TAMEST 2020: Texas Instruments: Leading Technology Innovation

Well, good morning everybody. And it really is a privilege to be here. I understand David Daniel is under the weather and missing one of his first conferences in a long time. And it's a pleasure to be here to talk about innovation, which is a subject that is just very near and dear to not just our company's heart but mine personally, and really why I was attracted and became an engineer and wanted to be in the semiconductor industry from the earliest days I thought about the options. I believe it is really not an exaggeration to say that innovation is truly the most important thing to determine our future prosperity. That future prosperity could be as individuals, as a company, as a local community, as a state, or as a country for that matter. So with innovation as this theme, David Daniel asked that I talk about the invention of the integrated circuit, which was done by Jack Kilby back in 1958 when he was working at TI. And David also asked if I would take just a few minutes to talk through the things that we have been going through as a company over the last 25 and 30 years to reinvent and reinvigorate ourselves in the highly competitive world of semiconductors. And then I'll wrap up with just a couple of comments about some things that I think we should be doing. It's not a new list. I think most in the audience will be aware of it, but they remain important things and I think we have to be doing to create the right environment for innovation. So let me start first with the story of Jack Kilby and the integrated circuit and Texas Instruments. And to appreciate that background and that story, I think it is helpful a little bit to understand the history of Texas Instruments, where we came from, a little bit about our passion and about our values as a company, because I think it explains why things happened the way they did. But TI began in 1930. We were in the seismology business. We basically used electronics to help companies look and discover oil. We had expanded into defense electronics in the 1940s for both additional growth as well as diversification. Most of you may recall that in 1947, Bell Labs invented the transistor. And at that time, they started opening up four licenses to be issued in the early 50s, and TI was one of the few truly small companies that I would say had the audacity to decide that we needed to go get a license for the transistor. The fact is, in 1951, we were still a very small company. We actually didn't manufacture any electronic components, and we had none of the manufacturing processes that you would think associated with being able to produce transistors. But what drove us to go get that license was that we knew the importance and we knew the implications of making electronics more affordable. And that when you can do that, you can actually profoundly change the world. More affordable to me is really very simple. It's about making things smaller, it's about making things cheaper, it's about making things faster, and it's about making things lower power. Over the decades, this drive to make electronics more affordable has somewhat become a very unspoken passion that continues to lead most of our innovation and our thoughts as a company today. Now, in addition to the fact that we were really still a pretty small company back in the 50s, the good news was that our founders actually had the wisdom and the forethought that they knew if we wanted to grow and become a successful company over the long term, we had to have the right attributes in terms of what would be called culture, I think today, that would let us thrive and would let us survive. So if you think about almost all the decisions that we make today, and they were identical to the ways we were making decisions almost 60 years ago, these things can really break down as being guided by three ambitions that we still use today. Our ambitions were really quite simple. First, we felt it was important to act like owners, and owners that intended to own the company literally for decades. We felt it was important that we were going to have to adapt and succeed in a world that is ever-changing, and obviously in the technology industry, that statement has never let us down. And then finally, we wanted to make sure that we were going to be a company that we would be personally proud of and that we would be proud to have as a neighbor. So we very simply believed even back in the 50s that if we were successful working to those three ambitions, that the winners were going to be really pretty simple. The fact is, we do these things well, our employees are going to win, our customers are going to win, our communities are going to win, and then obviously our shareholders win. So these ambitions, along with the passions that drove us to go have the audacity to sign up for a transistor license in the early 50s, they remain alive and well today. So there it was, 1958, and at the time we were not a startup company. We're almost a 30-year-old company. And the fact is that by 1958, we had actually surprised the world by becoming the leading transistor manufacturer. We started with germanium transistors, we were the first ones to put into manufacturing silicon transistors. But for those of you that recall history, as the world moved from vacuum tubes to transistors, a new problem was growing at that time that was referred to as the tyranny of numbers. Transistors were obviously a vast improvement from vacuum tubes, but as even today, the more intelligence that you