“When we started, it was just Amelco and one other little division. When I left there were about 150 divisions.”
“I asked Henry was he trying to build another Litton. He said, “Hell no. I’m going to build another GE.”
“The only problem we faced was the world couldn’t have cared less about the integrated circuit at that time.”
At the beginning of the 1960s, Jay T. Last founded a renewed Amelco, Inc. Teledyne first acquired shares in the “run down” microelectronics company in 1960.
Amelco breathed innovation into Teledyne’s branching tree over the next decade: Singleton and Kozmetsky’s first acquisition lay at the heart of their combinatorial fructification electronics strategy.
Jay Last received a Ph.D. in Physics from MIT in 1956. William Shockley personally recruited him for Shockley Semiconductor Labs. Then, Last left for Fairchild Semiconductor.
Jay was Teledyne’s VP for Technology and oversaw the technical interaction of Teledyne’s acquisitions. Quite a task.
Here is the story of Teledyne Inc.’s beginnings, told by Jay Last (JL):
Farewell Fairchild…
Interviewer: your departure from Fairchild. Could you talk about the events that led to that and what your thinking was?
JL: For reasons that are pretty clear to me now… [Integrated Circuits] really didn’t fit into the Fairchild sales programs.
The integrated circuit was a side thing…
1.) you couldn’t make it very well
2.) nobody wanted it except for specific military programs.
I also felt that integrated circuits were going to be a major thing and whether they were or not, I wanted to work on them. Henry Singleton was starting Teledyne and wanted to build a company based on integrated circuits for advanced military systems.
Jean Hoerni and I were very close friends. Jean was feeling that he wasn’t part of a group any more.
Sheldon Roberts and Gene Kleiner were both feeling disaffected. Sheldon joined us. Kleiner came in for the first six months or so. So half the original [“traighterous eight”] left to start this.
Interviewer: So four of the original founders left [Fairchild]… I guess Bob Noyce and Gordon [Moore] must have not been happy.
JL: They weren’t happy. But I kept good relations with Fairchild…it would have been suicide to compete directly head-on.
…our original mandate was to make very sophisticated devices that could be used for the Teledyne Systems Company to make very sophisticated military equipment. Henry Singleton had come from running a big division at Litton where there were inertial guidance systems and all these aspects.
Unfortunately, this stuff was classified and the records just don’t exist.
… also when the space programs came along, Teledyne was very heavy in that. We had a number of things on the first moon shot we made. [Amelco] had the doppler device that told you how close you were to the moon’s surface and all sorts of stuff.
Ancillary Arthur
Interviewer: What role did Arthur Rock play in this when you left and set up the company?
JL: Art was on the board of directors of Teledyne and he had come to me as early as August of [1960]. And he said, “The next time you are in Los Angeles you ought to go talk to Singleton. He’s quite an impressive guy.”
So I called him and Jean Hoerni and I went down there New Year’s Eve and started talking to him and we very quickly said, “This fits our plans. We’ve got somebody that really likes the sort of things we want to do.” So we joined…
Henry wanted to put [Amelco] in L.A. and I said, “No way. There’s the infrastructure in Silicon Valley,” or what is now called Silicon Valley. It’s non-negotiable. We have to do it in the Bay Area. He said OK, so we started out.
Minuteman Musings:
“the thing that made the integrated circuit take off once again was a second Minuteman program based on integrated circuits instead of the transistor.”
Interviewer: I’ve also read that Autonetics, the Minuteman contractor, was a key force in getting to the planar transistor. Could you talk about that?
JL: [Autonetics] was key. The transistors were very expensive, difficult to use…completely different design concepts than were needed with tube design. The military needed small devices that could be used for airborne computers and they also had temperature constraints which meant that they had to use silicon rather than germanium… we were at the right place at the right time.
We had separate production lines there and had sort of almost a division of Autonetics at one point for some of the things we were doing.
