National Semiconductor CEO Brian Halla: 'we are sitting in the middle of a perfect storm of...

National Semiconductor CEO Brian Halla was trying out images, looking for one vivid enough to bring home his misgivings about America's current readiness for world competition in technology. Might it be Sputnik's flyover awing his Midwestern neighbors in 1957?

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The problem, as Halla framed it, is that money for basic research--the kind that produces fundamental discoveries and opens up the longterm commercial horizon--has dried up. "What we're finding is that some of the coolest stuff in the world can't get funded other than from industry," he said, "because the pipeline from government funders has been cut off."

But in a "fiercely competitive environment" and under pressure from Wall Street analysts, Sarbanes-Oxley, and frivolous lawsuits, U.S. corporations have neither the incentives nor the means to underwrite an R&D program adequate to national needs, according to Halla. For one thing, "industry is no longer focused on R, we're all doing D: With the exception of a couple of companies, we're all looking at a six-month lookout." For another, industry funding efforts amount to "nickels and dimes"--to "$20 million here and $30 million there"--when a "fix" that Halla put at anywhere from $10 billion to $40 billion is what it will take "to secure the leadership" in technology for the U.S.

The consequences of inaction, Halla warned, promise to be grim. Among them, he sees "NSA trying to order parts from China and being on an allocation list. 'I can't get delivery? What? What do you mean? Didn't start my wafers? Why not?'" So he's devoting time and effort these days to "trying to raise awareness without Sputnik having to go up, without DARPA or NSA having to stand in line to get their chips because they're being allocated to Estonia and God-knows-where else."

The main target at a time of what Halla sees as generalized suspicion, if not disdain, toward corporations must, he believes, be the electorate. His keynote speech at the Innovation Leadership Forum of the International Electronics Manufacturing Initiative (iNEMI) in Herndon, Va., last month followed a talk during which Rep. Frank Wolf, R-Va., had counseled iNEMI members that winning increased funding for research would require carrying four critical "precincts": President Bush, Vice President Cheney, Office of Management and Budget Director Joshua Bolten, and White House Deputy Chief of Staff Karl Rove (MTN, Sept. 20, p. 5).

Observing that "most politicians aren't going to adopt this cause until their constituents say, 'Hey, this is a problem,'" Halla plunged in:

There's a fifth precinct, and that's the American public. The American public doesn't care. They've got their cell phones. They've got their laptops. They don't know where they got them, but they're happy. They don't care about us; they're not interested. A wake-up call for the fifth precinct--for the American public--is what we need right now.

I was in a meeting on Monday with several politicians from California, with all of the venture capitalists that you know and love, with the CEOs of Cisco and Adobe and the presidents of Stanford University and the University of California system. By the time they called on me, I said: "The amount of enthusiastic support for these issues is phenomenal!" It was all the same things: lack of funding, lack of research labs, not letting [foreign students] go to our universities anymore and then not letting them stay if they are here, etc., etc., etc.

And I said, "It's amazing how we can all be in such enthusiastic agreement." And: "Every other forum I go to, it's the same amount of agreement--in California, Texas, New York, and Massachusetts. The people in every other state think that the people in this room are a bunch of crooks: 'Stock options are evil. They are tools used by evil people for evil deeds.'"

Let me ask a question: How many were alive in October of 1957? I was 11 years old, but I remember the day like it was yesterday. Everybody on my street back in Ft. Dodge, Iowa, was out on their front lawns. There was a lot of talking, a lot of yelling. Somebody would say, "There it goes!" and everybody would say, "No, that's just a shooting star."

We were all waiting. You could smell the cigar smoke from across the street. And all of a sudden, there it was: Whooosh. It was Sputnik flying over. Ft. Dodge, Iowa, is a town where, like a lot of other towns, some of those people on that block have bomb shelters. So Sputnik flies over and all of a sudden it's: "Whoa!" The noise died down. It was quiet.

That was a wake-up call that was so dramatic it hit every man, woman and child in the country so that Eisenhower had no problem allocating a billion dollars [to science and technology], which was a lot of money in 1957. And Kennedy had no problem supporting it, to put a man on the moon.

