Students report On Economics by Constantine Nikitin Contents Silicon Valley - what is that? 3 Stanford University 3 Hewlett Packard - the garage myth 5 HP Foundation and first years 5 The rise of HP up to the present 6 The HP Way - an example of corporate culture for a whole industry 7 HP today. 7 The rise of Silicon Valley 10 Invention of the transistor 10 Shockley Semiconductor 11 Importance of military funding 12 Intel Corp. 13 Foundation in 13 First products - Moore s Law 13 Ted Hoff s first microprocessor 14 Cooperation with IBM in the 1980s 15 Intel today 16 The emergence of the PC industry 17 Altair - the first PC 18 The first computer shops 19 Homebrew Computer Club 19 The Apple Story 19 Woz and Jobs - the two Steves 19 The first Apple 20 Building up the company 21 Apple II - starting the personal computer boom 22 Turbulences in the early 1980s 23 The Lisa project 23 The Macintosh revolution 24 John Sculley and Steve Jobs 25 Apple today. 27 This question may have occurred to many people s minds when they came across the term Silicon Valley. What hides behind it is mostly unknown to them, although the revolutionary inventions and developments, which have been made in this Valley , affect everyone s daily life, and it is hard to imagine our modern civilization without them. Silicon Valley is the heartland of the microelectronics industry that is based on semiconductors.
Geographically, it is the northern part of the Santa Clara County, an area stretching from the south end of the San Francisco Bay Area to San Jose, limited by the Santa Cruz Mountains in the west and the northern part of the Diablo Range in the east. It covers a thirty- by ten-mile strip extending from Menlo Park and Palo Alto, through Los Altos, Mountain View, Sunnyvale, Cupertino and Santa Clara, down to San Jose. The name Silicon Valley was coined in 1971 by Don C. Hoefler, editor of the Microelectronics News, when he used this term in his magazine as the title for a series of articles about the semiconductor industry in Santa Clara County.
Silicon was chosen because it is the material from which semiconductor chips are made, which is the fundamental product of the local high-technology industries.
Silicon Valley saw the development of the integrated circuit, the microprocessor, the personal computer and the video game and has spawned a lot of high-tech products such as pocket calculators, cordless telephones, lasers or digital watches.
Looking at our high-tech society in which the PC has become indispensable - both in business and at home, replacing the good old typewriter by word processing - the crucial role of Silicon Valley as the birthplace of the microelectronics and then the PC revolution becomes even more evident.
Silicon Valley is also seen as a place where many entrepreneurs backed by venture capital have made the American Dream come true as Overnight Millionaires.
This makes Silicon Valley a philosophy saying that everything which seems impossible is feasible and that improvements in our society can take place daily, as Thomas McEnery, the mayor of San Jose, the capital of the Santa Clara County, puts it. Thomas Mahon calls it the economic and cultural frontier where successful entrepreneurship and venture capitalism, innovative work rules and open management styles provide the background for the perhaps most profound inquiry ever into the nature o f intelligence which might, together with bioengineering and artificially intelligent software, affect our very evolution.
On the following pages I would like to convey the image of Silicon Valley as the nucleus of modern computing, presenting the most important events, which comprise the developments of the three major companies Hewlett-Packard, Intel and Apple. Stanford UniversityThe story of the Silicon Valley starts with Stanford University in Palo Alto, which has been of fundamental importance in the rise of the electronics industry in Santa Clara County.
In the 19th century, Spanish settlers, who have been the first white visitors to California, founded civilian communities and gave them Spanish names such as San Francisco, Santa Clara or San Jose. They liked the Mediterranean climate in the Santa Clara Valley, which was very hospitable.
This area came to be used by farmers and ranchers cultivating orchards, for it provided some of the world s finest farming soil. In 1887, Leland Stanford, a wealthy railroad magnate who owned a large part of the Pacific Railroad, decided to dedicate a university to his son s memory who had died due to a severe disease shortly before he intended to go to a university.
