In a medium-sized town in southern Serbia, there lies the decaying remains of a semiconductor giant. For twenty years, EI Nis was Yugoslavia's biggest electronics company. They made X-ray machines, radio sets, Televisions, and more. I am really impressed by their semiconductor factory - the largest in socialist Yugoslavia. They exported a good 30-50% of their production and
their products were praised by both Tito and Texas Instruments alike. But that is all gone now. In this video, we look at the story of Serbia's bygone semiconductor giant: Elektronska Industrija Nis (Електронска индустрија Ниш) or EI Nis. ## Beginnings The Nis in "EI Nis" - rhymes with "leash" - refers to a city in Serbia, one of the countries in the Socialist Federal Republic of Yugoslavia.
Nis is Serbia's third largest city by population. It has a long history dating back to the Roman Empire. Due to its strategic location between Greece and the Central European area, Nis first hosted a large Roman military garrison. The first Christian Roman emperor, Constantine the Great, was born in Nis, and he apparently liked to go there to rest. This brought a great deal of development to
the city, and it remained a large city throughout the subsequent centuries. By the 1930s, about 36,000 people lived in Nis. While secondary to the capital Belgrade, Nis remained important because it hosts the junction of two major highways and several railroads. This transport hub promoted industry. Nis hosted factories producing tobacco, chemicals, railway cars, and various other metalwork. It remains the cultural and
economic center of the Serbian south and is apparently a very nice city to live. ## X-Ray Tubes It is 1947, the post-War years of scarcity, and the Yugoslavian government is suffering a shortage of X-ray tubes. Without them, Yugoslav hospitals cannot diagnose or treat patients. So the government sent a small delegation to Germany to acquire the tubes. To their surprise, the delegation comes back with a contract for a whole production line of X-ray tubes and machines. This was part of Germany's war reparations. During World War II,
the Third Reich invaded Yugoslavia and committed many atrocities. Sending a few experts to make tubes was part of paying that back. Thus a little bit later, about 40 experts and technicians plus their families arrived from Telefunken, Siemens and other companies in West Germany. In April 1948, the government founded "RR Zavodi". The RR stood for "Radio Röntgen", the latter word a reference to X-ray tubes. In Serbian, Zavodi means something like an institute. So literally speaking, the Radio and X-ray Tube Institute. The city of Nis was chosen simply because the mayor promised the new arrivals free apartments.
The Germans then apparently fell in love with the city's fine weather and excellent food and refused to relocate even when tensions with nearby Bulgaria arose after the 1948 Tito-Stalin split. With the experts' help, RR produced their first radio tubes in 1951, called the AZ1. After that, X-ray tubes and then the company's first set of X-ray machines - named "Morava". Which is likely a reference to Serbia's great river system. This success in
X-ray machines stands in stark contrast with their struggles in another item - radio sets. ## Organizational Struggles At its founding in 1948, RR Zavodi projected that it would be making some 40,000 radio sets annually in five years. In this goal, the factory failed. The first radio set prototype in 1953 failed to impress enough to go into high volume production. Two more prototypes presented in 1954 did not receive approval either. Compounding on this failure, RR pre-ordered raw components in anticipation of mass production. But when the radios failed, the components were left in warehouses unused.
This happened three times, putting the company in financial distress. What happened? In the early 1950s, the German radio experts returned home, leaving the factory members in a bit of a scramble to replace them. The technology transfer had apparently not been as complete as thought. And secondly, the company was in the midst of a major organizational revamp. In 1948 Tito infamously broke with Stalin, and Yugoslavia adopted a new economic philosophy centered on worker self-management.
Here, employees would have a key role in the decisions of their employers through worker councils, though with the tacit approval of the Communist Party. They marketed it as the Yugoslav way of building Communism or Socialism or whatever, but it failed. So in 1950, the RR Zavodi factory was "handed over" to the workers, creating a chaotic situation of “no responsibility”. Divisions didn't communicate with one another. Important technical decisions were made by those without any technical knowledge. It was chaos. In November 1955, the government investigated the situation and decided to assign Vladimir Jasic to be RR Zavodi's new director. He imposed on the workforce the necessary discipline for production, saying "Order must be maintained".
Jasic also removed the workers' commission from having to decide various pointless everyday decisions. This turned RR Zavodi in a more traditional enterprise, with its board only deciding high-level things. RR Zavodi recovered from its moment of chaos. And 1958, the company started producing its first TV sets for export and sale to Egypt and Paraguay.
## Entry into Semiconductors RR Zavodi's goal was to produce its radio and TV sets with domestically sourced parts, which means semiconductors. In 1958, the company decided to start a semiconductor production team. Early efforts were led by Dr. Đorđe Bošan. A Holocaust survivor, Bošan led the factory for about a decade before retiring to teach at the University of Nis. They also invited through UNESCO the physicist Jean Grosvalet. Grosvalet worked at France's
big semiconductor company - COSEM or CSF, an ancestor to today's STMicroelectronics. He grew a special fondness for the Yugoslavs and much later passed away there while on vacation in 1971. Grosvalet's four-month long effort focused on producing pure Germanium single crystals at scale for diodes and transistors. At the same time, R&D was initiated for eventual silicon crystal production. In 1962, the company commissioned their first semiconductor factory - a 1,500 square meter facility with capacity for 600,000 germanium transistors each year. The factory employed about 300 people over two shifts.
