National Semiconductor: "Animals of Silicon Valley"

National Semiconductor:

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they were called the animals of Silicon Valley run by a silicon Legend National semiconductor ran a tight ship Ruth Lee low-cost they went head-to-head with some of the industry's biggest they played an integral role in the small but relevant linear circuit industry for over half a century dominant for decades in this video I want to talk about National semiconductor and I want to dedicate this video to my father who once worked there I still remember him taking me to the Santa Clara office thanks Dad this one's for you but first I want to remind you about the newsletter sign up for updates and new analysis the full write-up for videos you might not have seen before and more the sign up link is in the video description below I try to put one out every week maybe two alright back to the show National semiconductor was founded in 1959 by Dr Bernard J rothline and seven of his colleagues at Sperry semiconductor Sperry semi was a subsidiary of Sperry Rand the computer giant they had been making an alloy transistor something similar to the Mesa transistors first produced and announced by Fairchild in mid-1959 after raising some funding rothelene and his colleagues left and set up a 26 000 square foot factory in Danbury Connecticut rothelene said in an interview just a few months after the company's founding although we are only five months old we've already equipped two plants we expect sales of three million dollars one year from now and 10 million within three years this sounds like big talk but in the semiconductor field there is no middle ground you're either big or you're dead really interesting how fast they hit the ground well as it turns out they started up so fast because they made the same products as Sperry semi like just walked out with their IP and everything is that legal well stay tuned to find out by 1961 National semiconductor had 250 employees working in two factories producing 60 types of silicon alloy and Mesa transistors rothelene grew the company from about 3 million in Revenue in 1961 to about 5.3 million in 1965. nice but profits fail to rise as quickly probably because many of their products were over customized for their customers which prevented them from achieving scale very quickly Sperry ran sue rothlein his co-founders and National semiconductor for patent infringement and the theft of Trade Secrets National semi eventually lost that suit the court froze their assets and ordered them to destroy all of their inventory those chips were literally put into a grinder basically insolvent at the end of 1966 the company was saved by a young investor named Peter Sprague just 27 his uncle was the founder of Sprague electric company once a very large electric components company back in its day Peter invested in a series of interesting things today you would probably call him a private Equity investor notable Investments included a food processing company in Iran and a last-second bailout of Aston Martin to save it from bankruptcy anyway sprog purchased a sizable portion of national shares and became its chairman he booted the old CEO rothalene hired two brilliant linear circuit designers to kick-start the turnaround and started a search for a skilled operator to run the business Charles Spork had joined Fairchild from General Electric as a production manager he knew nothing about semiconductors born in Upstate New York nearly a century ago Spork train as a mechanical engineer and joined General Electric but he didn't enjoy GE stale culture and searched for something new he saw a job ad in the New York Times for a production manager position at Fairchild and applied he got the job and moved his family across the country to California Fairchild then was a mess in classic startup fashion Spork found out that they had hired two guys for the same position the other guy left though and Spork rapidly Rose in a year and a half he became fairchild's operation manager another year and a half after that he became general manager the West Coast minded Fairchild semiconductor had long clashed with its traditional-minded East Coast owners Spork saw some of the company's top people leave to start companies like cygnetics amelco and so on these departures dealt the company a serious morale blow Spork did all he can in order to keep things together yet in the back of his mind he too wanted to run his own semiconductor business but he knew how difficult the industry was even back in the 1960s you need a lot of money up front to hire special experts and build a factory money you are unlikely to get unless you had some serious pedigree recall Jerry Sanders another Fair child alumni and his struggle to get AMD off the ground no no it made more sense to take over an existing established company Spork first took a meeting with the British Plessy companies electronic subsidiary and things seemed to be progressing well until one of the Plessy company's senior Representatives asked at a final review dinner now what is a semiconductor well that made the decision easy Spork quickly left the dinner and it turned out to be the right call then to a spork's colleagues linear Circuit Master genius Bob widler and Dave Talbert left to go to National Semiconductor in his exit interview survey for Fairchild whittler you're going to hear more about this guy later wrote in huge block letters I want to get rich this caught Charles's attention the company's issues were pretty bad but there were some compelling assets Spork analyzed the company's financial statements and felt that he could turn it around pretty quickly so in 