Leland Stanford and his wife built Leland Stanford Jr. University on 8,800 acres of farmland in Palo Alto and also donated 20 million dollars to it. The university opened in 1891 and would in time become one of the world s great academic institutions. In 1912, Lee De Forest, who had invented the first vacuum tube, the three-electrode audion, discovered the amplifying effect of his audion while working in a Federal Telegraph laboratory in Palo Alto. This was the beginning of the Electronics Age, and amateur radio became an obsession at Stanford University.
Frederick Terman, who was the progenitor of the initial Silicon Valley boom, changed the state of this university fundamentally. Today he is also known as the godfather of Silicon Valley. Terman was born in 1900, and as the son of a Stanford professor who developed the Stanford-Binet IQ tests he had grown up on the campus. After his graduation from Stanford University he decided to go East to the Massachusetts Institute of Technology MIT , which was the leading university in technology then. He studied under Vannevar Bush, who was one of America s leading scientists, and was offered a teaching position at MIT after receiving his doctorate in 1924. He returned to Palo Alto to visit his family before he intended to start at MIT, but he was caught by a severe case of tuberculosis, which forced him to spend one year in bed. This made him finally to decide to stay in Palo Alto and teach at Stanford University because of the better climate in California.
Terman became head of the department of engineering by 1937 and established a stronger cooperation between Stanford and the surrounding electronics industry to stop the brain drain caused by many students who went to the East after graduation, as they did not find a job in California then. The Varian brothers are an example of such cooperation between university and industry.
After graduation they founded a company upon a product they had developed at the Stanford laboratories.
Their company, Varian Associates, was settled 25 miles from the university and specialized on radar technology. After World War II, the Stanford Research Institute SRI was founded. Its aim was to provide the industry with more skilled students and to increase the number of companies in Santa Clara County. Terman wanted companies to settle next to the university. In 1951, he founded the first high-technology industrial park, the Stanford Research Park, where business, academic and government interests could come together in a synergistic vision of the future.
Portions of this land would be leased to companies, because the original Stanford family land gift forbade the sale of any of its 8,800 acres. These companies were offered close contacts to the SRI and could lease land for 99 years at a fixed price, which they had to pay in advance. The first firm to settle in this park was Varian Associates leasing land for 4,000 an acre, which was a good deal as there was no inflation clause in the agreement making this site today worth several hundred thousand dollars.
More and more firms - among them Hewlett-Packard as one of the first residents - settled their Research and Development R D departments in this park, and they were to become the core of the early explosive growth of Silicon Valley. Today, there are m ore than 90 firms employing over 25,000 people. During the Korean War the US government placed Stanford with a great deal of their projects, which made more, and more electronics companies among them IBM and Lockheed open R D departments in Santa Clara County.
Due to his prepaid leasing program Terman received more than 18 million and, moreover, many companies endowed the university with gifts, which Terman used to hire qualified professors from all over the USA. Thus, he had created a mechanism which increased the settlement of the electronics industry. The successful Stanford Research Park has served as a worldwide model for a lot of other high-technology parks.
Hewlett Packard - the garage myth Hewlett-Packard was one of the first companies to be founded in the Silicon Valley and has today become the largest one to be seated there. Its story is typical for this Valley and has had a great impact on many firms founded later on.
Bill Hewlett was the son of the dean of the Stanford Medical School, w... They both were very interested in electronic engineering and spent a l... After graduation in 1934, Packard went to Schenectady, New York, where... Terman was very convinced by this product, so he encouraged them to tr... He himself loaned them 538 for the production and arranged an addition...
They have spent millions of t heir profits for social welfare and have... In the 1980s, HP introduced its LaserJet printer 1985 , which became t... The net revenue went up to 5.5 million in 1951 and the HP workforce wa... Radio stations used it, for example. So, in 1957, the stocks were offered to the public for the first time.
This has led to the establishment of a new corporate culture in Silico... They cover as follows Profit, Customers, Fields of Interest, Growth, O... The roots of many subsequent companies are located in HP, e.g. HP always renounced the hire and fire mentality, which meant to employ... From the beginning the two founders have developed a management style,...
During the quarter, HP completed its previously announced 2-for-1 spli... I accept full responsibility for the shortfall, said Carly Fiorina, HP... We are determined to succeed and are not backing away from our growth ... Computing Systems The computing systems segment a broad range of Inter... Net revenue in the United States rose 14 to 21.6 billion, while revenu...