## The Creation of EI Nis That same year, RR Zavodi merged with another company in Belgrade called Belind to create EI Nis. Belind itself descended from several smaller research institutes in the capital. They researched diodes and transistor components for various electronics items, though they didn't commercially produce them. The government arranged the merger to achieve scale and cut costs for better international competitiveness. Other companies within the Yugoslav electronics industry would be similarly merged. The merger kicked off EI Nis' most glorious years. The next ten or so
years saw EI Nis growing to become Yugoslavia's biggest and most prestigious electronics firm. They not only had monopoly share of the domestic TV and radio markets, but also made air conditioners, speakers, TV receivers, tape recorders and more. ## EI Nis and Technology Transfer Yugoslav companies during the Tito era commonly relied on technology transfer. I first noticed this while doing the video about Zastava, the country's flagship car company and maker of the famous Yugo. Their cars were designed with the help of Italy's Fiat. EI Nis too regularly struck its own joint ventures with the West. A 1960 deal with the Dutch electronics giant Philips helped them produce television sets.
In the late 1960s, the company struck a deal with Toshiba for a silicon transistor production line. Toshiba provided their recipes, but all the equipment - furnaces, lithography, etc - came from the United States. Applied Materials and the like. Since Yugoslavia was a Communist country, any equipment exports needed approval from the American authorities. But relations then were quite amicable. The US saw Yugoslavia as
a bridge between the West and East, so little trouble was had. At least then. Since they were using American equipment and taught how to use that equipment by Americans, the yields were quite good. The semiconductor factory churned out enough power semiconductors, bipolar transistors and diodes for export. Yugoslav labor was never as productive as workers in the West, since there were so few ways to reward good workers or punish bad ones. Despite this, the work they did was widely acknowledged to be good quality. In 1971, EI Nis collaborated with Texas Instruments to provide additional packaging capacity in a time when their existing Germany factory suffered shortages. TI
praised the quality of the work in a telegram, and even visited the factory ## CMOS ICs EI Semiconductor's technological peak was its production of logic integrated circuits. This technology came again from abroad, this time from the RCA Corporation in the United States. Sounds familiar? It should. Taiwan founded their silicon semiconductor industry with a legendary 1976 technology transfer deal with RCA. RCA was apparently doing this deal on a rather large scale to raise spare cash.
In 1981, RCA agreed to teach the Yugoslavs their silicon CMOS semiconductor technology and make a late 1960s-era RCA aluminium-gate CD4000 series chip. A 3-inch wafer line was set up in the factory. The EI Nis director in charge of adapting the RCA CMOS IP recalls getting detailed written instructions from RCA's CMOS people plus doing several trips to the RCA plant in US for learnings. But the recipe oftentimes could not simply be copied 100% because the available equipment and raw materials have since changed. So the team had to extract the recipe's "essence" - which
required learning new semiconductor physics on the fly - while also training up and managing a brand new operator team doing their literal first ever job. It was hard. Today's logic integrated circuits are CMOS devices. The CMOS arrangement combines two transistors - a P-channel metal-oxide-semiconductor or PMOS combined with a N-channel metal-oxide-semiconductor or NMOS. It is rather tricky to produce in high yield. Regular production began in 1983. Despite eventually producing about 30,000 to 50,000 chips monthly with good yield, EI Nis lacked the volume to generate exciting profits.
The reason being that the chips lagged those which can be found in the rest of the world. But obviously, EI Nis' senior management intended to do far more with the RCA CMOS technology than make obsolete chips. They wanted to improve the tech and use that to produce more advanced compute products.
Probably their best IC was a variant of the RCA 1802 8-bit microprocessor, which first entered production in 1976. So seven years-old technology. Quite old. These were nowhere near powerful enough to power calculators or watches, then the dominant consumer electronics space. ## Lacking Sales and Demand So if the EI Nis semiconductor team took an RCA technology transfer deal similar to that taken by Taiwan, and it took well ... Why didn't they push forward up the tech tree like what happened in Taiwan? One major thing was that you need revenue and profits to do that. But the EI Nis team was not particularly good at marketing or sales. Henry Sweatt, a Honeywell executive, worked with EI Nis staff on a 1979 joint venture for computers. He recalls:
> As far as going out and pounding the bricks or hustling to sell their products, they are really not terribly into marketing. They're interested in making a deal for somebody to take it off their hands. They did do some advertising for their products in newspapers and magazines, which survive. But I wonder if their general disinterest in sales and marketing might have
been connected to the company's inability to reward higher performing salespeople. A second major issue had to do with them being in Europe. EI Semiconductor executives made it clear to me that virtually all the European semiconductor makers struggled to compete with the Americans - Intel, IBM and the like. There was an issue with demand drivers. I discussed this in a previous video about European semiconductor development. Europe used to be weak in the consumer electronic and computer industries - key demand sources for advanced digital logic semiconductors.
