement known as the Coordinating Committee for multilateral export controls or cocom and the US most closely adhered to cocon restrictions but back then not every Western Country Hues so closely to cocom like the United Kingdom so in 1959 a 10-man East German delegation went to England to visit a number of semiconductor factories and purchase equipment through the context of Arthur Lewis a British labor party politician the delegation saw plans owned by British Phillips Siemens Edison and British Thompson Houston the latter is a descendant of the Vickers company that sold oil equipment to the Soviets in the early 1900s just thought that was a nice connection this visit was very successful the East Germans learned a whole lot about Industrial Level semiconductor manufacturing they even managed to purchase equipment for low frequency transistors a trailing Edge technology despite the success of the 1959 trip the East German semiconductor industry was not making up ground substantial gaps remained in the industrial knowledge Bank qualified Personnel kept leaving for West Germany foreign exchange was limited all the while the rest of the industry was surging ahead in 1958 wbn produced 100 000 germanium diodes transistors and rectifiers but some 98 of what they produced eventually needed to be discarded throughout their entire working lives that same year in 1958 the United States alone produced 27.8 million transistors two years later in 1960 the U.S grew that production capacity five times over to 131 million the year after that in 1961 Texas Instruments started selling its integrated circuits to the market this remarkable invention LeapFrog the United States into the technological lead Japan for their part already had their Sony tr-55 transistor radio exporting over 10 million radios to the United States in 1960. it was not like the East Germans were unaware of their shortcomings as they were happening a 1958 inspection led to a scathingly negative report Eric Apel head of the economic Commission of the Central Committee public Bureau and an economic reformer wrote in late April 1959 compared to the American Japanese and West German industry we lie in a state of backwardness that can scarcely be estimated this backwardness will not decrease through 1961 at least but will instead grow another inspection in 1960 identified more items of backwardness and semiconductor production workers tended to use rules of thumb rather than their instruments to measure the various Factory lines did not cooperate with one another and so on interestingly when reporting these results to the economic Commission of the Central Committee public Bureau that inspector softened his results it is notes to State authorities he said that the gdr was five to six years behind but in his analysis to the more politically charged economic commission he cut it in half three to four years this essentially places the gdr in the fast follower category alongside countries like Japan West Germany France and Italy it is hard to justify this but the inspector probably felt that five to six years evaluation would be construed as being overly negative by 1960 over 3.5 million young East Germans had left to the West turning the gdr into a rapidly aging Society with earlier efforts to restrain brain drain failing in 1961 East Germany erected the Berlin Wall the wall had far-reaching effects we shall not discuss them here for semiconductors however the wall pinched off what little technology the gdr had imported from the West how to replace this the initial reaction would be that the gdr needed to nuzzle even closer to the Soviets but relations were tense during these times the Soviets criticized the East German's lack of specialization and question their willingness to play their role the East Germans in turn felt that they were being used to cover gaps the Soviets had in their production after the wall went up the Soviets realized perhaps correctly that the gdr had nobody else they became reluctant to supply oil to the Germans and still dragged their feet and sharing computer technology then in 1965 the East German signed an extremely unfavorable trade agreement with the Soviets this agreement likely contributed to Eric opel's suicide that same day with the Soviets being the way they were the gdr embarked on a concerted initiative to acquire and develop its own domestic capabilities in 1963 the Aging Walter ubreck launched a new initiative called the new economy system of planning to bring more Market elements to the gdr economy now industrial groups not bureaucrats can actually decide how money can be spent the reform also elevated the status of Technology sectors like semiconductor Manufacturing in the economy r d spending increased by over a third from 1959 to 1963.
in 1965 nearly 40 percent of the electronics that the gdr produced by value were semiconductors 82 million marks out of 223 million marks in total four years later in 1969 that number grew fourfold many of these transistors went into new consumer technical Goods like radios TVs and fridges in 1971 semiconductor production reached 535 million marks by value that year East Germany began producing their first integrated circuits some 10 years after Texas Instruments did it so ulbrich's reform did yield some benefits however it petered out in the late 1960s strange inequalities in policy planning meant that color televisions were widely available but consumer items like toothbrushes and toilet paper were in short supply in 1971 the SED made a conservative turn replacing Old Brick as its first Secretary with Eric Honaker impatient the party ended its expensive r d Investments and started cutting Corners like copying One Day in 1967 the minister of electrical engineering and electronics showed up to an East German electronics firm with a suitcase full of integrated circuits from TI he told them to copy them exactly the ministry for State security better known as the Stasi had been engaged in scientific and Technology Espionage since the 1950s mostly related to Atomic engineering and other Sciences then in 1969 the stasi's scientific and Technical sector was reorganized and expanded with the goal of acquiring military Technologies after Honaker came into power in 1971 the Stasi job shifted from acquiring scientific knowledge to specific Technologies mostly via informants in the west who found and handed the goods over to East Germany one such informant was Hans render a physicist working for the West German firm's Telefunken and AEG he handed over technical secrets for over 28 years and was never caught the Stasi officer would give redder a shopping list of material they wanted with grades on importance highest grades mostly going to Military and computer Technologies redder gets it and passes it to the case officer at the friedrichstrasse station the only station in East Berlin service by West Berlin Subway Lines it was a border crossing well known for spy activity once acquired the Stasi laundered the technology tearing off labels and such so that people cannot identify from where it came from and then passed it to companies like veb Robotron and veb Carl Zeiss Jenna in the late 1960s the Socialist block copied the IBM 360 system for their unified series of computers such an effort not only required procuring several said computers but also placing agents with an IBM itself which sastasi did Western companies knew about this copying of course and one famous example a gdr chip analyst