CHAPTER ONE

COLD WAR BOOMTOWN: FEDERAL POLICY AND THE ESTABLISHMENT OFTHE ELECTRONICS INDUSTRY IN THE SANTA CLARA VALLEY

It has been basic United States policy that Government should foster the opening of new frontiers.

- Vannevar Bush, Science the Endless

Frontier, 19471

Science and technology is being latticed into the structure of government and the pattern of everyday life. From the report comes explicit evidence that science, in its broadest terms, is now one of the largest, most powerful, and most important forces with which Congress must deal.

- George P. Miller, Chairman, House Committee on Science and Technology, 19672

High-tech electronics is arguably the most important

industry in the global economy. In a new era of global

communications, the internet and telecommunications

technology are critical to the rapid exchange and

dissemination of information on which companies throughout

1 Vannevar Bush, Science the Endless Frontier, http://www1.umn.edu/scitech/VBush1945.html, p. 1. Note: The Endless Frontier is available at a number of sites on the web. This version includes an outline, the letters from FDR to Bush, mandating the project, Bush’s response the full text of the report. For a print version: Vannevar Bush, Science the Endless Frontier (Washington, D.C.: National Science Foundation, 1960), p. 11.2 U.S. House of Representatives, Toward the Endless Frontier: History of the Committee on Science and Technology, 1959-79 (Washington, D.C.: Government Printing Office, 1980), p. 151.

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the world base decisions critical to their operations and

continued economic well-being. Semiconductors, a broad

technological category of electronic switching hardware

comprised of components from simple transistors and vacuum

tubes to highly-complex integrated circuits and

microprocessors, are the core electronic technology on which

all modern electronics are based. The semiconductor

industry is responsible for the rapid advances in technology

that made modern computers

telecommunications hardware, and the internet possible, and

is thus often credited as the

driving force behind globalization. One of the oft-

overlooked aspects of the industry’s development, however,

is the role of federal policy in promoting the rapid

advances in semiconductor technology that took place in the

seven decades following World War II.

The semiconductor industry and high-tech electronics

industry are products of the post-World War II era. Their

birth and growth, and their insinuation into popular culture

are intimately related to the pursuit of and uses for

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science and technology during the Cold War, but their

integration into the Cold War was not a product of

straightforward historical cause and effect as well as the

burgeoning commercial markets for radios, television,

transportation and communications advances before, during

and after the war. In the Santa Clara Valley, it occurred

as wartime industries flocked to California during the war

and developed in the postwar years as the result of key

policy decisions made within a charged ideological and

military rivalry with the Soviet Union and China. In many

instances, ideology was more instrumental than the actual

military conflicts between the superpowers and their

surrogates, because U.S. anticommunist ideology injected

both substance and urgency into policies that mandated rapid

technologcial/industrial development and confrontation.3

The Vietnam war was the prime example of a tragic and bloody

conflict that was brought on the by the United States

confusing material and strategic interests in a Cold War

3 Cristopher Lécuyer, "Fairchild Semiconducter and its Influences" in Lee, Miller, Hancock and Rowen ed. The Silicon Valley Edge (Stanford: Stanford University Press, 2000). pp. 158-160.

27

ideological crucible.4 Examining the rise of the

semiconductor and electronics industry in the context of

Cold War policy is important to understanding its eventual

commercial success, as well as its relationship to and

reliance on federal policy that persists to this day.

Science, National Security, the Ideology of the Cold War

I know that you are also deeply concerned with the relationship ofscience to our national defense and security. Three years ago, when the fighting stopped, all of us were eager to return to our peacetime pursuits. The first thought of a great many of us was how to translate our wartime advances in scientific knowledge intobetter standards of living. It is an unfortunate fact, however, that the peace we hoped for has not come quickly. We are still living in hazardous times. We are required to give unremitting thought to the defense of the United States at a period when defense has become incredibly more difficult. American scientists must, like all the rest of our citizens, devote a part of their strength and skill to keeping the Nation strong. At a time when wehoped our scientific efforts could be directed almost exclusively to improving the well-being of our people we must, instead, make unprecedented peace-time efforts to maintain our military strength. For we have learned--we have learned the hard and bitterway--that we cannot hope for lasting peace with justice if we do not remain strong in the cause of peace.

Science has no political affiliation. Concern for our national security is nonpartisan. Sober recognition of scientific research as the basis of our future national security should certainly be nonpartisan.