1967 he went to Sprague and proposed to join National semi as its president taking a 50 pay cut to do so he would bring along with him four other talents from Fairchild semiconductor the plan was announced on the 1st of March 1967. National semi stock surged from five dollars to eleven dollars but Fairchild already staggered from a series of similar exits was devastated Jerry Sanders said Charlie Spork resigned I couldn't believe it I remember it so well I mean to me you didn't resign from a company you believed in Robert Noyes said Charlie was well liked very well liked he was a straightforward person and I suppose I essentially cried when he left I just felt that things were falling apart and I just felt a great personal loss frankly from his side Spork wrote in his Memoirs Bob asked me if he could do anything to change my mind but it was a done deal Bob understood my desire to be my own boss in an oral history for the Computer History Museum he adds that Bob Noyes had already by then decided to go to Intel saying Bob said he was leaving and starting a company and Gordon was going to go with him and Andy Grove was going to go with him and he said we need to talk about combining our companies the combination never happened but it would have been fascinating to contemplate Fairchild continued to Hemorrhage Talent after spork's departure its golden age was essentially over National semi had interesting products but the company's culture was best described as lackadaisical which was great because Spork was a guy who knew how to efficiently market sell and Supply those interesting products and he ran a tight ship the first thing Spork and his management team did was to cut the fat they went to the plan in Danbury Connecticut and laid off what would eventually be half of the plant's 600 workers they would squeeze the Danbury plant for cash to pay for a new linear circuit plant in California new plant manager Fred Bialik who came over with Spork from Fairchild discovered a makeshift golf course near the plant several managers were skipping meetings to play golf Bialik called a Landscaping service to tear up the golf course the next day the job Cuts made national semiconductor profitable again even so Spork kept a tight lid on things the company outsourced accounting and sales the use of independent sales representatives let them deploy a larger sales force on the ground than their competitors in line with this era of low-cost National semiconductor was one of the first semiconductor companies to build overseas factories in Southeast Asia semiconductor packaging is the process of protecting the Silicon dye from the outside world it is a low-cost and labor-intensive step Fairchild first outsourced the work to Hong Kong National semi thought about doing the same but failed to look elsewhere labor costs in Hong Kong were already Rising anyway so in 1968 National decided to build a new packaging Factory in the recently established country of Singapore they liked the city-state's good engineering school as well as its Western educated technical people the company came at the right time the city-state was then bracing for the British Army's withdrawal from their military base a move that the government estimated would push 40 000 singaporeans into unemployment the Singaporean government thus quickly worked with national semi to get things rolling within two months there were the nation's first Semiconductor Company and their success attracted others like Texas Instruments and Hewlett-Packard later on Singapore's labor costs Rose too so Nationals started looking at other countries in Southeast Asia like Malaysia's Penang they might have done something in India though that was eventually ruled out due to onerous government restrictions Spork first Focus National semiconductor's sprawling product line on linear circuits linear circuits work with analog signals like voltage or sound unlike digital signals these vary continuously over time such chips are used in consumer electronics Automotive Systems audio processing and so on in 1967 National semiconductor introduced the lm100 voltage regulator voltage Regulators are common circuits to stabilize voltage levels within a specific range so to provide a steady and reliable power source designed by the aforementioned Bob widler the lm100 was the Market's first monolithic voltage regulator Ergo the name LM or linear monolithic it far exceeded expectations it was valued for its unique adjustability and stability whittler Then followed that up with the lm101 the first modern operational amplifier the lm100 and lm101 both became the cornerstones of national semiconductors dominant linear circuits business analog madman Bob widler was one of the truly wild Geniuses of Silicon Valley the stories about this guy are Legend in 1970 money got so tight that they stopped Landscaping the lawn around the Santa Clara Fab the grass grew tall so widdler found a sheep and tied it to the front lawn the local newspaper showed up and took pictures pissing off the management the Sheep was eventually returned to its owner whitler had insane work ethic you never ordered him to do something he liked to say that he never worked you just stimulated his interest on a project and he would endlessly turn on it for hours once it was done he then let loose he was aggressively brilliant together with his famed design partner Robert Dobkin he is said to have designed over half of the world's linear circuits yet he was also crazy and difficult to work with he drank like a maniac going on these all-night binges Regis McKenna the legendary marketing genius behind apple and Intel remembers whitler telling him that he had a tree up on