can put into systems, engineers wanted to put even more. And what that led to was a rapidly growing number of components, a rapidly growing number of interconnects, which meant more size, more power, more cost, poor reliability because every interconnect had a reliability challenge. So it's May 1958. Jack Kilby is 34 years old, working in Wisconsin, and he joined TI to work on what was called miniaturization. The industry at that time was working on various approaches, which usually included working with different branches of the government, like the Army Signal Corps as well as the Air Force. Jack looked at these various approaches for miniaturization that were being explored and told his boss, in Jack's usual very understated way, 'None of them are going to work.' Now, I actually think it's important to pay attention to that statement because you would have to call that a pretty bold move. He's 34 years old, he's been a new hire for less than a month, looks at what's going on and says, 'None of that's going to work.' And the good news for us as a company, maybe for us as an industry, was that he had a boss at that time that just very quietly and very smartly said, 'Well, Jack, why don't you go work on some ideas that you think will work and get a little out of the way of everybody?' And he created an environment for him to get moving. He might have told him, 'Well, come up with these ideas quickly,' I don't know, but I think it was the tone and the environment that he said. Now, back then, TI used to take mass vacations in early July. It was just easier to shut the whole site down, everybody would take vacation. But when you're a new hire that joined in May and mass vacations in early July, you have no mass vacation. So you stay at TI. And the fact is, Jack's a new hire, and in those two weeks in early July, sitting in a mostly empty building—this building still sits up on the expressway site just north of here—Jack sketched out an idea in his lab notebook: the integrated circuit. Well, vacation ends, middle of July, Jack's boss comes back, Jack shows his boss the idea, and you know, Jack recalled and he's been documented saying this, his boss said, 'Well, I'm kind of doubtful, but it's certainly an interesting idea.' Found him enough resources to go do a prototype, and sure enough, on September 12th of 1958, we had the first integrated circuit demonstrated in the lab. Prototyping Jack's approach, and he created it, was actually a phase shift oscillator at that time. So today, 60 years later, the semiconductor industry globally is approaching $500 billion annually in sales. I do not believe that there is an industry or a person that has not been affected by semiconductor technology. Now, Jack's accomplishment inventing the integrated circuit probably overshadowed Jack's follow-up act, which was to be part of a team that invented the handheld calculator. Okay, pretty good on-court to say the least. Jack went on, really, for election into the National Academy of Engineering, was awarded the National Medal of Science and Technology, as well as eventually he was awarded the Nobel Prize for Physics. If anybody ever had the opportunity to meet Jack, he was the humblest of men. I had the chance because I was in town in 2000 when he won the Nobel Prize. I hosted him when the media came over that morning that it was announced that he was selected for the Nobel Prize. Of course, the media's all gather around, first question: 'Jack, what did you do when you found out you won the Nobel Prize?' Jack's response was, 'I made coffee.' And it was just that humble of a man in terms of how he handled things. But going back to 1958, I think there are some lessons that apply today when it comes to innovation. Just think about some of the things that I described going on. First, the fact is TI was looking forward and trying to solve some tough problems, the tyranny of numbers, and we were thinking for the long term. You know, just think about it, it's really tough to find something when you're not looking for it. Second, and this is a classic, TI had a large and very successful transistor business that was underway, yet we had the discipline to set aside some resources to work on the next problem or the next challenge. How many people in this room have heard the story about the company that's so busy with the now they missed the transition to the next? Unfortunately, we didn't mess that up. In addition to internal ideas, we actually had the courage to go outside and bring in fresh ideas to be able to take a different look at how to approach it. When an innovator didn't think that existing approaches would work, his boss quietly got him into a productive environment and said, 'How about you go work on some ideas that you think will work?' Instead of what could happen in a lot of companies or a lot of environments when you run against traditional thinking. The prototype was bootstrapped. They went from the idea that Jack showed his boss in the middle of July, they had it demonstrated and working in two months. They moved quickly. It was low-cost and they just proved out the idea. And it makes a lot of sense even today to be able to operate that way. And then maybe most importantly, and it's something that Jack would talk about a lot, while the invention was in 1958, it was another decade before the world really recognized the integrated circuit to be as important as it was and to be commercially the commercial success that it really would lead to, would go on to become. Because it does take a long time to go