[Hoerni] was trying to make a PNP transistor whereas a group lead by Gordon [Moore] was making an NPN…
In early 1959, Jean went back and started thinking about the planar transistor again which was going to involve a fourth mask to delineate the base area. Jean wrote up a patent application for this and showed it to Bob Noyce. Jean had his idea, he talked to Bob and Bob a week later wrote down his integrated circuit thoughts.
With all of these things it wasn’t an enormous leap forward in imagination. You sit down for a few minutes and you could visualize these things.
Every day we could come up with a dozen new great ideas of things we could do but the question was
1.) could we make them
2.) would the world buy them?
So we focused a lot more than the venture capital firms today that think the world is going to pay them for having a bright idea. We learned quickly in those days the world doesn’t work that way.
Planning Planar?
Interviewer: So the planar process quickly put a lot of other companies out of business, like Rheem [Ed Baldwin’s company] and Philco.
JL: The interesting thing… when there was a radically new technology, a new company came along and used it. Transitron and a few other companies were very strong in germanium transistors but didn’t make the transition to silicon. You don’t sit around and tell war stories about the old ways that you used to do stuff…
Interviewer: could you tell me when you first heard about [Texas Instruments’] integrated circuit and sort of what impact that had at Fairchild?
JL: This was early in ’59 that TI started talking about that… it was individual devices—just a transistor and a resistor essentially—on a piece of germanium.
We knew how to make planar devices but the problem was electrically isolating them.
It turned later into big patent wars on this stuff… the three key things you need [for an Integrated Circuit] were three separate patents by three separate people.
Kilby [at TI] got the patent for putting various devices on one piece of material. Fairchild got the patent for interconnecting devices on the surface of the wafer from the planar device and Kurt Lehovec at Sprague got the patent for the diffused electrical isolation to isolate the devices.
The first devices were made by taking the device, turning, fastening it to a plate with the operating side down, etch through the device until you came to the oxide on the back, only a few wavelengths thick, and filling it.
So we actually developed a technique for making those devices and it involved a lot of technology. For example, how do you see the front from the back? So we developed infrared alignment devices…silicon was transparent in the infrared and we could see what was on the other side.
But as late as November, Gordon, who was head of R&D… said, “are we going to use the diffused isolation or the back-and-fill isolation?”
The only problem we faced was the world couldn’t have cared less about the integrated circuit at that time. Transistors were specified by circuit designers who put them all under their own circuits and the last thing they wanted was somebody to sell them the complete circuit to put them out of business which was the big reason that the sales department was not keen about it.
Also, it was a more expensive way to do things. So the only use for integrated circuits was military applications where small size was key and it took several years before the first inkling that this could potentially be a cheaper way of doing it.
And Gordon Moore told me that when he came up with what’s now called “Moore’s Law”, he said “this was just strictly a sales tool. I was just trying to point out to people that we’re greatly increasing our technology… and this is going to be a cheaper way of doing it.”
In-Fungible
The problem with Teledyne, it was under-financed. Henry was working at the limit buying these companies…he was helping as much as he could but we were always under financial strain. I remember one day I was having trouble meeting payrolls and I just got on the plane and flew down to Henry and said…
“Look, I need $100,000 right away. I’ve just had it.” And he turned to Betty, his secretary, and mumbled something and he came back and said, “Here’s a check for $60,000, not $100,000. I’m giving you $60,000 because that’s all the money there is in this whole damn company.”
That came later on to haunt us because we didn’t have the resources to build the mass of low-cost production lines, but we had the role of supplying devices for systems and being self-supporting by making products. Jean was very fond of field effect devices and we had a good business there so we had both internal and external sales…which were sometimes a little hard to see which one was going to get the priority.
Outside-In
Interviewer: I’ve read that because of this financial situation you went and bought equipment from outside, for example, diffusion furnaces from Electroglas? You would have preferred to build your own?