a hill with McKenna's name on it and that he used to shoot at that tree he kept an ax in his work room and when he got frustrated he would whack out big chunks of linoleum out of his floor once whitler used the ax to chop Staples of a pile of printed data sheets everyone in the linear IC World knew about Bob widler and they loved his aggressive colorful manner despite his roughness he had heart too one testimony reads he was absolutely incredible with customers I never saw him in a situation where he was stumped with a question he would tell you afterward if the customer knew what he was talking about or didn't although he never ever told the customer where to get off he was also a terrific teacher capable of controlling himself notes he prepared for a panel he attended had him outlining at the very top the words kindness sadly whittler lived a life shorter than most he died of a heart attack in 1991 at the early age of 53 while jogging down in Mexico he cashed out and retired there after leaving National Spork dealt with widdler's Antics because widler designed the best linear circuits and he needed the profits from selling those circuits to fund Nationals entry into new digital logic businesses two significant ones were transistor to transistor logic and metal oxide semiconductors transistor to transistor logic or TTL describe transistors used by system integrators as Like Glue logic in larger systems like computers metal oxide semiconductors are the type of semiconductors used for constructing microprocessors memory chips and so on these are both digital logic products Texas Instruments first popularized TTL and initially held the market National semiconductor basically produced our own versions of the Texas Instruments products but cheaper thanks to their overseas cost advantages at first TI attempted to match them on price but they didn't call Charlie Spork Attila the spork for nothing he recalls we entered fairly late in the game but we entered with our eyes open saying to ourselves we're going to have to do two things to penetrate this Market we're going to have to introduce some unique products and in addition we're going to have to be very price aggressive we went into the market with a Vengeance we were just playing heartless on price we kept driving the price until one by one the other guys for a child signetix GRE Harris Rockwell started leaving the game in a 1981 article Fortune called National semiconductor the animals so Silicon Valley saying in the Cutthroat semiconductor industry no company has a more fearsome reputation the national semiconductor Corporation known as the street fighter of Silicon Valley it has made a fetish of forcing down production costs for its broad line of microelectronic components and a moves with lethal speed to slash prices gobble up market share and drive competitors from the field their animals Marvels one of the company's largest stockholders National like the name so much they had a mirrored poster with the words animal of the month at the top it's an indication of the company's hard-working but enjoyable culture people really loved working there unfortunately Nationals animal instincts failed to win them the microprocessor Market Which Intel and Motorola cornered National had designed a microprocessor of their own called The Sixteen thousand but despite a strong Technical Edge it made no Headway in the market linear circuits are a steady but relatively low growth business in search of growth the national tried some other stuff Downstream there was an ill-fated foray into producing consumer products but calculators and watches weren't really National semiconductors game they made some profit at first but that evaporated once competition from the Japanese and Hong Kong came into play another effort slightly more successful was their work in point-of-sale terminals for managing supermarkets the data Checker systems which sold well in California they also got into producing low-cost computer mainframes for a marketing company called ital after a while they Acquired itel and went into direct competition with IBM this did not end well big blue not only made things very hard for them in head-to-head competition but it also got them caught up in a trade secret lawsuit between IBM and customer Hitachi they got out of that business in the 1980s however Spork largely made the right bets and semiconductor components the semiconductor growth wave supercharged the company's growth throughout the 1960s and 1970s in 1970 National semiconductor made 42 million dollars in Revenue six years later in 1976 they cleared an incredible 365 million dollars as I mentioned National semiconductor made its bones in the high volume low-cost business this put them on the front lines of the semiconductor competition in Japan which started coming up in the 1970s recognizing Japan's strengths in organizing industrial policy Spork was one of the first to call out the issue he later said in an interview a foreign industrial base now can attack an American industry financing it in such a way as to drive down the profit margins such that the U.S industry cannot maintain research and development and not attract investment money a weaker and weaker position that's why we have to decide what the hell is important and do something about it it's difficult to get that message across because everybody seems to feel that hell what's wrong with buying our computers in Japan they're cheaper what they forget that means is that we're not producing anything all we're going to have left to sell the Japanese is soybeans speaking of which isn't America's biggest export to the People's Republic of China soybeans should look that up