Silicon Valley History – Part XII

Silicon Valley History – Part XII
April 14, 2021 admin
In Podcasts
Silicon Valley History - Part 12

Ray Zinn, the longest serving CEO in Silicon Valley, discusses the history of silicon as only he can, having watched it from Shockley to Facebook.

In Part XII, Ray, Goldman Sachs analyst Peter Marchetti, and Silicon Valley vet Guy Smith, close this series by exploring the current state of Silicon Valley and where semiconductor and all high tech may be heading.

Peter Marchetti has spent the past 20 years as an advisor to some of the most significant families and foundations in the country. He joined the Goldman Sachs team  in 2000 after receiving his MBA from the Haas School of Business at the University of California, Berkeley.

Ray Zinn: Well, hello, everyone. Welcome back to another in our series of Silicon Valley History, we’re delighted to be with you today. My name is Ray Zinn. I’m the longest serving CEO in Silicon Valley. And with me, I have Peter Marchetti who is a financial advisor and a friend of mine, as well as that Guy Smith, who is my director of marketing for Tough Things First. Welcome back, you two.

Guy Smith: Always great to be here.

Peter Marchetti: Likewise, Ray.

Ray Zinn: Thanks again for being with us and doing this, I think very exciting series on Silicon Valley. So where we left off, you had a question, Pete, why don’t you go ahead.

Peter Marchetti: This has been in my mind since our last podcast, Ray. But you had mentioned that when you were a young guy, your father had kind of a prototype of a cell phone way back with a knife with an antenna. And you’d said that he didn’t really generally want you to use it that much, but you did here and there. And it was mainly to impress the ladies. And I guess what I’ve been wondering about is, is that actually how you were able to impress DeLona. [crosstalk 00:02:03].

Ray Zinn: No, I didn’t need to have that to impress her. What I meant was it was very expensive to use. And back in the fifties, it was a very expensive way to communicate. And my father, I don’t know why he bought it. I mean, again, I didn’t see him use it that much. Maybe because it was so expensive. But it was huge. I mean, the transmitter and the whole electronic equipment was a size of a small suitcase and it fit in the back of your car. And then you had this gigantic antenna, like nine feet long. You’d look like a highway patrolman back in those days. And of course, I had a hand set up front there in the console and it was interesting. I did use it a few times.

It just had a way of connecting up with the telephone company. And then you would switch it. It would switch over to, in fact a woman would come on and let you know that you were mobile and you would give her the number that you wanted to call. And she’d call that number. And then you would have your discussion and you would hang up. So it was kind of archaic by today’s terms, but it did work. And we thought it was exciting because it was electronics. And you could communicate anywhere all over the world with this mobile device.

Peter Marchetti: Even though it was impressive back then, you were able to use other things that were more impressive to make the positive impression on DeLona. Not that you’re in any short supply of things that are impressive, Ray. Just wanted to figure out where the cell phone ranked in relation to those other things. That sounds like it was further down the list, which I’m glad to hear.

Ray Zinn: Well, yeah. I mean, I got married in 1961. So I didn’t even have one of those fancy phones in those days. We had CB radios that we used.

Peter Marchetti: I guess you wouldn’t have been married for 60 years if it was all based on that cell phone, especially with how it ended up getting obsolete, probably pretty quickly.

Ray Zinn: Exactly, exactly. Well, anyway.

Peter Marchetti: I did have another question that’s a little bit more contemporary as it relates to our last discussion and you were talking about … we talked about the iPhone and kind of the personal computing in your pocket, if you will. And we talked about sensors and where they were going. And I guess if you could maybe spend a few minutes just to talk about some of the companies that really benefited from these evolutions or revolutions in some ways that were happening within the need for semi’s to give us a sense of like who the winners were. And then also, who were the losers? Who were the folks that weren’t keeping pace and suffered because of these?

Ray Zinn: Well, a lot of the … there used to be a Commodore computer. They’re gone. There used to be Atari with their palm game, they’re gone. You know, Osborne Computer, they’re gone. You know, many, many companies that were the hot companies in those days are no longer around. They just, you know, [inaudible 00:05:24] something like that.