- Harry Truman, 4 In the Tragedy of American Diplomacy, William Appleman Williams discussed the warping influence Cold War ideology on the a long-standing U.S. commitment to an Open Door trade policy in which U.S. ideas about foreign trade and domestic economic health were already entangled with economic interests.

28

19485

In the heady days following the surrender of Japan in

August 1945, few achievements seemed beyond the reach of the

scientists and engineers who had invented the atomic bomb,

radar, computers and other technological marvels that had

aided the Allied victory in World War II. Under the aegis

of war, both the university and private industry bent their

R&D operations to the war effort with spectacular results.

"Yankee

know-how," a well-worn aphorism before the war, was both

confirmed and

institutionalized through the triangular relationship

between state, business, and the university.6 The ENIAC

computer, and the less well-known, but equally significant

improvements to the Klystron Tube for use in both radar and

bombsights were two of the results of this cooperative

5 Harry Truman, “Remarks Delivered at the Opening Session of the Centennial AAAS Annual Meeting, September 1948,” in Science, September 24, 1948, 108, pp. 313- 314.6 David Montgomery, “Prosperity Under the Shadow of the Bomb,” in André Schiffrin, ed., The Cold War & the University (New York: The New Press, 1997), pp. xi-xxxvii. Note: Montgomery states that: “ . . . military expenditures not only became the driving force for economic growth for the next forty years [after the Korean war], but also provided a shelterfor research grants.” P. xix.

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relationship.7 Though less well-known than the Manhattan

Project, the funding and bringing together of physicists and

electrical engineers on these electronics projects would

have an equal, if not greater impact on American postwar

society. The contributions of scientists and engineers to

the war effort became celebrated and ingrained in the public

imagination. With the coming of peace, the particular

contributions of scientists and engineers seemed to point

the way to a world of potentially unlimited progress and

opportunity.8

Vannevar Bush, Director of FDR’s Office of Scientific

Research and Development (OSRD), supervised the writing of

the famous report, Science the Endless Frontier, in the belief that

there were few limits on what could be achieved by an

7 Both of these developments had direct impacts on the growth of the young electronics industry in Santa Clara Valley as the Varian brothers founded Varian Associates after World War II on capital raised by their work on the Klystron and ENIAC opened the door for the semiconductor andcomputer industries for which the Silicon Valley later became known. 8 Paul Boyer, By the Bomb’s Early Light: American Thought and Culture at the Dawn of the Atomic Age (New York: Pantheon Books, 1985), pp. 58, 133-140. Note: Generalizations, such as the one I’ve made here, should be tempered by the fact that there was also a countervailing public fear of the atomic bomb and the potential for future atomic warfare. Indeed, much of Paul Boyer’s book is dedicated to the public ambivalence and competing visions of whether a “nuclear future” would be dominated by “peaceful” use of the atom for energy or a nuclear holocaust.

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alliance between science, government, and business working

in close cooperation. Bush submitted the report to Harry

Truman in July 1945 as a blueprint for an ongoing

relationship between the university, the federal government,

and private industry in a postwar world. The report reached

Truman’s desk two weeks before the atomic bomb was dropped

on Hiroshima. Bush stated the central premise behind the

report in its second paragraph: “Science can be effective in

the national welfare only as a member of a team, whether the

conditions be peace or war. But without scientific progress

no amount of achievement in other directions can insure our

health, prosperity, and security as a nation in the modern

world.”9 Bush proposed this relationship as a formula for

socioeconomic as well as scientific progress:

The pioneer spirit is still vigorous within this nation. Science offers a largely unexplored hinterland for the pioneer who has thetools for his task. The rewards of such exploration both for the Nation and the individual are great. Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress.10

A substantial number of Bush’s proposals became national

9 Vannevar Bush, p. 1. 10 Ibid., Bush to Truman, Letter of Transmittal, July 25, 1945.

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policy a few years after the end of World War II, but it

took the United State’s mobilization for the Cold War with

the Soviet Union to bring about the full implementation of

his proposals.11

In August 1947, The Endless Frontier was followed by a much

more detailed proposal for the wedding of science to state

policy, simply titled: Science and Public Policy: a Program for the

Nation. The drafting of this four-volume report was

supervised by John R. Steelman and Vannevar Bush, but

contained the advice of a committee that included some of

the nation’s most prominent World War II and Cold War policy

makers: Omar Bradley, James Forrestal, Julius Krug, W.

