Sunday, January 24, 2010

Silicon Valley and its "honest children"

The phrase "Silicon Valley" has long been a household word - today they represent any techno park, any isolated area, which are concentrated high-tech production and development. But those who use this expression, as a rule, themselves know little about the history of the very - first - the Silicon Valley. Let's try to fill this gap.


Silicon Valley (Silicon Valley) - District of California, high-density high-tech companies - in the first place, computer and telecommunications. Silicon Valley is located in the San Francisco Bay: in fact it is the space between the cities of San Francisco and Los Angeles. Today the main factors of this valley, a phenomenon called the presence of Stanford University and major cities within less than an hour away, sources of funding new companies, as well as superb Mediterranean-type climate. It all started back in 1891 when the valley near the town of Palo Alto as a bequest large landowner Lilenda Stanford opened Stanford University. Graduates of the new school worked well, 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-ies administration from Stanford University, determined to raise the prestige of his high school, hired teachers from the east coast. One of them was an alumnus of Stanford electrical engineering professor Frederick Terman of the Massachusetts Institute of Technology. Terman seriously concerned about the problem of brain drain, and he began to support students in their quest to found the company not far from 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 technologies from the military - and the innovative companies grow like mushrooms. But after the war, government funding of defense programs were largely curtailed, and the University began to experience financial difficulties. In the early 50's Frederick Terman (he became the rector of the university) took the initiative to donate free land to rent (sell it prohibits 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. That is how the Stanford Industrial Park - the world's first technology park. At the same time, to accelerate the economic development of the western coast of the U.S., was created by Stanford Research Institute. He coordinated and funded by government programs, for which concentrated brought here by private companies. At that time, were leading the state program associated with the defense, aviation and space exploration. To avoid stagnation in the post-war industry, the U.S. authorities in the early 50's created the Institute for Small Business and SBA approved the law on investment. The law stipulates 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 to the investor's investment to three thousand dollars more added nine thousand from the state.

In 60-ies started to operate the first venture capital firms (venture - risk, venture). Their creators realized that the main thing in hi-tech-business - not financial assistance to young companies, and investing in their own business knowledge and experience. Then the company receives not only the funds needed for development, but also the right connections and the ability to structure their business processes. In the late 60's venture capitalists have begun to finance the company's Stanford Industrial Park. Then it was associated with greater risk - of ten companies, two were ruined. However, if successful, would bring an investment of up to 300% of the profits and pays for three decades of failed investments. Successful investing is supported by three out of ten, the remaining companies worked without any special achievements, with about 40 per cent yield. Such cooperation was beneficial to scientists - they have access to funds much more than state appropriations. Venture business added to the three pillars of Technopark (education, science, production), the fourth - financial. "Intellectual capital, plus venture capital" - as in Silicon Valley today and formulate a formula for success. In the 70 280 hectares owned by the university, became insufficient to accommodate all comers. New companies started to explore the nearby town of San Jose - the capital of the valley, and then the entire valley, and was then nicknamed Silicon. In Stanford University, a considerable role in the formation of the whole complex of Silicon Valley have played the adjoining University of California (Berkeley) and University of San Francisco. Development of Silicon Valley has caused three world innovative breakthrough. This development of semiconductor technology in the 70's, computer technology in the 80's and network technologies and the Internet in the 90's. Just a few decades, Silicon Valley of brave experiment into a profitable enterprise: the combined annual income of 4,000 companies located in the Valley - $ 500 billion

The phenomenon of Silicon Valley

Today, many states are trying to repeat the success of its territory in Silicon Valley. In Europe and Asia are being built or already built similar to its parks, public subsidies for hi-tech, etc. However, Professor, Nobel Laureate in Economics, Gary Becker, have long studied the phenomenon of Silicon Valley, I am sure: for the development of dynamic industrial clusters requires flexible economic environment, rather than government industrial policy.

In 1999, venture capitalists invested more than $ 6 billion in new companies Valley - startups. Stanford and the University of California continues to lead the formation of new IT-companies. In addition, in the U.S. are very few obstacles to the creation of new firms, investment of private capital and going public limited company. The elimination of artificial obstacles to the founding of the company (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 "safe" new companies, which mainly meet the needs of bureaucrats, not markets. Incredible spontaneity typical of Silicon Valley, can not play due to bureaucratic support.

Fairchild and Fairchildren

For the semiconductor industry company Fairchild Semiconductor was roughly what the firm Marconi - radio and Xerox - in the field of copying documents. But the main thing in it was not scientific discoveries and patents, and people and their ideas. Later, former employees of the company became known as Fairchildren.