Now, where'd that take us? Well, I grew up in the mainframe business at first, and the mainframe business was catering to the aerospace industry, where there was intense competition for faster and faster computers. Why? Because that's what NASA and Lawrence Livermore Labs wanted.

Mainframes were expensive. They ran hot. A couple of young guys out of Fairchild decided they could take the transistor, which was invented in 1947 at Bell Labs, and integrate it into a DRAM, which could replace the ferrite core in the back of mainframes. Cool. And the semiconductor industry was born.... Meanwhile DARPA tried to tie those mainframes together, especially the supercomputers, to create supersupercomputers. As a byproduct of that, DARPA along with Mosaic introduced the Internet.

So here we are today poised on the threshold of the best, biggest opportunity we've ever had as an industry. China is the best opportunity our industry has ever seen. Laptops are going crazy being sold into Asia. What we're seeing is that personal technology--"consumer electronics"--is eclipsing information technology. Killer apps are being replaced by killer experiences that are video, audio, smaller form factor, longer battery life, etc.

There's a gold rush taking place in China. It's a major opportunity, and it's a major threat if we blow it. And we are blowing it--big time. The Great American Dream appears to be moving to Shanghai ...

The semiconductor industry is shipping $225 billion worth of product today. Why? DVDs, PDAs, MP3 players, video games, LDC TV, HDTV, HD satellite, cell phones, fully-featured handsets are a few of the drivers of semiconductor demand.

There's another thing that's happening that's a little more subliminal here. The first boom was man-to-machine. There's only a certain number of people that are going to program the mainframe--and, after you've satisfied those people with enough mainframes, the semiconductor industry overbuilt. The same with the PC industry: After everybody bought their second PC, we overbuilt. Then all of a sudden we had the dot-com boom. We had man-to-two-machines: your connected PC plus your cell phone.

But look at where we are now: We've got man-to-lots-of-machines. The most logical next step in our evolution as an industry is that we have machine-to-machine for the benefit of man. All these machines are talking to each other in wireless sensor networks. For the first time, when you have machine-to-machine, you have demand that is independent of the number of consumers.

For example, all of the seven bridges in the Bay Area have cameras that can cover virtually every single inch, night or day. Today those cameras are not wirelessly talking to each other, collaborating, but they will be. Now, all those cameras and wireless sensor networks will exist, along with semiconductor demand, independent of the number of people that cross the bridge. Those cameras and sensors are all just looking for the one terrorist.

There are sensors in the roads in California. If you're a single driver today and you go into the commuter lane, it's a $701 fine; but if the commuter lane isn't that busy and you want to go over there and the sensors say it's not that busy, then you can go over there and you will have an automatic $7 deducted from your credit card. It's machine-to-machine for the benefit of man.

What comes next are wireless and analog sensor networks working adaptively and collaboratively, networked together for infinite power. Machine-to-machine comes to life. Here's Metcalfe's Law: "The value or power of a network increases in proportion to the square of the number of the nodes on the network." The difference between this and Moore's Law is that with Moore's Law, the more users that you add, the slower things run. In Metcalfe's Law, every time you add a node, you increase the power of the network and increase the bandwidth. That means with wireless sensor networks, the more sensors you have, the more powerful is the combination of those sensors. Everything will go wireless, because it can: because all the way from RFID--where the energy comes from the interrogation beam--to Zigbee and Bluetooth, wireless LAN, enhanced wireless LAN, and now with UWB, we have standards that allow us to produce networks at any level of bandwidth, transfer rate, and power consumption. We all know the applications and we're all using them already. Bluetooth is throughout our car.

Someday there'll be an RFID tag with an analog temperature sensor on every label of every wine bottle that gets shipped from the vintner to the retail outlet. It will be checking the temperature of that bottle as it goes on the journey from Napa Valley to New York City. If it ever gets out of the acceptable range of temperature, [it flags that the] bottle can't be guaranteed as good quality by the retailer. The same temperature sensors will [be affixed to] slabs of meat being shipped out on trucks in the Midwest. They're putting sensors in every redwood tree in California for early detection of bark beetles. You can start to add up the aggregate demand for chips....

