The Roots of Silicon Valley, Part 1: Founders, Legend, Legacy

Article By : Malcolm Penn, Future Horizons

The first of a three-part series recounting the history of Silicon Valley, how it came to be, the men who enabled it and the legacy they left.

EE Times 50th Anniversary Special: This three-part series by Malcolm Penn looks at the 74-year history of Silicon Valley, how it came to be, how it found itself in California and the legacy of William Shockley, Fairchild, and the “Fairchildren” that created a significant part of the foundation of the semiconductor industry today.

Part 1: William Shockley Jr. and the Birth of the Transistor

The transistor was successfully demonstrated on Dec. 23, 1947, at Bell Laboratories in Murray Hill, N.J, the research arm of American Telephone and Telegraph. The three individuals credited with its invention were William “Bill” Shockley Jr., the department head and group leader’ John Bardeen; and Walter Brattain. Shockley continued to work on development at Bell Labs until 1955 when, having foreseen the transistor’s potential rather than continue to work for a salary, he quit to set up the world’s first semiconductor company, becoming a de-facto industry father.

Shockley was born in London on Feb. 13, 1910, the son of William Hillman Shockley, a mining engineer born in Massachusetts, and his wife, Mary (née Bradford), who had also been engaged in mining as a deputy mineral surveyor in Nevada.

The family returned to the United States in 1913, setting up home in Palo Alto, Calif., when Mary joined the Mining Engineering Department faculty at Stanford University. But for this twist of fate — given that both Shockley’s parents were mining engineers — the family could have instead settled in Colorado, Nevada or West Virginia.

William Jr. was educated in California, earning his BSc degree at the California Institute of Technology (CalTech) in 1932, before moving to the East Coast to study at Massachusetts Institute of Technology (MIT) under J.C. Slater. He obtained his Ph.D. there in 1936, submitting a thesis on the energy band structure of sodium chloride, and joined Bell Telephone Laboratories where he remained until his resignation in 1955.

Upon leaving Bell Labs, Shockley moved back to Palo Alto where his ailing mother still resided, initially as a visiting professor at Stanford but with the vision to establish his own semiconductor firm making transistors and four-layer (Shockley) diodes. Had he decided instead to remain on the East Coast, close to Bell Labs, MIT, or IBM in Vermont, Silicon Valley might well have developed on the East Coast rather than the West Coast of the United States, with almost certainly a very different DNA and personality.

Back to Palo Alto, Shockley found a sponsor in Raytheon, a pioneer in what came to be known as electronic warfare. But Raytheon’s support was short-lived. Undeterred, Shockley, who had been one of Arnold Beckman’s students at CalTech, turned to him for advice on how to raise $1 million in seed money. Beckman was an American chemist, inventor, entrepreneur, founder and CEO of the hugely successful Beckman Instruments — and now also a budding financier who believed that Shockley’s new inventions would be beneficial to his own company. So, rather than pass the opportunity to his competitors, he agreed to create and fund a laboratory under the condition that its discoveries should be brought to mass production within two years.

Shockley Semiconductor Laboratory - arnold-and-mabel-beckman-foundation
Shockley Semiconductor Laboratory. (Image source: Arnold and Mabel Beckman Foundation)

Beckman and Shockley signed a letter of intent to create the Shockley Semi-Conductor Laboratory (the hyphenation was then common practice) as a subsidiary of Beckman Instruments, under Shockley’s direction. The new group would specialize in semiconductors, beginning with the automated production of diffused-base transistors.  Shockley’s original plan was to establish the laboratory in Palo Alto, close to his mother’s home, but this changed when Fred Terman, provost at Stanford University and central figure in the rise of Silicon Valley, offered him space in Stanford’s new industrial park at 381 San Antonio Road in Mountain View. Beckmann bought licenses on all necessary patents, for $25,000, and the firm was launched in February 1956.

Stanford Sows the Seeds

The seeds for Stanford’s high-tech relationship with industry were sewn much earlier. In 1936, Sigurd and Russell Varian — together with William Hansen, Russell’s ex-college roommate and by then a professor at Stanford — approached David Webster, head of Stanford’s Physics Department, for help in developing the Varian brothers’ idea of using radio-based microwaves for aircraft detection in poor weather conditions and at night. Webster agreed to hire them to work at the university in exchange for lab space, supplies and half the royalties from any patents they obtained. The group’s work eventually led to the development of the klystron in August 1937, subsequently adopted by Sperry, and a decade later, in 1948, the formation of Varian Associates.

In 1938, shortly after the klystron’s development, Bill Hewlett and David Packard, who had graduated three years earlier with degrees in electrical engineering from Stanford University, formed Hewlett-Packard in a garage at 367 Addison Avenue in Palo Alto under the mentorship of Fred Terman. The garage is often referred to as the “Birthplace of Silicon Valley,” understating both the role Terman and Stanford played in creating the catalytic environment for Californian high-tech ventures and the explosive role Shockley Semiconductors would subsequently play. From a semiconductor perspective, 381 San Antonio Road in Mountain View, Shockley’s address, is more appropriately the real birthplace of Silicon Valley, as recognized by IEEE.

Shockley Semiconductors

Given his own prodigious IQ, Shockley embarked on an ambitious hiring campaign, seeking to employ the brightest scientists available; not just Ph.D.s, but Ph.D.s from the finest universities at the very top of their class, bringing together a veritable brain trust of brilliant engineers. The hiring process was not that straightforward, however, given that the majority of electronics-related companies and professionals were at that time based on the East Coast, thus requiring ads to be posted in The New York Times and the New York Herald Tribune. Shockley initially tried to recruit from his Bell Lab peers but, knowing his reputation as a difficult manager, none would join him.

