On the eve of the millenium, the San Jose Mercury News ran a series of
articles listing the "Top Ten" factors in the making of "Silicon Valley."
Number 1 was Fairchild and "the Chip."

#1: The Start-up Culture:
Quonset hut semiconductor operation sparked revolution in '55
 

BY TOM QUINLAN
Mercury News Staff Writer

It was the relative lack of silicon in the soil of
Santa Clara Valley that helped persuade 18th-century Spaniards to
make this fertile region the site of the first
real city in California.

Today, it's impossible to imagine what the valley
-- or the world -- would be without silicon. From the time your
clock radio wakes you up in the morning to the moment
you switch off your flat-screen television at
night, you're probably never more than 10 feet away from a
transistor, an integrated circuit or a microprocessor. Silicon
chips,  which were largely developed here, are now virtually
everywhere.

Although the physical amount of silicon used in
high-tech products is pretty small by weight, the element
has also become the symbol for the wealth, power,
entrepreneurial energy and fast-paced change that define the valley's
collection of semiconductor firms, software
companies and Internet start-ups.

In 1998, 119 of the top 150 companies in Silicon
Valley were in high-tech, accounting for $183.2 billion
in sales and employing 1.3 million people.

But in some ways, the fact that it all happened
here is a historical accident.

 The valley's advances in semiconductor technology
could have taken place anywhere -- and did. Although
Robert Noyce invented the integrated circuit here
in 1959, for example, Texas Instruments' Jack
Kilby had made a similar breakthrough months
earlier.

Old-line East Coast tech giants such as General
Electric Co., RCA, Philco, AT&T, Eastman
Kodak and IBM had world-class research labs in the
1950s, and indeed, they funded most of the
original semiconductor research.

Even Intel Corp., which arguably developed the
first commercially viable microprocessor in
1971, had competition from companies all over the
country within a couple of years.

But the Santa Clara Valley of the 1950s was also
primed for the tech revolution. Local officials
were promoting industrial growth and drawing
people to the area. Defense contractors were
moving in, transforming a somewhat sleepy
agricultural region into a bustling industrial center.

Frederick Terman -- known as the father of Silicon
Valley -- was transforming Stanford
University into a world-class institution and
extolling the virtues of the engineer as entrepreneur.

However, the spark that set off the explosion was
William Shockley's 1955 decision to start his
semiconductor company in a Quonset hut at 391 San
Antonio Road in Mountain View -- not far
from his boyhood home in Palo Alto.

Shockley -- who co-invented the transistor in 1947
with John Bardeen and Walter H. Brattain
while working at AT&T's Bell Laboratories in New
Jersey -- set about luring eight of the best
and brightest young engineers he could find. That
included recruiting the Iowa-raised Robert
Noyce away from Philco and giving Gordon Moore a
chance to return to his own valley roots.

``If Shockley hadn't happened to have grown up in
Palo Alto, I don't think any of us would have
been here,'' said Moore, one of Intel's founders
and himself a central figure in Silicon Valley
lore.

 Shockley had such an intuitive feel for the physics of
semiconductors that the joke at his company was
that ``he could see electrons moving.''

Despite his brilliance as a physicist, however,
Shockley was a disaster as a leader. ``He was very erratic as a
manager,'' said Moore. ``It seemed like he was almost paranoid.''

Eventually, Shockley's team couldn't stand it
anymore. Rather than dispersing to other companies, the renegade
engineers -- nicknamed the ``Traitorous Eight'' by Shockley --
decided to stick together and form a new company.

First, the engineers needed money, and to get it
they turned to Arthur Rock, a Massachusetts banker who ultimately
landed funding from Fairchild Camera in New York. Rock
later funded many other local start-ups, essentially founding
the Silicon Valley venture capital industry.

Spawned start-ups

The creation of Fairchild Semiconductor also set
in motion a way of doing business that now defines Silicon Valley.

Although the company had its technical successes
-- it patented the integrated circuit, still the fundamental building
block of the digital revolution -- the legacy of Fairchild isn't in its
products or sales, but in the companies it spawned.

Following the lead of Fairchild's founders,
engineers with good ideas or talent didn't have to
wait for approval from Fairchild Camera to try
something new; it was just as easy to start their
own company or move elsewhere.

The departing ``Fairchildren'' helped to create or
reinvent the who's who of the chip industry:
Advanced Micro Devices Inc., LSI Logic Corp.,
Teledyne, Rheem and National Semiconductor
Corp. The most successful company to trace its
lineage to the company was chip giant Intel
Corp., founded by Noyce and Moore, the last of the
Fairchildren to leave.

More important, the Fairchildren established the
central philosophy of Silicon Valley: that anyone
with a good enough idea can get the capital, the
workforce and the markets to make it a reality.

Failure: rite of passage

Eventually, the model moved beyond semiconductors
to spawn hardware giants like Apple
Computer Inc. and Sun Microsystems Inc., software
companies like Oracle Corp. and Internet
pioneers like Netscape Communications Corp. and
Yahoo Inc.

Could the start-up culture have taken hold if
Shockley had stayed in New Jersey?

``I don't think so,'' Moore said. ``There was just
a different attitude out here. People were more
adventurous. There wasn't the fear of failure here
that there was back east. Failure out here is like
a rite of passage that you have to go through.''
 

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