We now have the basis for the emergence of mesh networks. You will see, in the very near future, kids with their video games buying a $100 LAN antenna that they can point at the kid across the street. He will point it at another kid across the street. A whole school district will have these antennas for video games and pretty soon kids will have voice over IP that can go anywhere across the nation for free because of their little video-game antennas--mesh networks.

We haven't even scratched the surface in medical.... Implants and eyeballs have already been done to cure macular degeneration or at least greatly assist the vision of those people. We've now planted chips in brains.

This is phenomenal, all of this is untapped: security, medical, machine-to-machine--an infinite demand, an incredibly bright future for our industry. But you gotta ask: "Where?"

I just spent a week in Shanghai. It is an incredibly busy place. Shanghai has 3,000 skyscrapers, and 2,000 more are in development. They have the longest suspension bridge, they have the tallest hotel, they have the fastest railroad, etc., etc., etc. There is a lot of stuff going on.

The week I was there I couldn't find a hotel room in Shanghai because it was the very first NBA exhibition game ever played in China. It was the return of Yao Ming; the Houston Rockets were playing the Sacramento Kings. The entire city was sold out, not to people like me--travelers--but to Chinese people who have this consuming power. Ten percent of the tickets were sold through normal channels and 90 percent were scalped at approximately 5,000 RMB per ticket, or about $762 U.S., to see the first NBA exhibition game in China. The house was packed. The next day, they sold out in Beijing ...

Is any of this going to affect our future? We're not prepared. That brings up American competitiveness. Again, we're all saying the same thing; we're all talking to ourselves. The fifth precinct has got to be talked to, and that's the American public. It's got to be every bit as serious to them as Sputnik was in October of 1957.

We are sitting in the middle of a perfect storm of technology neglect. University research is getting starved. I'll tell you a story that is going to break your heart. There's a big university that we work with in the Bay Area, and one of our fellows is a professor there. He told me that they got a gift of an Agilent network analyzer, which costs over $100,000. They put it on a cart and wheel it around and professors hide it, they hoard it. You have to sign up for it; it's a four-day waiting time to use it. He said he went over and gave a talk at Chinghua University. They took him through the double-e labs, and every single lab had one of those network analyzers.

You hear the story over and over again: that there are several sources of university funding and they've virtually all been cut off. DARPA no longer goes to universities, they go to companies that can give them an 18-month payback or better. They go to Raytheon and Lockheed, but not to universities. Those funds have been pulled.

How about research-center funding? What happened to Bell Labs? It used to be that AT&T could take one penny of every phone call made in the United States and that funded Bell Labs. You had 7,000 Ph.D.s. You had seven Nobel Prize winners, and they got to do professional dabbling. One out of 20 projects was successful. Any of us CEOs would say, "It's a disaster." However, those successful products included Telstar satellites, the transistor, the laser, video phones, UNIX, VSPs, T-1 carriers, etc., etc.--you name it.

It was a pretty good thing for us. It was fantastic. What's happened to Bell Labs? It's a fraction of itself. Same with SRI. What's left of SRI is peddling itself to Taiwan now. Xerox PARC became PARC after they invented the Apple Computer and, again, it's a fraction of itself.

How about access to the best and the brightest? Now we've got H-1B visa caps. After the best and the brightest get their Ph.D. in the United States from the best university system on the face of the earth, we send them home to compete with us. But it's getting worse now because we don't even let them into the country post-9/11 to start on their Ph.D.

Our plant in Suzhou, China, was built by a Singapore-Chinese development group. The person who was the liaison to the U.S. companies was taking me back to Shanghai Airport and I said, "So when's the next time you're in the States?"

And he said, "I've never been."

I said: "How can you do the job that you have without visiting the States?"

He said: "That's what my employer's asking me." He says, "I went to apply for a visa. I waited two hours, got up to the front of the line, and the guy says: 'I have two questions to ask you: Are you married?' I said, 'No.' 'Do you own a home?' I said, 'No.' He said: 'Visa denied.'"