Averill Harriman, and Robert Patterson.12 While Science and

Public Policy was essentially a more detailed version of Bush’s

11 Note: The National Science Foundation – the core element of Bush’s proposal for a national partnership between industry, government, and universities – was not founded until 1950. The NSF website has several documents surrounding the organization’s founding, including “Science the Endless Frontier,” and the following statement form its first annualreport: "By the National Science Foundation Act of 1950 the Congress established the National Science Foundation to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.' The President approved the act on May 10, 1950." Excerpt from The First Annual Report of the National Science Foundation, 1950-51, http://www.nsf.gov/od/lpa/nsf50/history.htm.12 John R. Steelman, et al., Science and Public Policy: A Program for the Nation (Washington, D.C.: Government Printing Office), pp. II-IV.

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earlier statement, the emerging Cold War’s influence on the

report is evident in its plenary statement:

The security and prosperity of the United States depend today, as never before, upon the rapid extension of scientific knowledge. So important, in fact, has this extension become to our country that it may reasonably be said to be a major factor in national survival. This fact lends an urgency to the studies of the President’s Scientific Research Board.13

In fact, the report was issued only a few months after the

articulation of the Truman Doctrine and slightly before the

Marshall Plan was submitted to Congress, both considered

keystones of U.S. Cold War policy in the post- World War II

period. As part of this package, Science and Public Policy became

a commensurate statement of the role of science in a war

that would not quite be a war and a peace that promised only

the unrelieved tension of an extended stalemate between the

world’s two remaining superpowers. In the new conflict,

even more than in the last, the laboratory would become “the

first line of defense” and the scientist an “indispensable

warrior.”14

Alongside the strategic importance and blossoming

status of science and engineering, the American business

13 Ibid., p. 3.14 Ibid.

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community also enjoyed a renaissance of its public image

for its response to FDR’s wartime call for the establishment

of an “Arsenal of Democracy” to defeat fascism.15 The

monumental task of retooling American industry for war

production and the sheer magnitude of military hardware

produced by industry during World War II aided in a partial

restoration of the social status of large corporations

tarnished by the financial failures and labor battles of the

Great Depression. Science and Public Policy articulated a new

parallel strategic role for industry in the coming Cold War:

“If we are to remain a ‘bulwark of democracy’ in the world,

we must continually straighten and expand our domestic

economy and foreign trade. A principal means to this end is

through the constant advances in scientific knowledge and

the consequent steady improvement of our technology.”16 The

15 Postwar polls reveal the ambivalence of public opinion toward industry, particularly big corporations. While the pendulum of opinion showed diminished support for labor after the massive strikes in coal, oil, steel, rail and auto industries in 1946, and commensurately more faith in business, a public opinion poll sponsored by General Motors in 1951, revealed that 71% of Americans still felt corporate profits were excessive, and only 14% saw managers as “conscientious and principled.” Howell Harris, The Right to Manage: Industrial Relations Policies of American Business in the 1940s (Madison: University of Wisconsin Press, 1982), p. 193.16 John R. Steelman, Science and Public Policy, pp. 3-4.

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United States’ World War II “arsenal of democracy” was thus

superseded by a Cold War “bulwark against Communism” that

emphasized scientific knowledge, technological innovation,

and dynamic economic expansion as geopolitical weapons in

the Cold War alongside the military forces of the nation.

When Congressional Representative George P. Miller

noted that “science and technology is being latticed into

the structure of government and the patterns of everyday

life [quote on page 1 of this chapter],”17 he was

responding, consciously or unconsciously, to the central

role they played in the ideological and military strategies

of the Cold War. The federal government’s Cold War focus on

science and technology was reflected by a commensurate focus

in the popular press and became part of the “everyday

patterns” in popular thought and practical use of new

17 United States House of Representatives, Toward the Endless Frontier, p. 151. Note: Miller’s statement that “science and technology is . . .” was nota grammatical or typographical error. The two were, and then and often still are conflated in public consciousness. Cold war science was funded as a utilitarian effort, conceived and pursued as means to achieve technological advances in the weapons of modern warfare, whethermilitary – missals, nuclear weapons, radar, jets, etc. - or ideologically – such as the Gemini and Apollo Space programs undertaken as part of a “space race” with the Soviet Union. Science and Technology were so often combined in the political and popular language,they became – in essence – one thing in popular consciousness.

