Andrew S. Grove & Gordon E. Moore

Silicon Magicians

Andrew S. Grove & Gordon E. Moore
Co-founders of Intel Corp.
Founded: 1968

"Only the paranoid survive."-Andrew S. Grove



The history of the modern computer industry is rife with pioneering duos: William Hewlett and David Packard, Steve Jobs and Steve Wozniak, Bill Gates and Paul Allen. But the duo that is most responsible for making personal computers as common a consumer durable as television sets is Andrew S. Grove and Gordon E. Moore. Through the combination of Moore's inventive engineering and Grove's hard-driving, sometimes ruthless management style, these innovative entrepreneurs provided the "ammunition" for the personal computer revolution and built one of the most profitable businesses in the annals of industry.

Born in Pescadero, California, a tiny coastal town about 50 miles north of San Francisco, Gordon Moore never dreamed he'd become an entrepreneur. He wanted to pursue the quiet, contemplative life of academia. But after graduating from the California Institute of Technology with a Ph.D. in chemistry and physics, he found that teaching jobs were scarce and accepted a position with Shockley Semiconductor, a research lab founded by Nobel Prize winner and co-inventor of the transistor, William Shockley. At Shockley, Moore met and became friends with another engineer, Robert Noyce.

William Shockley may have been a brilliant scientist, but he proved to be a merciless manager and virtually impossible to work for. After a year of frustration, Moore, Noyce and six other engineers left Shockley and started Fairchild Semiconductor, a West Coast subsidiary of Fairchild Camera & Instrument. Together, this close-knit group developed the first integrated circuits, which combined several electronic components onto a single chip rather than devoting a separate chip to each function. As Moore would later recall, "We had no idea that we had turned the first stone on something that was going to be a $1 billion business."

During his time at Fairchild, Moore interviewed and hired his future partner, Andrew Grove. A holocaust survivor, Grove had immigrated to the United States in 1957 when the former Soviet Union invaded his homeland of Hungary. Grove arrived in New York City with $20 in his pocket and little knowledge of the English language. He enrolled in the City College of New York-a free school that had become kind of an immigrant's Oxford-to study engineering.

Overcoming the language barrier, Grove received his bachelor's degree, graduating near the top of his class. From there he headed to California, where he entered the Ph.D. program at University of California, Berkeley. Again he was an academic star, and upon graduation in 1963, he had his pick of American research corporations. He narrowed his choices down to Bell Laboratories or Fairchild Semiconductors, and finally chose to cast his lot with Fairchild. For the next five years, Grove would work side by side with Moore, who became his mentor and friend. At Fairchild, Grove was a member of the team that perfected the use of silicon in transistors, which set the stage for the semiconductor revolution.

But while Grove and his team were revolutionizing the semiconductor industry, Fairchild was falling apart. Engineers were leaving, top executives didn't understand the business, and science was being replaced by politics. Sensing Fairchild was doomed, Robert Noyce and Gordon Moore decided to start their own company. Knowing of his excellent organizational, communication and leadership skills, they asked Grove to join them.

Backed with money provided by San Francisco venture capitalist Arthur Rock, the trio founded Intel (short for Integrated Electronics) Corp. in 1968. With Noyce as CEO, Moore as executive vice president and Grove as director of operations, Intel produced its first product-a bipolar memory chip-in 1969. From the beginning, Intel adopted what Moore calls the "Goldilocks Strategy." Intel's execs knew they had a choice of three technologies¬: an easy one that could be quickly copied by the competition, a complicated one that might easily bankrupt them, or a moderately complicated one. Like Goldilocks, they chose the middle course-a decision that would eventually enable Intel to dominate the microchip market.

Intel's first big product, the 1101 Static RAM chip, gave the company a strong lead on its competitors, a lead it maintained for nearly 10 years. In the early 1970s, Intel reached beyond the memory chip market and began experimenting with "multipurpose" chips-using software to make one chip perform multiple functions. It was this research that led Intel to produce the world's first microprocessor-a single chip powerful enough to run a small computer-in 1971. Ironically, Grove and most other Intel execs did not think of it as part of the company's core business. Nevertheless, Intel continued to refine its microprocessors.