And so he said, "I got engaged, and I bought a house, and I went back, and I applied, and I got right up to the front of the line this time and the guy says: 'One question: Have you ever been denied a visa?'" Denied again ...

So we absolutely have to figure out a way to fund research. This is a call to action. Again, it's got to be the Sputnik equivalent. The president needs to support this. I supported the president. I helped campaign with him, and yet he lost California and still became the president. If the president doesn't get excited about this, then I fear that we'll have a tough time getting the American public excited.

I'll tell you right now, though, the Democrats will take all of this and turn it into a discovery of neglect and mold it into the shape of a dagger that they'll stick into the administration's eye and find a new reason to blame him--if he doesn't get ahead of this and say, "I've discovered a problem that needs to be funded." And tripling the funding [for research in the physical sciences would] probably be a good place to start ...

People are going to look for the equivalent Sputnik that launches us into the next generation of greatness in technology, and the only thing I can think of is maybe it's somewhere in what's happening with gas prices. If you ask anybody today, 'If the government spent $10 billion creating independence from other countries for our energy, for our oil,' would we do it? We'd do it in a heartbeat. So I'd say, why wait 10 years when we ask ourselves the same question about technology? It won't be $10 billion, it will be $100 billion to get it back. We've got it now and all we need to do is sustain a momentum, but not coast, not relax.

Manufacturing & Technology News: Where is the money going to come from for the new Bell Labs?

Halla: The thing that everybody's trying hard not to do is to advocate where the money should come from, because nobody wants to take money away from Katrina. You're faced with a couple of choices and one of them is to go further into debt. Does that make going into debt wrong? I don't think so, not in this case. It's a good cause, it's a worthy cause. I don't think it's a well-known cause, but I think we can run at a deficit if everybody understands.

I do not spend any oxygen advocating welfare for industry or tax credits because that's not the biggest problem. Since there are no Bell Labs to fund just wild, reckless imagination, then that money has to come from the government, and it has to come from deficit spending right now. The question you're asking is going to be asked by everybody. The 46 states that don't particularly care about technology and believe that this isn't as serious as Sputnik are going to say, "Wait a second. Why would we fund that? These guys are all fat cats anyway and they're just going to get fatter."

Q: What do you think happened to DARPA?

Halla: Every budget cut says you've got to get payback for the money you invest. There's a role industry is playing here: When we find something really, really cool in a university that's not funded, we will make a visit to the appropriate DARPA group and say, "You've got to fund this thing because it is so cool." If you can get them really excited on a one-off basis, they'll come in and fund the project.

We're trying to do that more and more. That's why we developed NS Labs at National: so that we could really devote the time and energy to find out what is going on and, if we're lucky, actually direct the research. We have probably 20 Ph.D. candidates, and we try to get ahead of the power curve to where we actually propose what they ought to be working on, and then they work at our site and at the school.

It's been okay. It's not Bell Labs, but we're just on the verge of getting our first payback on really cool stuff with array speaker technology--with microphones on a chip and microphones in the speaker so that the speaker can dynamically adjust itself.

Q: What was the genesis for the creation of your NS Labs program?

Halla: A couple of people at our company were beating the drums when everybody else was saying: "Don't bother me; I've got to worry about my bottom line and I can't worry about stuff that's five years out, so go away." We bought a company many years ago called Algorex, which was headed up by a Bell Labs research scientist. He is a wireless expert who wrote the book on OFDM [orthogonal frequency division multiplexing]. When we bought Algorex we made him a fellow, and in the process of being a fellow he's also an adjunct professor at both Stanford and Berkeley. He's got a mind that asks: "Can I commercialize some of this stuff? Can I turn research into business?"

We have Ph.D. candidates lined up to try to get into his labs. He tries to sell university research projects to the product lines. If he gets people interested, then he pulls somebody out of the product line to sit in the labs. I don't know if this model is going to be wildly successful, but it's been moderately successful for us. Every time we look at budgets we say, "Hmmm, do we want to fund it? Yeah. Okay, we'll fund it."