looking at a stolen chip from the U.S firm digital Corporation saw a message in Russian roughly translating to when do you want to stop to swipe own design is better the total effectiveness of the stasis foreign technology Acquisitions we will probably never know the Stasi destroyed most of its foreign records shortly after the fall of the Berlin Wall but what records we have uncovered imply that East Germany stealing and copying saved the gdr billions of dollars in r d while also allowing them to significantly close its gaps with the West however it is also clear that East Germany's Industries struggled to absorb the information because the Stasi were spymasters not technical experts they frequently asked for the wrong item their methods of laundering their technology before passing it on made it harder to understand how to use it tightening embargoes from the West also interfered with Industrial Development stolen Western Products got progressively older and more expensive to acquire the embargoes gave other countries the chance to scam the Stasi adding markups frequently in the range of 30 to 80 to even 100 percent this drained the East Germans already limited r d budgets one vax 8800 computer was being trucked in from Yugoslavia via Hungary and Czechoslovakia but was cited for having Bulgarian papers and was quote unquote impounded forcing the Stasi to pay an extra 2.15 million dollars to finally get their computer a month later the wholesale copying also undercut the country's ability to export its goods abroad vestasi did not want other countries to see what they managed to acquire and had they tried anyway sales would have been blocked on patent infringement grounds and finally semiconductors were getting to the point that East German technicians struggled to replicate them as early as 1976 an ic's physical form no longer yielded secrets on how to produce them in 1981 with the gdr still about seven to ten years behind the west and microelectronics development Eric Honaker announced a 10-point program to produce the majority of its semiconductors domestically by 1985. the 1970s were rough years for the gdr tighter export bands the oil crises of the 1970s heavy borrowing from the West declining productivity and worsening competitiveness it was all weighing heavily grinding the country's economy to a halt Gerhard sure Head of the State Planning Commission convinced Honaker that investing in semiconductors would bring the country out of its economic morass at the start this wasn't a totally wrong idea computer-aided manufacturing and design were sweeping through the world and East Germany's manufacturers needed to get on board but this pragmatic techno-economic view mutated into magical thinking semiconductors became the preconditions for the transition to Communism and would combat imperialism from the West this magical thinking turned into a poisonous obsession with Financial Resources still scarce the cocom export ban still in place and the Soviets still with bigger fish to fry the gdr plunged even deeper into spycraft and Espionage to steal and copy Western technology some of the stasis best work came during this period in 1985 one of their best spies Gerhard runenberger struck an astounding technology transfer agreement with Toshiba in exchange for 25 million marks Toshiba a long-running technology partner with the gdr would furnish the gdr with designs for their 256 kilobyte memory chips along with instructions on how to produce them at the time 256 kilobyte was Leading Edge stuff the gdr was still struggling to produce 64 kilobyte memory this would have been a game changer but in 1987 Toshiba got caught selling submarine propeller equipment to the Soviet Union huge Scandal back then afraid of getting caught again Toshiba offered the Stasi a 95 refund to destroy the evidence ronenberger agreed so in July 1988 he got the money back and dissolved the chip designs in a vat of acid in front of toshiba's people but never trust a spy those were just copies produced for exactly that purpose yet it all can only go so far in one meeting astasy and Foreman told his case officer I'm giving you the best technology available why can't you use it thusly despite considerable effort and Investment East Germany still lagged by 1987 the U.S had 215 computer-aided design and Manufacturing Systems per 1000 employees West Germany had 111 systems East Germany had just eight aware of this in 1986 the East German government decided to go all in they began a program called highest integration its goal was to adopt the LSI and bring East Germany to the Leading Edge within three years between 1986 and 1990 the gdr government plowed 14 billion marks into semiconductor r d 20 of the country's total r d budget straining the country's already heavily indebted finances four hundred thousand employees worked in the microelectronics effort either manufacturing r d or support functions this implies that one out of every eight employees in the gdr's entire industrial population was somehow connected to semiconductors highest integration comprised of several programs for instance the gdr state-owned Enterprise veb microelectronics airford was assigned the task of producing a 32-bit microprocessor by 1990. nine years after Intel did it in 1981.
but the biggest program of all was the development of the 256 kilobyte and one megabit memory chip by veb Carl Zeiss Jenna spending over a billion marks to build a new facility in the city of Dresden the Prototype 256 kilobyte chip was completed in 1987 ahead of schedule they were never able to put this 256 memory into high volume production but regardless Zeiss Jenna plunged onwards to one megabit finally in September 1988 Zeiss General director Wolfgang Berman triumphantly presented Eric Honaker with the first samples of that one megabit chip the u-61 thousand Honaker said that the chips were convincing proof that the gdr is maintaining its position as a developed industrial country this technical Triumph was the bitterest of them all in semiconductors prototypes mean nothing production means everything Dresden produced just 35 000 chips throughout the entirety of 1988 and 1989 with a yield of 20 percent they plan to scale up to one hundred thousand one megabit chips each year Toshiba alone produced that many in a single day two months later in November 1988 the Leading Edge moved once more Toshiba began shipping its four megabit dram in high volume seeking to produce a million chips a month by March 1989. by then the East German economy was in shambles scheduled to default on its debts by early 1990. it never even got there in May 1989 Hungary opened its borders with Austria and East German swarmed through there on route to West Germany later in November 1989 a year after its one megabit technical Triumph the Berlin Wall fell the gdr semiconductor products were technological dead ends but its societal Legacy lives on the billions of marks invested into the city of Dresden turned it into one of Europe's top silicon manufacturing regions today hosting companies like Global foundries Infineon and maybe perhaps tsmc by the 1970s Leading Edge semiconductor production was bigger than any single country can handle especially one a small and isolated as East Germany they never should have tried and when they did it ruined them all right everyone that's it for tonight thanks for watching subscribe to the Channel Sign up for the newsletter and I'll see you guys next time
2023-01-14 00:36
