Wednesday, March 4, 2009

Silicon Valley and its «honest children»

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The phrase «Silicon Valley» has long become common nouns - now they refer to any techno, all separate areas of concentrated high-tech production and development. But those who use this expression, as a rule, very little is known about the history of the same - the first - the Silicon Valley. Let's try to fill this gap.


Silicon Valley - District of California, featuring a high density of high-tech companies - especially computer and telecommunications. Silicon Valley is located in the vicinity of the San Francisco Bay: in fact it is a space between the cities of San Francisco and Los Angeles. Today, the main factors of this valley, a phenomenon referred to as the presence of Stanford University and major cities in less than an hour away, the sources of funding for new companies, as well as superb Mediterranean-type climate. It all started back in 1891 when, in a valley near the town of Palo Alto as a bequest a large landowner Lilenda Stanford opened Stanford University. Graduates of the new school well behind them, but at the time to find a job in California, as a rule, could not, therefore, were forced to move to the east coast of the United States. Therefore, in the 20's of the twentieth century, the Administration Stanford University, having decided to raise the prestige of the university to employ teachers from the east coast. One of them was a former graduate of Stanford electrical engineering professor Frederick Thermal Technological University of Massachusetts. Thermal seriously concerned about the problem of brain drain, and he began to support students in their quest to found a company near the university. Among these students were William Hewlett and David Packard. In 1937, a small company Hewlett-Packard with a starting capital of $ 538 began to work in the garage - it now hangs a bronze plaque: «Birthplace of Silicon Valley».

The emergence of Venture

During the Second World War was a great demand for new technology by the military - and innovative companies to grow like mushrooms. But after the war gosfinansirovanie defense programs have been largely phased out, and the university began to experience financial difficulties. In the early 50's Frederick Thermal (he became the rector of the university) took the initiative to donate free land to rent (sell it to prevent a testament Lilenda Stanford) companies operating in the field of hi-tech. The first tenants were Eastman Kodak, General Electric, Shockley Transistor, Lockheed and Hewlett-Packard. Thus was formed Stanford Industrial Park - the first in the world of techno. At the same time, to accelerate the economic development of the western coast of the USA, was founded Stanford Research Institute. He has coordinated and funded by government programs for which involved private companies are concentrated. At the time, leading state associated with the defense, aviation and space exploration. To avoid stagnation in the post-war industry, the American authorities in the early 50's created the Institute for Small Business and SBA adopted the Law on Investment. The law envisaged the creation of small business investment companies whose capital is ensured not only by private sources, but also the state (on concessional terms). In practice, it looked like this: if the project received the approval of SBA, then the investor to invest thousands of dollars were added to three additional nine thousand from the state.

In the 60 years of work first began to venture capital firms (venture - a risk venture). Their creators were aware that the most important thing in hi-tech-business - not financial assistance to young companies, and investing in their own business knowledge and experience. Then the company gets not only the funds needed for development, but also necessary, as well as an opportunity to build their business processes. In the late 60's venture capital investors have begun to finance the company's Stanford Industrial Park. Then it was associated with greater risk - of the ten companies, two smash. However, in the event of a successful investment is brought up to 300% of your earnings and pays for three dozen unsuccessful investments. Successful investments have been three of the ten remaining companies have worked without any special achievements, about 40 per cent yield. Such cooperation is beneficial to scientists - they have access to funds much more than government spending. Venture business added to the three components of techno (education, science, production), the fourth - financially. «Intellectual capital, plus venture capital», - as in Silicon Valley today and formulate a formula for success. At 70 280 hectares, owned by the university, was not enough to accommodate all comers. The new company began to absorb the nearby town of San Jose - the capital of the valley, and then the whole valley, and then called Silicon. In addition to Stanford University, a major role in the development of the whole range of Silicon Valley located in the neighborhood played the University of California (Berkeley) and University of San Francisco. Development of Silicon Valley has led the world's three innovative breakthrough. This development of semiconductor technology in the 70's, computer technology in the 80's and network technologies and the Internet in 90 years. Only a few decades, Silicon Valley of the bold experiment has turned into profitable enterprise: the combined annual income of 4,000 companies located in the Valley - $ 500 billion

The phenomenon of Silicon Valley

Today, many states in their attempt to repeat the success of Silicon Valley. In Europe and Asia being built or already built similar to a technology, government subsidies are allocated to the hi-tech, etc. However, the professor, Nobel laureate in economics Gary Beker, long studied the phenomenon of Silicon Valley, I am sure: for the development of dynamic industrial clusters requires a flexible economic environment, rather than state-owned industrial program.

In 1999, venture capitalists invested more than $ 6 billion in new companies Valley - start. Stanford and the University of California continues to lead in shaping the new IT-companies. In addition, in the U.S. very few obstacles to the creation of new firms, private equity investments and exit at the level of the open joint stock company. The elimination of artificial obstacles to the founding of companies (as is done in the U.S.) is very different from the generous subsidy programs in Germany, France and some other countries. Subsidies lead to the creation of «sound» new companies, which mainly meet the demands of bureaucrats, not markets. Incredible spontaneity characteristic of Silicon Valley, you can not play due to bureaucratic support.

Fairchild and Fairchildren

For the semiconductor industry company Fairchild Semiconductor has become some what firm Marconi - radio and Xerox - in the copying of documents. But most important, it was not science and not patents, but the people and their ideas. Later, former employees of the company became known as the Fairchildren.