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technological advances in military hardware and consumer

products. 18 In essence, science and technology became so

familiar to Americans, they seemed elemental, natural

forces; this is how they are often still represented and

approached in both journalistic and some scholarly circles

today.19

The foundation for the “latticing” of science and

technology into American politics, culture, and everyday

life does not, however, have its source in the abstract

realm of human imagination or some innate human desire to

achieve – though these are both integral to the process of

innovation. In the post-World War II era, scientific

invention and technological progress were driven by two

interrelated forces: the ideological and geopolitical

conflicts of the Cold War and the concurrent growth of

18 Examples of the popular adoption of Cold War rhetoric into American culture can be found in many advertisements in popular magazines from the era. One small, but chilling example can be found in a Goodyear ad in Life Magazine in 1952, which stated: “CITE”19 Michael Malone, The Microprocessor, A Biography (New York: Springer-Verlag, 1995), p. 37. Michael Malone actually lays out the mechanical process of manufacturing microchips in the vernacular, but even Malone succumbs to the temptation of “elementalizing” the process by naming this chapter“Fire, Water, Earth and Air,” thus viscerally conferring an “organic” framework to the highly technical manufacturing process.

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global capitalism. Within this context, the elevated public

esteem for business, science, and engineering, and the

ideological reconstruction and institutionalization of the

triangular relationship between government, industry, and

the university as a weapon of Cold War led to the birth and

growth of the semiconductor and high-tech industries of what

became known as "Silicon Valley."20

Cold War Political Economy and the Foundations of the Modern Electronics

20 For the national trend in this growing postwar relationship see: JohnTirman, ed., The Militarization of High Technology (Cambridge, Mass.: Ballinger Publishing, 1984), and Andre´ Schiffrin, ed., The Cold War and the University . ..; for the relationship between Stanford and the federal government, see: Rebecca S. Lowen, Creating the Cold War University : the Transformation of Stanford (Berkeley : University of California Press, c1997).

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Industry

Our foreign relations, political and economic are indivisible.21

- President Harry S. Truman

I welcome you to this quiet meeting place wit h confidence and hope. . . . It is fitting that even while the war for liberation is at its peak, the representatives of free men should gather to take counsel with one another respecting the shape of the future which we are to win.22

-Franklin D. Roosevelt, Statement to the BrettonWoods Conference.

Toward the end of World War II, the United States began

to shift its attention from how to wage the war to the more

puzzling dilemmas in how to wage the peace which would

follow. Today, many people have forgotten that World War II

did not neatly follow the Great Depression as much as it was

waged substantially in the midst of the largest economic

crash the in the history of Capitalism.23 During the war, 21 Harry S. Truman, “Address on Foreign Economic Policy,” Delivered atBaylor University, March 6, 1947, in Public Papers of the Presidents of the Untied States: Harry S. Truman, 1947 (Washington, D.C.: Government Printing Office), p. 167.22 U.S. State Department, United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1-22, 1944: Final Act and Related Documents (Washington, D.C.: Government Printing Office, 1944), p.1.23 Of course, the war marked the end of the Great Depression in the U.S., beginning with the boom in war production for Great Britain in 1940. War production also arguably lifted Germany out its depression a half-decade earlier, and Japan never experienced the complete economic collapse that gripped Europe and the U.S. because its economy was partially buffered by the Imperial Campaign that began the early 1930s. In each of these countries, however, the actual dividing line between

38

the U.S. economy experienced a significant recovery from the

depression on the strength of the wartime production boom,

but much of the rest of the world’s productive capacity lay

in ruins. The major industrial powers of Europe and East

Asia did not have a chance for full economic recovery before

the war laid waste to their factories, cities, and merchant

fleets. The U.S. economy was robust by the August 1945, but

none could predict what would happen to the economy once the

war ended. During the war, the United States international

trade was confined to allied nations. Much of that trade

was limited to war supplies. Even after the war, U.S. trade

existed mainly as a function of transoceanic, bilateral

exchanges between the U.S. and the war ravaged economies of

Europe and Japan. Re-establishment of a thriving global

economy was considered a prerequisite for U.S. prosperity.

As a consequence U.S. planners had two pressing questions

before them as the war wound to an end: How to reconstruct

the devastated global economy, and how to prevent a

depression and war is at the very least hazy, and recovery from the depression intimately involved with the occurrence of and production forwar.

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reoccurrence of depression and war?24

The modern electronics industry in the United States

was born as these questions were being considered. It rose

to prominence within the dynamics of the reconstructed and

restructured global economy that emerged from the solutions.

