Post subject: Politicians, Visas and Stock Options Posted:
Fri Jun 03, 2005 5:14 pm
Politicians, Visas and Stock Options
By Ed Sperling -- Electronic News, 6/3/2005
chairman and CEO of National Semiconductor, sat down with editors from
Electronic News, Electronic Business and EDN -- sister Reed Business
Information (RBI) publications -- to talk about the effect of politics
on the electronics industry, the future of technology and what needs
to change. What follows are excerpts of that conversation.
Where is the industry heading these days?
Halla: We are in the most
disruptive, the most exciting, the most dangerous period since any of
us was born. It's all about the new industrial revolution. Only this
time, if our politicians have their way, the great American dream will
move to Shanghai. If you listen closely to [Federal Reserve Chairman
Alan] Greenspan's presentations, the first 10 minutes is always thanking
the technology industry for the economic security that we get through
productivity. But he does that less and less. We were just in Washington.
I'm going to be the new chairman of the Semiconductor Industry Association.
We had a reception the night before and I began asking each of the politicians
who came, ‘When was the last time you were in China?' It turned out
that in the crowd, only one person had been to China -- and that was
four years ago. I'd say half of our Congress people don't even have
passports. And yet they enact legislation daily that makes us less competitive
with China, with India, with Russia, and the rest of the industrialized
RBI: So why is it happening?
Halla: It's largely
self-inflicted. We as an industry keep beating this Moore's Law drum
as if people are still going to pop up out of bed thinking, ‘Gee, I
wonder what's going on with Moore's Law.' Moore's Law has to be done,
but it's not what's driving the industry anymore.
get back to China for a moment. What's the thinking in Washington about
Halla: Our politicians think that China is filled with a bunch
of people in Mao coats in dimly lit rooms bending over things they're
doing by hand. The rate of change there is incredible. Whatever you're
looking at today, come back in three months. You know that whatever
you're looking at, you ain't seen nothin' yet. In Shanghai there are
3,000 skyscrapers, the world's fastest train, the world's tallest hotel,
the world's longest suspension bridge.
RBI: And four traffic
fatalities a day, according to the local newspaper.
Halla: At least.
But they'll solve that. That won't keep anybody out of there. They've
got the largest fashion plaza, now, too -- Three on the Bund. People
will hang around those fashion plazas until 11 o'clock at night buying
the best brand-name stuff they can get at a premium. The longest waiting
list for a car in Beijing is a Rolls Royce. Foxconn -- which is all
Taiwanese, except they've moved most of their employees over to Beijing
and Shenzhen -- is a city within a city. They had 35,000 employees there
when I visited. Now there are double that number. Rolls of sheet metal
come in one end, and out the other side come every PC you've ever seen,
Playstations, cell phones. It's state of the art by anyone's metrics,
and it's all automated and being done in a lights-out mode.
So what is the United States doing about all of this competition?
Halla: After our SIA dinner in Washington, we spent the next day talking
about lack of funding for nanotechnology, lack of funding for research.
It was kind of like a whine-in for all these initiatives that chase
Moore's Law. After the meeting was over, we went to see Greenspan and
four of the other Federal Reserve governors. My bit was to complain
about Sarbanes Oxley and what overkill it is. In the case of National,
we spent 68,000 additional man-hours just this year implementing Sarbanes
Oxley. Craig Barrett said it's been 250,000 additional man-hours for
Intel at a cost of $30 million. My take is that someone now has to come
out and say how much of it is good, and how much is a total waste. We
need checkers checking checkers. We did find some inefficiencies in
our own systems. But Sarbanes Oxley was enacted after Enron and Worldcom.
It wasn't even a bill. It was an outcry. Those were cases of the management
taking gold bullion out of those companies on 18-wheeler trucks. Sarbanes
Oxley is more focused on looking for pocket change in seat cushions.
RBI: What happened next in the meeting?