JL: That was always the way. If you can buy it, buy it. I built the step-and-repeat [camera] because there was no commercial supplier for anything like that. I found somebody to build this lens track for us. I said, “What are your qualifications?” … the guy said, “I developed equipment to put asparagus in a can. If you can do that, you can do anything.” …it proved to be right. But then anything you can…you buy. Life is too short.
Lead bonding equipment was a real pain to try to build. You could start buying this stuff. And companies like Tektronix with specialized oscilloscopes, you could buy all that stuff.
Anti-Competitive Amelco, Inc.
Interviewer: Just backing up a bit, the name Amelco, is there any particular story behind that?
JL: Yes. Singleton and George Kozmetsky started in business. They wanted to build a big conglomerate and I asked Henry was he trying to build another Litton? He said, “Hell no. I’m going to build another GE.” So that was his thinking…our division was the only inside technical thing that they were developing.
Everything else was by acquisition and one of the companies they bought was sort of a run down job shop in L.A. called Amelco. They had a big tax loss and Kozmetsky said, “You name your company Amelco and then we’ll be able to use these various tax [write offs]…”
Interviewer: You talked earlier about not wanting to compete head-on with Fairchild, but when Fairchild dramatically cut the cost of the Integrated Circuit, that had a pretty bad impact on Signetics, but how did that affect [Amelco]?
JL: Didn’t affect us at all. The products we were making… our external market was not something that was competing. I mean, Signetics and Fairchild were just head-to-head on a circuit that was a lot more useable than the DCTL we were making.
I was always intrigued with linear circuits rather than digital and one big step forward we made at Amelco was making very sophisticated operational amplifiers. That was a business that Fairchild got into a little later and that was one place where we did meet head on.
We were building in small quantities which is no way to run a business in the long run…it’s more supported research rather than mass production.
Another thing we did at Amelco was develop a way of taking bits and pieces, little circuit pieces and building arrays, getting a lot of stuff packed in a small volume. We developed a lot of technology for that which was of great interest for military systems… this division is still in existence 50 years later—it’s now focused mainly on medical equipment.
At Fairchild, we never took any military contracts. Amelco was just the other way around. [At Fairchild] I looked at Pacific Semiconductors…the company that really scared me as far as the technology they had. They were supported by military contracts making very specific transistors and I thought in a big system there is going to be one of their transistors and there’s going to be 50,000 of ours and which one do you work on?
(A)political Culture?
Interviewer: Probably just to finish the story, how and why did you end up leaving Amelco?
JL: Jean left after a couple of years. We were both vice presidents of Teledyne so we could do pretty much what we wanted but Jean was having some difficulties with Kozmetsky. After a couple of years he wanted to leave, and not on terribly good terms, and start something else. That was just his nature.
When we started it was just Amelco and one other little division. When I left there were about 150 divisions.
George Roberts was intrigued with the way I was [learning about Teledyne’s acquisitions] and said, “Why don’t you come down to L.A. and be a vice president for technology and just do that full time?” which I did...
I was there a total of 12 years. I was in my mid-40s and I said, “Life is just too comfortable for me here now. I can do what I want to do. I have a plane that flies me around. I’m too young not to have any more challenges. I’m on good terms with everybody here. I like them. They like me. This is the time to quit and go off and do something else with my life.”
So I just left and for the next year I thought that was about the dumbest thing anybody ever did.
(There are extra stories not included above that are also fun to read... access the full interview here.)
Dear Intelligent Investor, thank you for reading.
All emphasis added is my own.
If you enjoyed this week’s article, I’d appreciate you sharing it.
Readings that may Pique your Curiosity:
Serial Acquirer Primer: The Light Book on Assets at acquirers.com
The password is “acquirers”
The Direction of The Moat by Matt Franz at Eagle Point Capital.
The First Thing You Learn in Skateboarding is How to Fall by
2nd-Level Thinking: Exploiting Inefficient Share PRICES (Supply vs Demand) by