Starting Up: Silicon Valley's Origins
Fri April 6, 2012
Intel Legends Moore And Grove: Making It Last
Part 3 of a series on Silicon Valley's history
In Silicon Valley, the spotlight is often on young entrepreneurs with fresh ideas that will change the world — people like Mark Zuckerberg of Facebook, or Jack Dorsey of Twitter.
But for decades, two older titans of the high-tech industry thrived in that fast-paced world: Gordon Moore and Andy Grove of Intel.
Speaking recently in a rare joint interview, the two discussed how their company survived, and what they think of the current crop of Silicon Valley techies.
Intel's Odd Couple
Moore and Grove met with us at the sunny offices of the Moore Foundation in Palo Alto, Calif. Moore is the co-founder of Intel, the most profitable silicon chip maker in the world; his foundation is a retirement project. Grove is the legendary former CEO of Intel, and its first hire.
The two men sat by big windows, overlooking a landscape of office parks where younger companies are using technology the pair helped make possible.
And although they spent more than three decades working together, nowadays they say they only see each other about once a year. Moore and Grove were a successful duo, but they're kind of an odd couple.
Moore is a modest, introverted chemist. When he says of himself, "I'm a loner," Grove nods his head and agrees.
Grove, who is Jewish, survived Nazi occupation as a child and later fled communist Hungary. He arrived in the United States in 1956. He has a reputation for being a savvy businessman with a wry sense of humor.
"I'm an older, creakier version of the same aggressive young engineer that Gordon hired," he says with a laugh.
When Intel Was A Startup
Moore first hired Grove at a startup called Fairchild Semiconductor, right after Grove had finished his doctorate in chemical engineering. For five years, they worked together at Fairchild. Then in 1968, Moore and another key executive, Robert Noyce, decided to leave and start their own company.
When Grove heard the two men were leaving, he just decided to go with them.
"I never got an offer" to join them, Grove chuckles. "Or, I should say, I never got an invitation."
The company Moore and Noyce founded was Intel. In 1968, other companies were already making chips to help businesses manage their payroll, accounting and banking. But, Moore says, he saw room for a lot of growth.
"We got to the point that electronics were going into almost all consumer items," he says. "So, we had the feeling that this was the basic technology of some kind of a revolution."
Moore saw an opportunity for Intel in a relatively new area: putting computer memory or data storage on microchips. These chips would allow computers to be faster.
In 1970, Grove and Moore led Intel when it came out with the industry's first mega-hit: low-cost memory on a chip. But developing that chip was tough. Grove still puts his head in his hands when he thinks back to all the experiments.
"Every pestilence that could kill a microchip hit it," he says with a sigh. "We had no idea what we were doing. Key people [were] standing around and testing all the chips in a wafer: 'Green light is good,' 'Red light is bad.' "
Unfortunately, Grove says, time after time, the result came out "red, red, red, red, red. And we were a schlocky little outfit of 50 people."
Finally, after two years — though Grove says it felt like 20 — they got their chip.
For many years that followed, Intel dominated the memory business.
Revamping The Business, Once Again
When Japanese firms started making memory chips cheaper and better, few companies could compete. A lot of American memory chip companies went under. That could have been Intel's fate, back in 1985.
But a conversation in one of the company's famous Silicon Valley cubicles was the beginning of Intel's radical turnaround.
Grove says he and Moore were in his cubicle, "sitting around ... looking out the window, very sad." Then Grove asked Moore a question.
"What would happen if somebody took us over, got rid of us — what would the new guy do?" he said.
"Get out of the memory business," Moore answered.
Grove agreed. And he suggested that they be the ones to get Intel out of the memory business.
Under the new plan, the company laid off more than 7,000 employees, almost a third of its workforce. Grove says it was agonizing to shut down plants.
"We like to go to places where we'd be the only manufacturer," he says. "When we pulled out, we left a hole."
Intel decided to beef up something that had been a side business. The company was also the inventor of the industry's first successful microprocessor.
In the 1970s, microprocessors were used to control elevators, traffic lights, garage door openers and office printers. The chips are the brains of a computer, processing everything from computation to multimedia displays. Intel went from making computers faster to making them smarter and cheaper.
Rise Of The Personal Computer
In a bit of irony, Moore and Grove, like many others in the industry, didn't see that their biggest customer product was on its way: the personal computer.
"We were exposed to Apple's early products, and I could not imagine anything except trivial applications for that," Grove says. For instance, he and Moore thought a PC might be good for keeping recipes in the kitchen.
Yet it was the personal computer that fueled Intel's success, along with some shrewd business moves by Grove, who in the late 1980s became the company's CEO.
There have been books and business school talks about Intel's twists and turns. But Grove's key move was his refusal to license Intel's new cutting-edge microprocessor. Intel would be its sole manufacturer.
In 1997, Time magazine put Grove on the cover, choosing him as Man of the Year.
But not all the talk about Intel has been good. The chip maker has been the target of several antitrust suits. Though Intel hasn't admitted to wrongdoing, it has been forced to pay large settlements and fines and change some of its business practices.
What Grove emphasizes is that they were trying to create products of value and a company that would last. Today, Grove thinks that many in Silicon Valley are merely hoping to make a quick profit. There are two words that make him cringe: "Exit strategy," he says. "I hate it!"
Grove says too many young tech entrepreneurs and venture capitalists want to sell their companies or go public — get rich and get out.
"I really don't have much respect for the people who live their lives motivated by an exit strategy existing, being performed," he says. "There was no option that we were trained in that says, 'If it gets too hard, get up and leave.' "
Grove says he spent 10 years turning Intel back around.
Nowadays, both Grove and Moore look around at the Silicon Valley they helped to create, and they lament that the devices designed here are not manufactured in the United States. And they can back up that talk; Intel does about three-quarters of its manufacturing domestically.
Moore and Grove say they feel their biggest accomplishment is that in a fast-moving competitive industry, their company has survived.
"There were 50 other startups more or less in the semiconductor industry," Moore says. "We're about the only ones still around."
Produced by Cindy Carpien