History of Fairchild Semiconductor begins with the transistor inventor William Shokli. Back in 1945 Shokli, then worked at Bell Labs, carried away by the idea of a semiconductor amplifier, working like a vacuum tube. Idea was supported by staff Shokli Bell Labs - Bardin and Brattayn. The first working transistor engineers created in 1948. This development in the 1956-meters, all three received the Nobel Prize - this was the first Nobel awarded not for the pure science and for technology. Interestingly, co-author Shokli - John Bardin - the only one who received the Nobel Prize for Physics twice, and for very different things. The second award he was given in 1972 for an explanation of the phenomenon of superconductivity. In 1955 Shokli retired from Bell Labs and was founded in Palo Alto company Shockley Semiconductor Labs - one of the first Silicon Valley startups future. The company that was the first and only to deal specifically semiconductors. However, not a business - it is believed that Shokli was a weak manager. In addition, he made a bet on the structure of germanium, while it was clear that the future of silicon.

In the 1957-m eight leading engineers left the company Shokli and founded his own company - a Fairchild Semiconductor. The names of two of the eight all know today: that Robert Neuss, and Gordon Moore. And then, in the 1957-meters, the founders of Fairchild asked for money to the financier Arthur Rock - the only who their ideas seemed interesting. Rock has found those who had agreed to invest the required $ 1.3 million - enormous for the time value. Since this event is counted, and the history of the new mode of financing of innovation projects - venture capital investments. It was Arthur Rock first used the term «Venture Capital». Initially, the production process in Fairchild Semiconductor to look like this: silicon and germanium wafers manually loaded into the hot oven for doping. Then they saw the diamond sector to separate «slices» or «chips», which under the microscope by hand sweat finest gold wire findings. In the 1959-m Robert Neuss put forward the idea of chips - a chip in which all connections are drawn to the crystal directly in the production process. Later it was found that a little earlier a similar idea put forward a member of Texas Instruments, Jack Kilbi. To be honest, Neuss technology was developed in more detail - it was a so-called planar technology with aluminum interconnection, which is used today. Although Kilbi applied earlier (in February 1959 - on) than Neuss (in July the same year), but Neuss earlier received a patent. After ten years of trials, it was decided to take Neuss and Kilbi inventors chips together: Kilbi nominated as the first idea, Neuss - as the creator of works of production technology. In 1963, the Department of linear integrated circuits at Fairchild led a young engineer Robert Vidlar. He became the first developer of semiconductor operational amplifiers (OC). They have been used to perform operations - adding, multiplying, integrating, etc. - Over analog signals - in particular, analog computers, which then tried to compete with digital technology. Vidlar one of the first realized that the cost of the chip for almost indifferently, as the transistors on the fit - ten or a hundred. In 1966, Robert Vidlar resigned from Fairchild and moved to the National Semiconductors - the firm that later in the late 80's Fairchild rescued from bankruptcy.

To conquer the world

But the most famous Fairchildren become themselves the founding fathers - the same Neuss and Moore. In the 1968-meters, they resigned from Fairchild and founded Integrated Electronics. Its abbreviated name - Intel - now known to all. I will not now go into the history of Intel - it requires at least a separate article. I note only that the investor in the new company has been the same Arthur Rock. Incidentally, it is partly an obligation we have and the birth of Apple. Almost simultaneously with Intel Fairchild emerged from the depths of another famous company - AMD. Its founder Jeremy Sanders was educated in the field of electronics, but found his true vocation as a seller. At Fairchild, he appeared in the 1961-meters, and soon became director of marketing. Soon, Sanders realized the main feature of semiconductor manufacturing: the growth in sales volumes will reduce the value of chips in the tens and hundreds of times, and this, in turn, expands the market. This electronic chip itself is not worth almost nothing - virtually his entire cost of the sum of money invested in the development and organization of production. Accordingly, if the release of millions of chips, the cost would be pennies. That is, to overtake the competition, it is possible from the outset to establish the lowest price. So Fairchild and received. Sanders later recalled: «We are going to make chips at the factory, which we have not been using production methods that we have not yet developed, but only worth attention is that we come to the market price of $ 1.05 per chip, particularly stoivshy $ 150 . We sold in the computation of the future ». This marketing model has been very successful. And in the 1969-m, followed by Moore and Neuss, Sanders resigned from Fairchild and began searching for investors for the new company. Arthur Rock he refused, saying: «All the technology companies, which I lost money, were founded by people from the marketing department». However, it is interesting that one of those who invested money in a project that has become ... Robert Neuss. However, the primary role in the new venture has been the fact that the U.S. government (and many companies are giants - for example, IBM) have never ordered the products from firms monopoly. Therefore, the leaders of Intel simply have to create a competitor.

A feature of the company, called Advanced Micro Devices (AMD), were, firstly, the absence of any technological developments in the portfolio of the founder. After all, the company was created not an engineer, and the seller. The second feature is characterized by the words of Sanders: «First, the people, and then products with profits going». AMD - one of the first companies in Silicon Valley, which was clearly articulated corporate culture. No wonder that after the crisis that followed the attacks of 11 September, AMD has become almost the only company to fully pay to the dismissed employees. Until the mid-90's are not involved in the development of AMD processors, while conducting their own research in the field of flash memory (currently it has 13% of the market). In the 1995-m and it took over microprocessors that have successfully won market share in bulk Intel. In January 2000, Sanders left the post of CEO founded his company. At the time of departure, he was the oldest of the existing senior executives Fairchildren. Fairchild itself in 1996-m withdrew from the NS and then became an independent and prosperous company. One of its innovations have become famous, in particular, MOSFET-transistors - crystals, resulting directly from the logic chips to control the various power devices. But the main thing - today Products Fairchild necessarily present in almost every electronic device.

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