Intel experienced tremendous growth throughout the 1970s, dominating the memory chip market and increasing its earnings with each fiscal year. Moore succeeded Noyce as CEO in 1979, and Grove became the company's president. Two years later, IBM chose Intel's 8086 microprocessor for its fledgling personal computer. It couldn't have happened at a better time. Japanese semiconductor companies had begun dumping cheap memory chips into the U.S. market and were rapidly eating away at Intel's profits.

The crisis forced Grove to reassess the value of the microprocessor. In 1984 he and Moore suggested that Intel shift its focus from memory chips to microprocessors. This proposal would change the course of Intel history. IBM's decision to use only Intel chips in its computers had already given Intel a tremendous lead in the microprocessor market. In addition, IBM had purchased $400 million of Intel stock, which provided Intel with the capital it needed to design and construct new microprocessor plants.

By 1985, personal computer sales were booming as IBM clones poured into the market at record pace. But while cloners such as Compaq Computers were rapidly swiping market share from IBM, nearly all of them had to use Intel's chips, which had become the industry standard. With the huge and growing market assured by IBM as well as the cloners, Intel quickly became the world's largest producer of microprocessors.

In 1987, Moore retired, handing the title of CEO over to Grove. Under Grove's guidance, Intel produced increasingly powerful microprocessors throughout the 1990s, achieving near-monopoly conditions in supplying chips for PCs. In fact, Intel experienced little or no competition until the close of the decade.

As the popularity of PCs grew, competition in the market became fierce. A number of computer companies began using cheaper chips from other manufacturers in order to offer consumers PCs priced under $1,000. Unwilling to walk away from a market whose size Grove predicted "is going to be measured in tens of millions of units per year, maybe bigger," Intel began producing chips for "value PCs" in 1997. Once again, Grove was able to keep Intel on top. By the end of 1997, Intel held nearly 90 percent of the microprocessor market, with sales exceeding $25 billion.

In May 1998, three decades after he helped found Intel, Andrew Grove relinquished his CEO title to company COO Craig Barret. In an interview for CNNfn.com, Grove explained his reason for stepping down: "I have been CEO for 11 years. Intel has been around 30. I'm the third CEO, so I've had more than the average share of tenure."



Tech Prophet
Gordon Moore is a true visionary in every sense of the word. Like Jules Verne and H.G. Wells, Moore seems to have the uncanny ability to very accurately predict the future of technology. In a little-known article published in Electronics magazine in 1965, Moore formulated what would become known as "Moore's Law." It states that the density of transistors in an integrated circuit would double every year with proportionate decreases in cost. Moore was only off by a couple of months. In the more than three decades since he made his prediction, not only transistor density, but also microprocessor performance, has doubled every 18 months.

"Integrated electronics," Moore writes, "will make electronic techniques more generally available throughout all of society." He then went on to predict the coming of such things that have since become commonplace consumer items, including home computers, portable telephones and cars made smarter by use of dozens of relatively cheap computer chips.


Crisis Turned Caveat
If nothing else, Andrew S. Grove is a survivor. Although he made few missteps as head of Intel, his one major gaff actually turned into a boon for the company. In 1994, Intel released millions of flawed Pentium computer chips. Consumers demanded replacements. But Grove refused, insisting the glitch was so small that conventional PC users would not be affected unless they were working on "some advanced astrophysics problems."

Dissatisfied with this response, Pentium users turned to the press, and Grove had a public relations nightmare on his hands. Within a few days, he reversed his decision and agreed to spend $475 million to replace the chips, going as far as to offer home delivery. Grove would later admit that the incident was "a difficult education" in customer relations. Ironically, Grove's decision turned a PR disaster into an advertising bonanza. The extensive press coverage made Intel's name better known than ever. And once the firm agreed to replace the chips, customers saw Intel as a company that was determined to get things right, regardless of the cost.

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