Peter Marchetti: Or how about if we focus … just to refine my question a little bit more, Ray, how about if we focus just on the semi company? So I know you and I have looked at the list of top semiconductor companies in the world and how it’s evolved over time. And thinking about the mid-2000s into the 2010s and the 2020s now, how is that making that list shift considerably?

Ray Zinn: Well, it’s been in a very short period of time. In the early eighties, there were no foreign companies of any magnitude that comprised of the semiconductor industry. But now, with the advent of the cell phone, Samsung has become probably the largest. One time, Atari was the biggest user of semiconductors because they had all this RAM based cartridges you’d plug into your game console. And now they’re gone. So probably the largest user of semi-conductors today is Apple. You know, IBM used to be the biggest semiconductor company in the world by far. I mean, they were huge. And of course now you don’t even hear about IBM semi-conductor capability. Intel used to be a huge, dominant player. AMD is now catching up.

And in fact, Intel is having an identity crisis. You know, a lot of companies that were … like Xilinx is being gobbled up. My company Micrel got gobbled up in 2015. Linear technology was gobbled up by ADI. Maxim Integrated Circuits by ADI. And so many of these companies that were the well-known … Fairchild was gobbled up by ON Semi. And so many of these large, big players now don’t even exist. National Semiconductors gone. You know, and they were huge. They were top three or four in the world. And these companies are no more. You know, [inaudible 00:07:47] used to be a big one back years and years ago, back in the sixties. And Westinghouse was huge and they’re gone. These were all semiconductor companies that no longer exist.

And so it’s just interesting. The Valley has changed dramatically. There’s hardly any semiconductor companies that even manufacture their wafers in Silicon Valley. I’m hard pressed to think of more than one or two when there used to be, you know, 30 or 40 of us in the Valley that produced our own own wafers. And so the Valley has changed tremendously. It’s now more the software based companies, all these applications now that we can do on computers have formed all these software companies. Silicon Valley is really more like software Valley. I mean, it’s Facebook and Google and Twitter. These are the big unicorns now that have become what comprises the Silicon Valley.

Peter Marchetti: Does that make you worry at all about kind of like the future deep technology that exists here in the US and the development of it without as many semiconductors being as prominent as they used to be? That that might hurt future?

Ray Zinn: Well, I still see that as an issue for sure. You know, both China and Korea, who are large … South Korea, who are large companies and large countries have said they’re going to produce all their own semiconductors within their country. And of course, that does concern me because if you add China and Korea together, they’re probably two-thirds of all semiconductors used. Japan used to be the big guru. They used to be a big gorilla, I should say. It used to be the largest producers of electronics was in Japan. And now I hardly hear of anything out of Japan anymore from an electronics point of view. India is moving forward. They’re still behind, but they’re moving forward. So almost every country now has semiconductor capability, at least access to semiconductor technology. And so I am very concerned about the future of semiconductor technology within the United States. Because it’s been proliferated throughout the world.

And as I’ve said before, so goes semiconductors, so goes electronics. So goes electronics, so goes the world and at least on discretionary income. And electronics is a huge part of our lives. Refrigerators, dryers, washers, our security to run our home. Just every aspect of our life now, our cars, is associated with semiconductors. I’m hard pressed to find anything that doesn’t have a semiconductor in it except maybe our food. So it’s so pervasive that we can’t just throw up our hands and say, oh, well, we give up. If we want to protect the growth of this nation, if we want to protect the security and technology that we have worked so hard to have in this country, we need to take this seriously.

Guy Smith: And that kind of dovetails into a question which I’ve been having, which is what is going to be next, especially vis-a-vis semi-conductors and various growth industries. We see some of the fabs pushing now down to three nanometers. We see chips becoming absolutely intrinsic to the operation of AI because they need it, that kind of horsepower to grind these massive data collections that we now have. And we see some guys off on the side tinkering with quantum computers and who knows, maybe we can get those to room temperature, solid state devices some days. So I’m kind of wondering whether Silicon Valley has the right combination of talent right now to find that what I perceive is going to be a massive intersection of AI, quantum, and mass density on chips going into the future.

