TI: Semiconductor Industry History of Innovation

This is the fifth in the series of “20 Questions with Wally Rhines”

Texas Instruments is a remarkable company founded by remarkable people. And Eric Jonsson was one of the most remarkable visionaries of the 20[SUP]th[/SUP] century. He was a renaissance man who created an industry and a fortune by following the needs of the emerging oil exploration industry, then semiconductors and followed up as a statesman, Mayor of Dallas, to take a city from the depression of being the site of the Kennedy assassination to being one of the most innovative centers of commerce in the 21[SUP]st[/SUP] century. Today, Dallas is home to more than 10,000 corporate headquarters including over twenty Fortune 500 companies. But it didn’t happen by accident.

The roots of TI go back to New Jersey in 1939. J. C. “Doc” Karcher developed reflection seisography technology that could be used to reveal the character of strata beneath the earth and to predict the most likely places to drill for oil. The East Texas oil field moved the center of momentum for the oil exploration industry to Texas and so, Geophysical Services moved with it. Eugene McDermott, Cecil Green, Bates Peacock and Eric Jonsson were the founders. Their technology for seismic analysis became a success and they circumvented the costly approach to becoming a public corporation by acquiring a public company and changing the name to Texas Instruments. The original incorporation was ill timed on December 6, 1941, since the attack on Pearl Harbor the next day changed the whole dynamic of business in the United States.

But these were very adaptable people. They had developed electronic analysis equipment based upon vacuum tubes to use for seismic exploration. Interestingly, the U.S. had no shortage of oil during World War II. What the U.S. needed was electronic equipment for the military. Texas Instruments altered its strategy, developed equipment under contract to the Department of Defense and survived the 1940’s. A Navy procurement Lieutenant, Pat Haggerty, was so impressed with this group from Dallas that he accepted a job with them after the war and eventually became the President and CEO of the company. Haggerty was intrigued by the Bell Labs announcement of the development of the transistor in 1947 and decided that the portable military equipment that TI had developed would benefit from the low power and potentially low cost of transistors. As a result, TI became one the early group of companies that paid the $50K required for a license to produce the germanium transistor that had been developed at Bell Labs.

Not trusting to luck, TI also hired Gordon Teal who had been a primary developer of the techniques to purify germanium to make the transistor possible. Surprisingly, TI emerged as a key contender in the race to produce transistors for military and commercial use. Haggerty was convinced that consumer applications would drive the high volume so, while TI’s initial transistor revenue came from the government, he arranged a deal with Regency, a consumer products company, to market a transistor radio. TI developed the radio and Regency made the money. From then on, Haggerty became convinced that the money for the semiconductor revolution lay within its application to end equipment, a conclusion that drove TI’s strategy to both good, and not so good, results.

How can anyone criticize the evolution of a multi-billion dollar behemoth based upon a Haggerty driven decision to license the Bell Labs transistor? I can’t. It was truly a brilliant move. But the subsequent implementation led to difficulties that might have been avoided.

The drive to develop a silicon transistor was seminal. TI did so through development of the equipment to pull crystals and by understanding the chemistry of germanium, silicon, the dopants and the packaging materials. Two years ahead of the rest of the industry, TI was able to produce silicon transistors whose temperature stability overcame many of the problems of germanium. And the company grew from $20M in annual revenue to $200M in a short period of time.

During the summer of 1958, Jack Kilby, who was a new employee and had no vacation, spent the time of the summer shutdown creating a phase shift oscillator on a single chip with transistors connected with gold wires bonding the discrete devices together on the same chip. Today it seems obvious that multiple transistors on a single chip would be valuable but it wasn’t obvious then. Old timers I met at TI told me that it had been obvious that you could put more than one transistor on the same piece of silicon. “But why would you want to do it?” they asked. “ You would never get both of them working at the same time”. Ridiculous today, as billions of transistors work in harmony to solve problems, but it wasn’t obvious then. It was to Jack, however. And the subsequent litigation over the invention of the integrated circuit led to one of the most significant patent lawsuits of history, creating a career for Roger Borovoy. Jack insisted in his testimony that the words “layed down” applied to deposited metal electrical connections. But TI hired a prestigious law firm that thought the patent suit would be a slam dunk for TI. It wasn’t. Roger, who was corporate counsel for Fairchild, prevailed with the view that the planar process was distinctly different from Jack’s approach to connecting the elements of the integrated circuit. Roger moved on to Intel and became well recognized as a corporate attorney. Jack had to accept the incompetence of the TI-chosen law firm and share the recognition with Robert Noyce (although Noyce’s premature death made Kilby the sole recipient of the Nobel Prize for the integrated circuit). Sharing the recognitions was not a totally negative outcome. While Jack’s words “layed down” may have included the planar process in his view, the compromise to recognize both men settled the West Coast/Dallas dispute and brought us all together, a result that Jack, as a gentle non-argumentative person, would have applauded.

I had the good fortune to meet regularly with Jack. He was a truly wonderful person, very modest and quiet. We both joined the advisory board of Formfactor at Bill Davidow’s request, and I had many delightful discussions with Jack, in addition to those I had early in my TI career.

The 20 Questions with Wally Rhines Series