Early respondents included Sheldon Roberts of Dow Chemical, Robert Noyce of Philco, and Jay Last, a former intern of Beckman Instruments. Each was required to pass a psychological test followed by an interview. Julius Blank, Gordon Moore, Last, Noyce and Roberts started working in the April-May timeframe, and Eugene Kleiner, Victor Grinich, and Jean Hoerni during the summer. By September 1956, the lab had 32 employees, including Shockley.

Although never medically diagnosed by psychiatrists, Shockley’s state of mind has been characterized as paranoid or autistic. All phone calls were recorded, and staff were not allowed to share their results with each other, not exactly feasible since they all worked in a small building. At some point, Shockley sent the entire lab for a lie detector test, although all refused. Shockley also lacked business experience and industrial management, unilaterally deciding that the lab would pursue an invention of his own — the four-layer diode — rather than developing the diffused silicon transistor that he and Beckman had agreed upon.

Barely six months passed when discontent boiled over, prompting seven employees to voice their concerns to Arnold Beckman — not to get rid of Shockley but to put a more rational boss between him and them. Their request might well have been granted had Shockley’s Nobel Prize not been announced in November 1956, extending Shockley’s fame and inflated ego. Rather than rock the boat, Beckman chose not to interfere, instead telling the seven to keep their heads down. Future Intel founders Noyce and Moore stood on different sides of the argument, with Moore leading the dissidents and Noyce standing behind Shockley, struggling to resolve conflicts. Shockley considered Noyce his sole supporter, but the team started to disintegrate, starting with Jones, a technologist, who left in January 1957 due to a conflict between Grinich and Hoerni.

Arthur Rock Invests

In March 1957, Kleiner, who was also beyond Shockley’s suspicions, asked permission to attend and exhibition in Los Angeles. Instead, he flew to New York to seek investors for a new company that he and the six others were by now contemplating. Kleiner’s father, an investment banker, introduced Eugene to his broker, who in turn introduced Kleiner to Arthur Rock at Hayden Stone & Co. The team’s original idea was to join an existing company. Rock, already investing in new companies — what today would be called startups — together with Alfred Coyle, backed Kleiner’s proposition of a seven-strong, pre-packaged team, believing that trainees of a Nobel laureate were destined to succeed. Finding prospective investors, however, proved to be very difficult, given the U.S. electronics industry was at that time concentrated in the East Coast. The California Group — as the seven became known — wanted to stay near Palo Alto. Rock presented the group to 35 prospective employers: All declined.

Lacking financial backing, the group led by Moore, as a last resort, presented Arnold Beckman with an ultimatum in May 1957: Solve the “Shockley problem” or they would leave. Moore proposed finding an academic position for Shockley, replacing him in the lab with a professional manager. Beckman again refused, believing that Shockley could still succeed–later regretting this decision.

A month later, Beckman finally inserted a manager between Shockley and the team, but by then it was too late as the seven were now committed to leaving and embarking on Plan B, namely, creating their own startup. Recognizing they were followers, not leaders, the group persuaded the charismatic Noyce to join them. The now expanded California Group met up with Rock and Coyle at the Hill Hotel in California. These ten engineers became the core of a new company. Coyle, fondness of ceremony, produced 10 $1 bills and laid them carefully on the table. “Each of us should sign every bill,” he said. “These dollar bills covered with signatures would be our contracts with each other.”

Fairchild 1957_dollar-bill_contract - Computer History Museum
Dollar bills signed by each of the founding team formed part of the contracts between members of the California Group, which formed the basis of Fairchild Semiconductor. (Image source: Computer History Museum)

In August of that year, in a final throw of the funding dice, Rock and Coyle met with the inventor and businessman Sherman Fairchild, founder of Fairchild Aircraft and Fairchild Camera and Instrument Co. Fairchild, son of a wealthy entrepreneurial father who had made his fortune as an early investor in IBM, was a bright and equally entrepreneurial engineer who had amassed a small fortune during World War II selling cameras for reconnaissance planes. Given that he had already developed an interest in semiconductors, Fairchild sent Rock to meet his deputy, Richard Hodgson. Risking his reputation, Hodgson accepted Rock’s offer. Within weeks, paperwork and funding for the new company, Fairchild Semiconductor, had been completed.

The capital was divided into 1,325 shares with each member receiving 100 shares, with 225 shares going to Hayden Stone & Co. and the remaining 300 shares held in reserve. Fairchild provided a loan of $1.38 million and, to secure the loan, the eight gave Fairchild the voting rights on their shares with the option of buying them back at a fixed total price of $3 million.

“The Traitorous Eight”

The eight left Shockley on September 18, 1957, and Fairchild Semiconductor was born. While there is no documentary evidence, the group quickly became known as “The Traitorous Eight.”  Shockley never understood the reasons for their defection, considering it a betrayal, and allegedly never again speaking to Noyce or the others.

With the help of a new team, Shockley brought his own diode to mass production the following year but, by then, time had been lost and competitors were already close to developing integrated circuits. In April 1960, Beckman sold the unprofitable Shockley Labs to the Clevite Company based in Waltham, Mass., bringing his association with the semiconductor industry to an end.

On July 23, 1961, Shockley was seriously injured in a car crash and, after recovery, left the company and returned to teaching at Stanford. Four years later, Clevite was acquired by ITT. In 1969, ITT decided to move the labs to West Palm Beach, Fla., where it had an already established semiconductor plant. When the staff refused to move, the lab ceased to exist.

In Part 2, we look at the evolution of planar technology, the “family tree” of semiconductor startups that evolved from Fairchild, including Intel and its competition with Texas Instruments.

This article was originally published on EE Times.

Malcolm Penn is chairman, CEO and founder of semiconductor industry analysis firm Future Horizons.

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