from idea or invention to truly being able to productize and develop commercial success. It takes patience, it takes persistence, it takes a lot of skill, takes a lot of resource. Now, the fact is Jack inventing the integrated circuit while the rest of the company was on vacation is really a great story. It's something that we love telling. It had a tremendous impact. But the thing that I think this room can pay attention to is I think those lessons are every bit as applicable today as they were 60 years ago to be able to get something truly as amazing as the integrated circuit out of the lab and then start getting it on its way to the market. So telling the story about Jack Kilby and the integrated circuit, certainly fun, certainly a point of great pride. I think, as I mentioned, it's also instructional for the future. But we are also very careful as a company because we really pay great caution or pay attention to that famous quote that when your memories are greater than your dreams, the end is near. We spend more of our time on dreams. We spend more of our time on what are the actions to turn these dreams into the next invention, the next thing that would be talked about at a conference like this in 10 or 20 years. So there have been many semiconductor companies that have come and gone, and we even have new ones still appearing even today. And if you have followed TI throughout the years, you will find out that we have not been shy, we have not been afraid to reinvent ourselves, even though when you're going through it, it's never as easy as when you look back on it and it's been successful. In the 1990s, we've refocused ourselves primarily to become a semiconductor business. In the mid-2000s, while we had primarily become a semiconductor business, we felt the portfolio needed further strengthening, and we refined our focus to becoming primarily a company focused on analog and embedded semiconductors. In early 2010, while the world was nervous and mostly recovering from a global financial economic crisis, we actually saw it as a great time to invest $300 million in manufacturing, and we went out and strengthened our analog portfolio with a large acquisition of National Semiconductor. We also, over the past five and six years, looked forward, and we felt that the industrial and the automotive markets were truly going to be the next markets for the next few decades. Just look at the automobile and look at the semiconductor content that grows inside of that today and the importance of that. So I don't know if there is a simple or a single answer about why we have been able as a company to make these transitions, to reinvent ourselves, or to reinvigorate ourselves, but I think there are a couple of contributing reasons. First is that this passion that I talked about of making electronics affordable, it is alive and well today. Intelligence and, you know, via electronics to be able to make equipment smaller, faster, use less power, safer, easier, more maintainable, it's alive and well. For example, we have a family of radar devices, and we had one of the leaders that said, 'You know, they're really not that amazing. I worked on a system like this, you know, 15 years ago. It just happened to cost 15 million bucks, and today this radar device can now be done for five.' That's the power that we have. I truly believe the next 30 years are going to be more exciting than even the past 30 have been for the integrated circuit business. Second thing is I think that our ambitions, the three of them that I described earlier, where we want to act like owners that are going to own the company for decades, then we're going to adapt and change, that we're going to be a company that we can be proud of, I think that builds an incredibly robust foundation for the culture of a company that lets you do things that are not necessarily easy. So for example, today, market's not that strong, world's not that great, yet we're investing north of Dallas, bringing up yet another 300-millimeter analog manufacturing facility for demand in the future, because you can't wait. You've got to be moving forward and being prepared when that happens. We continue to invest in new capabilities. We also continue to invest in the communities. K through 12 education investment continues because it just makes good sense. Third thing is that I believe those values that flow from these ambitions are really important. They include critical things. If you walk the halls or you're part of TI, where we value being innovative, we value being trustworthy, we value the ability to be inclusive, to make sure you're competitive, and to make sure you're results-oriented, and we make sure we can pass that test even in the toughest of times, of the ability to quote walk the walk. And then lastly, we view the world, the global world, as an opportunity, not as a threat. And my guess, the reason we're blessed with that as a company is that in our founding as a geophysical or a seismic company, we traveled the world looking for oil. Okay, it's always been the way we viewed the world. That's where opportunity was. That's where the customers are. This means supporting customers around the world. It means attracting the best minds throughout the world, and of course, it means dealing with competitors from out the world, because there's nothing better in this world to get you stronger than dealing with good competitors. So I don't have a simple or a single answer of why we've been successful reinventing the company, but those elements have worked, and we