Halla: Greenspan leans
across the table and says, ‘What's the status of Moore's Law?' Barrett
answers, ‘We believe Moore's Law has another 15 years.' Greenspan replies,
‘You guys have been saying Moore's Law has another 15 years for the
past 20 years.' So he asks, ‘What's the next application that will drive
demand.' One member of the delegation said the next big application
will be cleaning up the inefficiencies in the office MIS systems. At
that point, everyone's eyes glazed over. Who cares about a computer
running faster than it does today? It's not the rallying cry for our
RBI: So what is next?
you look at the history of technology in this country, it's always been
about information. The mainframe was information technology. The PC
was information technology. The dot-com boom was connected PCs, but
information technology. We also had cell phones. We had man-to-machine
limitations with the mainframe and PCs. With the connected PC, it was
man to two or three machines. In the past year, the semiconductor industry
shipped $213 billion worth of stuff, but Craig Barrett still hasn't
declared the recovery. There still hasn't been a killer app, but $213
billion was $9 billion more than we were at during the top of the dot-com
boom. There's tremendous momentum out there today, but it's not going
into PCs. It's going into PDAs, fully featured cell phones, PVRs, HDTV,
video games and all kinds of stuff that you carry around. Some day all
those things will be connected. Now we have wireless standards for every
spectrum of bandwidth and power requirement, all the way from Zigbee
and RFID, Bluetooth, 802.11 and now ultra wideband. With these wireless
standards set, you have networks where machines can talk to machines,
and Metcalf's Law comes into play with every bit of importance as Moore's
Law used to. The value of the power of the network moves up as the exponent
of the number of nodes. Every time you add a node you increase the power
of the network. The point of all of this is that we haven't even scratched
the surface. So far there have been only two applications, IT and consumer,
which is where we're at today. What about medical? What about surveillance?
Sensors you sprinkle out of airplanes that have on-board MEMS gyros
that right themselves and talk to each other and together watch a railroad
track. They become a powerful supercomputer that create a 3-D image
of this thing that's approached the tracks, send it to an operator to
identify the face against a list of known terrorists. All of this technology
exists today, or it's right around the corner. But we'll have to buy
it all from China because we can't get H-1B visas to hire the best and
RBI: Can you be more specific?
Halla: We opened
a plant in Suchou, China, and we had the Sino-Singapore Development
Group. They helped us put up this plant. I asked our guide when was
the next time he was coming to the United States. He said he's never
been here. He said he applied for a visa. The official asked two questions:
‘Do you own a house” and ‘Are you married?' The kid said no. The visa
was denied. So he got married and went back to apply for a visa. The
official asked one question: ‘Have you ever been denied a visa?' The
kid said yes. He was denied again. So where are these people going?
To universities in Singapore, London and a lot of other places to get
their degrees. These are very competitive universities. That's a problem.
Another problem is we can't get the work force in this country. Through
the fourth grade, our kids are as bright as anyone. From the fourth
grade to the eighth grade, we fall behind. From the eight grade to senior
year in high school, we fall to the bottom 10 percent of the top 25
industrialized nations for scores on tests. Somehow we have to get that
back, but we have to get it back while we're letting in the best and
RBI: Will China remain the manufacturing center,
or will that shift the same way it did from Japan to Korea and then
Halla: If you think about it in the larger scheme of things,
Japan, Korea and Taiwan did nothing to nobody. They became manufacturing
centers, but for the most part they just participated in the natural
evolution of jobs going offshore. We hear all this stuff about outsourcing
and it's all very critical of companies. But when you think about what's
being outsourced, it's all jobs that would go offshore anyway. The jobs
that we have in Suchou, China, have not been on this country's shores
for 35 years. But if you stop to look at the big picture, we will create
hundreds of thousands of jobs. Fairchild begot Intel, Intel begot the
computer industry, the computer industry begot Cisco, Cisco begot Google
and eBay and Yahoo, and they all just keep creating new jobs. Nvidia
has 7,500 jobs, and those are all new in this industry. The thing that
will stop the creation of jobs is if we lose our competitiveness.
RBI: You're talking stock options?