Ray Zinn: Well, the technology for semiconductors is not just the wafer itself, it’s the processing equipment. It’s companies like KLA and all these large equipment manufacturers are the key to what’s going to happen to the technology. Because they’re the ones developing the ability for us to process down to seven by seven nanometers. And so it will continue. I mean, there’s no doubt in my mind that we may not be using silica. Maybe we’re using some other type of media to create these devices. We still have within this country, we still have the process technology, the ability to do these super tiny devices within the country. I don’t know of very few processed equipment companies outside the US. We still have that ability to hang on to the technology if we so desire.

Okay. So just to recap. The industry started in 1957, at least the semiconductor industry in Silicon Valley began in 1957 with Fairchild semiconductor. And then it blossomed, began to grow rapidly in the sixties. And the industry just flourished. And mainly because of the military. The military was the primary driver of semi-conductors back in the early sixties. But as the technology became more ubiquitous, as we were able to find more applications that weren’t military type specific, the industry began to really flourish in consumer type products with the coming about of the personal computer, which happened in the eighties, and then moving into the cell phones in the nineties, and then moving into the late nineties, going into 2000, we had the internet come in, blooming, blossoming with the internet of things, IOT. And everything is just … you know, automotive, which was nothing by the way in the eighties as far as electronics, is now totally dependent on electronics.

Ford nearly had to shut down its production line because of the lack of semiconductors because of the COVID-19 pandemic. I mean, they don’t have electronic parts to finish out their vehicle. And so here we have automotive now is, I would say, totally dependent on electronics. You’re not going to operate the car without electronics. And it’s become part and parcel of the functioning of the automobile. You know, back in the day, we only had radios. Your car could run fine without a radio. But now your car can’t run without electronics. I mean, it physically cannot function. You know, all the fuel control, the starting capability and monitoring, the mapping of the engine and so forth is all done electronically. And none of us anymore open up the hood of a car and work on it because it’s all done so technologically. And so as we now proceed into the 21st century, we’re seeing more and more software involvement is driving electronics. You know, software is even involved in the basic semiconductor. And so here we are, we’re now in 2021, been a very interesting year with the pandemic that we’ve had to face.

Peter Marchetti: On that point, Ray, we haven’t even talked about what the pandemic has done in terms of the proliferation or the added need for electronics, right? And more emphasis being on online stuff.

Ray Zinn: Yeah. That’s driven a whole different industry with that. Doing online learning, online teaching, you know, just communicating we’re doing this online right now. And yeah, absolutely. It’s going to spur it’s own industry. So as my dad used to say, necessity is the mother of invention. And so if we find a need, we’ll fill it. This has been a great series. This is kind of a recap of the history of Silicon Valley. We have almost no semiconductor companies anymore in Silicon Valley. Silicon is just a name. It’s not really a function anymore as far as the Valley is concerned, because you have all these software companies that are, like we mentioned, Google, Facebook, and Apple and so forth, which are not … we don’t refer to as semiconductor companies, but are very dominant electronically in the Valley. Hewlett Packard has now left and gone to Austin, Texas. And so a lot of the big electronic firms that we loved and admired here in the Valley have moved on. And the face of Silicon Valley is changing. Anyway, thank you both for being part of this podcast series. I’ve enjoyed doing it. It’s brought back a lot of memories. And I hope to be around to be able to talk about what happened, you know, 30 years from now, what happened to Silicon Valley.

Peter Marchetti: I’ve learned a time from this series and like listening to you recount history and your experiences. And I just want to say thank you. It’s been a great learning experience. I’ve really enjoyed it. And hopefully I’m a little better versed in Silicon Valley’s history than I was going into it.

Ray Zinn: Well, thanks, Peter. Appreciate you being able to join us. All right, everyone. Appreciate you being with us again today. Our podcast, Tough Things First, you can find it on our website, You can find my book, Tough Things First still available at your local book retailer. Amazon still carries it. And look forward to my new book. I have my second book, Zen of Zinns coming out. And that’s going to be an exciting book. You’ll be able to find it and read it. It’s a good philosophical book. It’ll tell you how to run your life and run your company.

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