Their stronger advantages were in automotive, telecom or specialized professional equipment like those in the medical field. Therefore, EI Nis executives decided to pivot and focus on producing niche semiconductors for those markets. For instance, they collaborated with several Yugoslav companies to produce components for a little modem.
And some funds had been allocated for the local University of Nis to purchase some modern EDA tools, that would allow for the creation of original designs. One notable design was the 1986 GEM21 gate matrix chip, shipped with unconnected gates allowing for post-fabrication programming kind of like a FPGA. Sadly it never entered mass production. In order to explain why, we need to talk about a few bad times. ## Trouble in Yugoslavia The Yugoslav economy grew very well during the 1960s and 1970s, but serious troubles arose in the 1980s. As I mentioned in the video about Zastava, the country's heavy dependence on imported foreign technologies had caused it to run up a large debt load. Such transfers
were paid in foreign currency from loans freely extended throughout the decades. Companies could not produce a high enough return on investment on this borrowed money. For instance, net profit margins at EI Semiconductors were in the 5-6% range. This trailed even inflation, which sat in the double-digit range throughout the 1980s, let alone foreign-borrowed interest rates. At least the semiconductor factory was profitable. Over the years, EI Nis' consumer divisions - which made things like washing machines, radios and TV sets - had gotten to be severe money losers. They should have exited those businesses.
Then in 1985, Gorbachev came to power in the Soviet Union, beginning new relations between the East and West. And then the late 1980s saw the establishment of new democracies and free market economies like Hungary, Poland, and Czechoslovakia. Foreign aid flowed there, rather than Yugoslavia, which did not make as radical a shift. Suddenly the economic situation there began to deteriorate very fast.
The worsening economy exposed worsening political issues, of which I will not go too deeply into. For years, Tito and the Communist Party held the country together by de-emphasizing nationalism, emphasizing social ideology, and brutal violence. Nevertheless throughout his tenure, he increasingly passed power over to the eight republics to defuse tensions. In particular 1974, when a new constitution basically produced eight separate governments within Yugoslavia. It did not matter so long as Tito was alive, because everyone agreed that he would be the final arbiter in any disagreement. But after he died in 1980 at the age of 87, his successors
failed to hold things together in the face of a deteriorating economy and rising nationalism. In the early 1990s, the country began violently breaking up. And in Serbia, a regime of Serb hard-line nationalists came to power frustrated about ethnic minorities on lands it considered to be theirs.
They began waging violence against their neighbors to create a Greater Serbian state under the guise of holding together Yugoslavia - causing much cruel injury and even deaths. The United Nations and the United States in particular objected to this and deployed a variety of methods to stop it. Ultimately escalating to bombings by NATO. ## The Fall of EI Nis What all this meant specifically for EI Nis and its semiconductor factory was devastation. The company had been super reliant on imports from the United States and other countries in the West for their raw goods. When the sanctions hit in the 1990s, the EI Semiconductors factory suddenly could not receive clean chemicals from their suppliers in Germany. Total semiconductor production volume drastically fell off.
As things deteriorated from sanctions and violence, EI Nis employees tried to keep things afloat by producing other things. Apparently they were making everything from nail polish to mushrooms. After sanctions lifted in 1996, government officials largely focused on making money for themselves via profitable import contracts or land. There was no interest in what was seen as an outdated industrial factory.
It was not until 10 years later that the government finally moved to privatize the company. By then 12 of its subsidiaries went bankrupt. 12 more had already been sold at auction. The 61 remaining subsidiaries generated a meager 6.2 million euro in annual revenue, losing more than twice that. The main company is gone, declaring bankruptcy in 2016. But various divisions in EI Nis spun off as separate companies and survive to this day - particularly those supplying critical electronics to the Serbian military.
They include EI-Opek of Nis, which produces timers and fuses as well as encoders and regulators for the civilian industry. And Harder Digital, a German company built from the privatized assets of an optoelectronics division of the former EI Nis company. Some factory equipment for making vacuum tubes remained - maybe even used - until at least the 2010s. But that tube equipment was packed up and moved to the United Kingdom for the Great British Valve Project for heritage purposes. ## Conclusion I want to thank several ex-EI Nis people, plus friend of the channel Stevan G, whose father worked in the factory, for their time and openness in sharing with me their experiences and image material. Stevan is working on a book! I hope you can go support it. Today the EI Nis grounds, which include its semiconductor factory, remain largely abandoned.
Apparently much of the equipment and offices were left as they were, things were so rough. To me, one can easily imagine EI Nis’ semiconductor business eventually becoming like today's STMicroelectronics. STMicro evolved from a messy cluster of factories to a billion dollar semiconductor giant on the back of close collaboration with Europe's large professional equipment and automotive companies. EI Semiconductors too had connections to potential big customers in the West, had the technical chops, and was starting to invest in the electronic design skills to pull off the strategy. But alas, bad luck, politics and war meant that it was not to be.
2024-08-27