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

In 1957, eight senior engineers left the company Shockley and founded his own company - the very Fairchild Semiconductor. The names of two of the eight now know everything: Robert Noyce and Gordon Moore. And then, in 1957, the founders of Fairchild asked for money to the financier Arthur Rock on - the only one of their ideas seemed interesting. Rock found those who agreed to invest the required $ 1.3 million - a colossal sum for those times. Since this event is counted and the history of the new method of financing innovative projects - venture capital investments. That Arthur Rock coined the term "venture capital". Initially, the production process in Fairchild Semiconductor was: silicon and germanium wafers manually loaded into the fiery furnace for doping. They are then sawn diamond circles on the individual "slices" or "chips", which under the microscope manually soldered delicate gold wire findings. In 1959, Robert Noyce put forward the idea of chips - a chip, in which all connections are put on the crystal directly in the production process. Later discovered that a little earlier the same idea put forward fellow Texas Instruments, Jack Kilby. It is true that Noyce's technology was developed in greater detail - it was a so-called planar technology with aluminum interconnections, which is used today. Although Kilby had applied earlier (in February 1959 - first) than Neuss (in July of that year), but Noyce had received a patent. After ten years of trials, it was decided to consider Kilby and Noyce co-inventors of integrated circuits: Kilby as the first had suggested, and Noyce - as the creator of a working technology. In 1963, the Department of linear integrated circuits at Fairchild led the young engineer Robert Vidlar. He became the first developer of semiconductor operational amplifiers (OC). They were used to perform operations - addition, multiplication, integration, etc. - Over analog signals - in particular, in analog computers, which then tried to compete with digital techniques. Vidlar one of the first realized that for the cost of the chip is practically indifferent to how many transistors to fit on it - ten or a hundred. In 1966, Robert Vidlar resigned from Fairchild and moved to National Semiconductors - a firm that later in the late 80's Fairchild rescued from bankruptcy.

Conquest of the world

But the most famous Fairchildren have become the Founding Fathers - all the same Noyce and Moore. In 1968, they resigned from Fairchild and founded Integrated Electronics. Its abbreviated title - 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 of the new company has all the same Arthur Rock. By the way, it is partly, we must have and the birth of Apple. Almost simultaneously with Intel, Fairchild came from the depths of another famous company - AMD. Its founder, Jeremy Sanders received his education in the field of electronics, but found his true vocation as a seller. At Fairchild, he appeared in 1961 and soon became director of marketing. Soon, Sanders realized the main feature of semiconductor production: growth of sales reduces the value of chips in the tens or hundreds of times, and this, in turn, expands the market. In this electronic chip itself is not worth almost nothing - almost all of its cost the sum of money invested in the development and organization of production. Accordingly, if the produce millions of chips, then they will cost a penny. That is, to outperform competitors, we can start to set very low prices. So Fairchild and received. Sanders later recalled: "We were going to make chips at the factory, which we have not been using the process technology, which we have not yet developed, but the only one worthy of attention was the fact that we have entered the market with a price of $ 1.05 per chip, which cost above $ 150 . We sold per the future. " This marketing model is very successful. And in 1969, followed by Moore and Noyce, Sanders resigned from Fairchild and began searching for investors for the new company. Arthur Rock he refused, saying: "All the technology companies, on which I lost money, were founded by people from the marketing department." But it is interesting that one of those who invested in the project, was ... Robert Noyce. However, the main role played in the new endeavor that the U.S. government (as well as many giants - for example, IBM) have never ordered a product from firm-monopolist. So Intel executives simply were forced to build their competitors.

The peculiarity of the company, called Advanced Micro Devices (AMD), was, first, the absence of any technological developments in the portfolio of the founder. After the company was established not as an engineer, and the seller. The second feature is characterized by the words of the Sanders: "Put people first, and then the products with the profits go." AMD - one of the first companies in Silicon Valley, which has been clearly articulated corporate culture. No wonder that after the crisis that followed the Sept. 11 attacks, AMD has become almost the only company that has paid off with the sacked staff. Until the mid-90's not involved in the development of AMD processors, but to conduct their own research in the field of flash memory (it is now owned 13% of the market). In 1995, she undertook and for microprocessors, successfully reclaimed a hefty market share from Intel. In January of 2000 Sanders resigned as CEO of the company he founded. At the time of departure, he remained the oldest of the existing senior management Fairchildren. Very Fairchild in 1996, withdrew from the NS and again became an independent and prosperous company. One of its innovations have become famous, in particular, MOSFET-transistors - crystals, which allowed direct from logic chips to control the various powerful devices. But the main thing - Fairchild's products are always present in almost every electronic device.

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