Halla: Yes. We're doing everything
wrong and China is doing everything right. Their strike price is at
par value and there is no capital gains tax on exercise. All of these
technology companies are blossoming. And the kids that do get in here
to get advanced degrees we kick out of the country afterward.
RBI: What's the mood in Washington on stock option expensing?
Halla: You can find any politician at any point in time saying they're
on our side, but I think it's going to happen. It's been delayed six
months. But you're seeing companies expensing stock options already
because it's inevitable.
RBI: Do they understand the implications?
Halla: They do not. It's ignorance. It's apathy. It's a case of, ‘Why
should we care?' And by the way, these technology companies are just
corporations and corporations are evil. It's a significant problem.
But a lot of it's self-inflicted, as I said before, because we go out
as an industry and drone on about Moore's Law. Moore's Law is the best
thing that will ever happen to China. They will have 65 nanometer as
soon as anyone else does. Semiconductor companies don't design technology,
equipment guys do. There's only one equipment guy left in the United
RBI: Is there any thought that instead of holding back
the floodgates we should be building a boat?
Halla: One of the things
this country needs is Sputnik 2005. In 1957 when the Russians beat us
with Sputnik and then with a live dog, it lit a fire under everyone.
The rest is history. We have owned the space industry for the last 35
to 40 years. I fundamentally believe you can't stop what's going on.
All of this technology will move to China. Just let us compete. We love
to compete. But we have to compete on innovation with the best and the
brightest engineers you can get, with new technology addressing new
issues. Space was a great place to test technology. But how about medicine?
We can put a MEMS processor in the blood today to go around and sniff
white blood cells and do biopsies on board. We get 90,000 die per wafer.
We have a camera on a chip. We can add temperature sensors that can
detect 1/10th of a degree. Anyplace you have a tumor or an infection,
it gets hotter. Where we sense the temperature change, that's where
you shoot all the pictures.
RBI: If you solve the expensing of
stock options and visas and Sarbanes Oxley, will that cure the problem?
Halla: We want them to trim back Sarbanes Oxley, but we can live with
that. With stock option expensing, if we have to, we'll come up with
something else. But we need to get an interest from our politicians
with funding for universities. Don't talk to me about H1-B visa caps.
Clip one to every PhD. Let the graduates stay. From a selfish perspective,
we're still okay on the analog side. We still get the majority of people
studying here because we have gurus everyone knows. For the analog companies,
we're still fairly well protected.
RBI: One theory is that all
the really great advances in technology have been government funded.
Is that true?
Halla: Yes, for the most part that's true. The Internet
was an attempt to wire together all these supercomputers to create a
super supercomputer. It became the wire that was the most important
thing. Now the wireless is the most important thing. Whatever device
you've got can connect. The MEMS will have configurable radios. If you
walk into a room and Bluetooth is available, that will be your connection.
If 802.11 is there, that's what it will connect to.
RBI: So does
that mean you're in favor of a single telecommunications company again
to set standards?
Halla: The United States does all this hand-wringing
on standards. Take 3G. Should it be UMTS, should it be wideband CDMA,
should it be any of several different proposals born out of selfishness.
China calls a meeting and says the new standard for 3G will be TD-SCDMA.
End of meeting. Boom, they're off and running. We can do that as well
if we have a sense of urgency. We're now 17th in the world in terms
of broadband coverage. Right now, most of our companies do big ‘D,'
little ‘R'. The universities do the big ‘R' and no ‘D.' That's where
we can light the world up. I talked about ultra wideband and how important
that will be. Ultra wideband is 10 meters, 10 gigahertz, and a lot of
bandwidth. Getting to the Internet will be hopping. What's the problem
with that? The large amounts of data and the large cycles will require
lots of power, and none of us will give up the battery life we have
in our toys to help the ultra wideband. We just launched a set of data
converters that do over 8 bits, 1 gigasample in one direction or 2 gigasamples
in both. But the real story is 850 miliwatts, so now you can think about
converters being used in handsets and not killing the battery life.
That's where we're coming from. Power management is 41 percent of the
RBI: So what you're saying is that no matter what the
problem, it can be solved?