remain very busy today making sure we can make that work well into the future. So as I mentioned in the opening, it really is a fun group of people, it's a great topic to talk about innovation. I think the focus that this organization has on innovation is really important, as I said, because it directly is proportional to the prosperity that we will enjoy in the state of Texas and the local community or as a company. I think there are some very important things that we can do as companies, as academic leaders, as government leaders, to create an environment that encourages and rewards innovation. And this is not a new list to anybody that's been around for a long time. First, investments to improve the quality of education, particularly K through 12 education, and particularly with a STEM focus. We've got to make sure that our children are prepared to be able to compete and to be able to make an impact in the years ahead. Second, close to the hearts of everybody in this room, is investment in research. Despite all the efforts, Texas is still third in terms of federal research dollars. As this room knows, research is vital for identifying and developing new ideas that lead to groundbreaking innovations that drive our economy. Strong programs in basic and applied research and technology transfer puts this research into action, and then they build upon one another. Third, we need to have access to the best minds. The U.S. must be an attractive destination for the world's best minds to complete their education at our top-rated universities, to join our companies, or to pursue their dream of starting their own companies. This intellect and this drive has been critical to the U.S. as innovation and economic growth. As I mentioned to people in DC all the time, and it gets missed a lot, we have 5% of the world's population. That probably means we have 5% of the best minds in the world. So if we want to be able to have a disproportionate share of that, we've got to be able to welcome the best minds to our country. And then finally, regulatory and tax environments that encourage investment and growth. Many countries understand very clearly the impact of innovation and would love to have the capabilities that the U.S. has been shown to have over the past 50 years, because they understand the impact on growth and they understand the impact on prosperity. So we believe that it is important that the U.S. can be a place that is friendly to investment, friendly for innovation, and friendly for companies to be able to invest and grow. Since I last spoke at TAMEST in 2011, we've made some progress in some of these areas. For example, I think we continue to grow federal research dollars in Texas, and we've also introduced a competitive corporate tax policy that encourages R&D investment as well as manufacturing investment in the United States versus elsewhere. But as I think people are aware, we've gone backwards on some areas, areas such as attracting and bringing the best minds from around the world to our country. We've also gone backwards in areas like viewing global markets as opportunities as opposed to threats. As I said, I think everybody in this room has heard that list and knows that list. It's not a new list, but I think it's important that we keep that list in front of us. I think it is especially important that we keep that list in front of us in times when some of these areas may not be popular. Global trade has not been popular for three or four years. High-skill immigration is not a popular topic to talk about, but they're critical for us to be successful in the long term. So we can't lose sight of those. It really has been a pleasure to be able to join you today, to be able to talk about innovation, to be able to understand what the impact it can make in terms of our state in Texas, what impact it can make in terms of our country. We really do share a common passion for innovation. And what I am excited about, and what I encourage this group to make sure they stay focused on, is not just the passion but the actions that convert that passion into results. So that when we gather ten years from now, we've continued to make progress on investment levels and the ability to move these innovations out into the marketplace and make a real impact in the world. So again, I want to thank everybody for the opportunity to be here today. I think we've got a few minutes to take questions, and if you do, please approach the microphones.

I'm not sure how to top those comments. That's probably the first statement. But you know, we have our version of that, which is people go through, and it goes back to some of John's comments of how do you measure innovation. I'm actually pretty simple, and that is go out and see how exciting it looks with customers. Okay, and I don't mean that they're ready to buy something. It's does the idea or does the concept look like it has great merit. You know, some of our best work, when we have our chief technology officer, Ahmad Bahai, spends a lot of time out with customers, not with our products or with our technologies, but spending time on what are the hard problems that our customers have. And okay, now is there some ideas that we have, maybe a different approach to go solve those. So I think that's, to me, it's the fascinating part behind innovation is there is not going to be a matrix, there's not going to be a metric, there's not going to be a formula to assess what's good or bad on that front. Now, we've got to be comfortable with that informality that goes along with it.