By the 1940s, the switching units in computers were mechanical relays,... In contrast, transistors were much better. And in 1956, the three scientists received the Nobel Prize in Physics ... But however brilliant Shockley was, who was called a marvelous intuiti... Within several months Shockley had to shut down his firm, since he had...
Before switching over to the events at Intel, the aspect of military f... military forces and of the military production was moved to California. Lockheed s move to Northern California was crucial for the development... The U.S. its purchases represented about 70 percent of the total production of ...
It was at Intel where the first microprocessor was designed - represen... . Intel Corp. Intel is regarded as Silicon Valley s flagship and its most successful... With its logic and memory chips, the company provides the basic compon...
Gordon Moore had belonged to the famous Shockley Eight and was in char... Foundation in. Intel s task was to drive down the cost per bit by increasing the capa... Berkeley, had joined Fairchild in the early 1960s. It all started in 1968, when Bob Noyce resigned as head of Fairchild S...
Within a year, Intel developed its first product - the 3101 Schottky b... Until today, semiconductors have adhered to Moore s Law, which has bee... The company s revenues surpassed operating expenses for the first time... Invented by Intel s Dov Frohman, the new memory could store data perma... The invention of the microprocessor in the same year, however, showed ...
The story to this technological breakthrough began in 1969, when a Jap... This chip is the actual computer itself It is the central processing u... The microprocessor made possible the microcomputer, which is as big as... For we d have a hard time getting information into or out of a micropr... However significant Hoff s invention, nevertheless, it was hardly noti...
sIntel s measures in the late 1970s as a reaction to increasing compet... IBM short for International Business Machines has been the world s lea... As well as for Intel, the CPU manufacturer, IBM s decision has been cr... Microsoft, a small company in 1980, grew explosively, and is today s s... At the beginning of the 1980s, IBM was concerned about Intel s ability...
e-Business solutions enable services and channel programs to accelerat... These products are used in communications servers, network appliances ... Component-level building blocks include communications silicon such as... Users of PC and network communications products including individuals,... None of these large companies anticipated the possibilities of PCs, wh...
After the first microprocessors had come onto the market, Ed Roberts, ... He boosted up the production, but still could not meet the huge demand... Initially, Terrell sold the Altair and accessory products such as addi... The hobbyists helped each other with advice. It was this spirit of sha... The club attracted many hobbyists and was attended by nearly 750 peopl...
Born in 1950, he had grown up with the electronics industry in Silicon... At the age of 13, he won the highest award at a local science fair for... Many other students who grew up in Silicon Valley shared this dream. I... He met people who shared his love for computers and learned from them ... The other hobbyists at Homebrew were impressed by Wozniak s kit, which...
Building up the company. While the first Apple was being sold, Steve Wozniak had already begun ... He visited Jobs s garage and became interested in their project. In 1977, Markkula hired Mike Scott, who had worked for product marketi... McKenna, who worked for successful Intel and many other companies, bro...
Apple II - starting the personal computer boom. The Apple II was more sophisticated than any microcomputer before, and... Woz took the challenge and finished in record time only one month. In 1979, Daniel Fylstra, a programmer from Boston, released VisiCalc f... The Apple Education Foundation was established, which granted complete...
Concurrently, Steve Jobs became the company s visionary and thought ab... So, in the course of a reorganization of the company, they decided to ... This project was the most professional operation ever mounted at Apple... The other strategic mistake was the announcement that the two computer... Finally, Lisa, which was intended for the business market at its price...
As well as other fundamental software the standard toolbox was availab... The introduction of the Macintosh, which was Steve s revolutionary mac... When the commercial was broadcast, it reached 46.4 percent of America ... People were stunned about this outrageous ad, which was unlike anythin... This feature would be taken over by many software companies in the sub...
Moreover, at the 1985 annual meeting, Jobs and Sculley neglected the f... Many sophisticated Apple II designers were annoyed and left the compan... He blamed everyone for it, except for himself. His restructuring saved a lot of costs and consolidated the company. CUPERTINO, California-December 5, 2000-Apple today announced that it h...