later anyway wanting a more unified industrial policy for the American Semiconductor industry spark joined up with the CEOs of Fairchild AMD Intel and others to form what is now called the semiconductor industry Association he and Sia led the American policy response to Japan's semiconductor challenge they focused on ending Market trade protections for the Japanese market and for dumping memory products at below cost this all eventually led to Reagan's 1987 sanctions the first since World War II perhaps a more lasting Legacy of Spork and the Sia's efforts is getting Congress to make Financial commitments to help the industry cooperatively develop new elements of advanced semiconductor Manufacturing nevertheless the 1980s were hard for National semiconductor buffeted by Japanese competition and a bad macro environment this was made worse by their 1987 acquisition of the old Fairchild semiconductor for about 200 million dollars Fairchild had fallen into hard times but still offered some compelling products many of which were sold to the US Military buying Fairchild made national semiconductor the world's sixth largest semiconductor company and Spork writes in his Memoirs that they made a killing on the acquisition saying that they bought it for 122 million sold off parts to earn back 150 million and eventually sold the rest for 500 million but the Fairchild acquisition burdened National with a lot of bad capacity and the numbers in the Years 1987 to 1990 show a financial dumpster fire return on asset ratios declined throughout the second half of the 1980s many of the Fairchild plants were outdated and had to be closed Fab utilization rates for the whole company were 63 percent in an industry where the norm is around 80 percent and amazingly gross profits and profitability declined despite National spending over a billion dollars in r d this all happened despite Spork never losing his trademark stinginess future CEO Gil Emilio recalls visiting a Fab in Salt Lake City and tripping over the carpet they couldn't fix the carpet or mow the lawn because Spork didn't give them the budget for it this whole thing was the very definition of Pennywise and pound foolish ultimately what was killing the company wasn't carpeting costs for the Fabs but rather offering too many high volume commodity product lines employing too many people and having too much unused Fab capacity National failed to adjust to the new semiconductor customer they were still advertising their chip products and catalogs they worked fine back when the customers were mostly buyers in search of a random piece but over the years the market shifted from dropping components to integrated subsystems close Partnerships where they have a say on what they are getting big fish customers are no longer interested in an arm's length relationship flipping through a catalog the company was rapidly burning cash sending them to the verge of bankruptcy the stock crashed from a high of 1825 in 1987 to about 4.1990 they needed another turnaround in 1991 chairman Peter Sprague finally decided it was time and replaced Spork with Gil Emilio Emilio embarked on a deep turnaround slimming down to sprawling company's various product lines with a focus on only retaining its competitive linear circuit and mixed signal products Nic signal products are those which can handle both analog and digital signals these Drew on Nationals long-standing strengths over the next few years Emilio had National exit out of various products and plants in Santa Clara Salt Lake City Tucson Arizona Hong Kong Washington the state and Brazil in part by passing those lines to the old Fairchild subsidiary and selling that off they also sold the product lines in Israel which later became Tower semi and later Intel as well as Thailand the turnaround showed some promise but a 1996 Emilio left to take the CEO position at the then struggling Apple computer he was there for a little over a year and is most well known for bringing Steve back in National Semiconductor in the late 1990s and 2000s was a way different company from the wild animals of Silicon Valley new CEO Brian holla tried to orient the company towards digital logic chips with a particular Focus towards the PC on a chip in 1997 National paid half a billion dollars for the struggling x86 producer cyrix two years later they started producing the geode line of x86 microprocessors these chips were used in embedded systems industrial control systems and set-top boxes this line of business turned out to be a costly failure for National competing with Intel and x86 microprocessors during the latter's peak is not a good way to make a business in 1999 they sold cyrix the Taiwanese semiconductor maker via Technologies keeping the geode microprocessors for themselves yes via is that one company helping with China's Dao Xing x86 CPUs now Nashville eventually sold the geode line to AMD in 2003. AMD kept selling the processors all the way into 2019 but the product was essentially marked as end of life in 2009.

from then on Nationals just sort of shuffled along spending most of the 2000s closing things down rather than building new things up sales fluctuated up and down in 2011 Texas Instruments paid 6.5 billion dollars to acquire National semiconductor adding their 12 000 analog products to their current portfolio it is a bit of a sad end for a Silicon Valley Legend my father left his job there long before that I haven't been back to where the Santa Clara office it was in a long time but a visit someday would be nice there dad what did you think of this one 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

2023-09-12 16:11

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