Though planning discussions for postwar global

reconstruction began before Pearl Harbor, the policies that

emerged from those discussions did not take shape until late

1944, and were not implemented until two years after the

surrender of Japan.25 Between 1945 and 1947, the Cold War

intervened in both planning and implementation and

profoundly re-shaped the global economy, then in the early

24 Ibid., p. 168. Note: References to these priorities are ubiquitous in policy statements following the war. In Truman’s Waco speech on foreign economic policy he stated: “We can lead the nations to economic peace, or we can plunge them into economic war. There must be no question as to our course. We must not go through the thirties again.”25 William Domhoff, The Power Elite and the State, p. 130. Note: Domhoff discusses wartime and postwar planning sessions held between the Councilon Foreign Relations and the State Department, beginning in the Fall of 1941. During these sessions, much of the philosophical approach to postwar reconstruction was developed, as well as the broad parameters ofspecific proposals that later emerged out of the Bretton Woods Conference in November 1944. A more detailed discussion of these issues will be provided in the following chapter. The World War II postwar planning process was recently cited by the G.W. Bush administration as amodel for postwar the reconstruction of Iraq after the 2003 U.S. invasion; administration officials, however, did not include in the model the four-year period it took to formulate the postwar plan. Giventhe contrasting results, they might have been wise to do so.

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stages of economic recovery. 1947 became a pivotal year for

the postwar economy and postwar politics, as well as a year

that fundamentally re-shaped American society and culture.

Perhaps serendipitously, 1947 was also the year in which the

transistor, the technological basis for the modern

electronics and semiconductor industry, was co-invented by

William Shockley, Charles Brattain, and John Bardeen at Bell

Labs in New Jersey.26

The invention of the transistor in December 1947 went

substantially unnoticed by all but a handful of people in

the scientific community and the newly re-organized

Department of Defense – formerly the War Department.27 It

capped off a year in which organized labor began the year in

the final stages of an all-out offensive, begun in 1946, to

win higher wages. Wages were previously held in check by

wartime and postwar wage and price controls. Labor ended

the year – after the passage of the 1947 Taft-Hartley Act –

engaged in civil war between the labor left (substantially

26 Stuart MacDonald and Ernest Braun, Revolution in Miniature . . ., pp.35-41.27 The announcement of the birth of the transistor was placed, rather inauspiciously, next to the radio schedule for the day in the column,: “The News of Radio,” in The New York Times, July 1, 1948.

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located in CIO industrial unions) and more conservative

unions in both the AFL and CIO.28 American foreign policy

was transformed in 1947, as well. At the beginning of the

year, the Truman Administration focused on the

reconstruction of Europe and Japan and pushing through a

series of monetary and trade reforms that had grown out of

the Bretton Woods Conference in November 1944. By the

year’s end, the complexion of foreign policy had changed

substantially, colored by the articulation of the Truman

Doctrine – a statement that helped commit the United States

to forty years of “Cold War” with the Soviet Union, though

none foresaw the length of the conflict that lay ahead at

the time.29 28 The Cold War in the ranks of labor is well documented in numerous sources. Two the best involve the evisceration of the United Electricalworkers through membership “raids” by AFL and CIO unions during the period from 1947 to 1950: Ronald L. Filippelli and Mark McColloch, Cold War in the Working Class : The Rise and Decline of the United Electrical Workers (Albany : State University of New York Press, 1995); and, Ronald Schatz, The Electrical Workers: A History of Labor at General Electric and Westinghouse, 1923-60 (Urbana :University of Illinois Press, 1983).29 The Truman Doctrine emerged in a series of speeches and statements toCongress beginning with his March 12, 1947 address on the crises in Greece and Turkey to a joint session of Congress. In the most dramatic moment of the speech Truman proposed that: “At the present moment in world history nearly every nation must choose between alternative ways of life. The choice is too often not a free one (p. 178).” He went on to state: “I believe that it must be the policy of the United States to support free peoples in resisting attempted subjugation by armed minorities and outside pressures. I believe that we must assist free

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Truman’s containment doctrine brought about fundamental

changes in postwar economic construction. 1947 was the year

of the “reverse course” in Japan occupation policy.

Reconstruction and restructuring of the Japanese economy

shifted from a focus on dismantling the military-industrial

complex known as the Zaibatsu, to harnessing the capacity of

the industrial combines to build Japan into a “bulwark

against communism in East Asia.”30 The Marshall Plan in

Europe was promoted in Congress and to the American public

using the rhetoric of the Cold War. Its benefits to Europe

were intentionally designed to exclude the Soviet Union,

though the plan was worded in a way so as to appear it was

included as a potential recipient of U.S. aid.31 The

peoples to work out their own destinies in their own way (pp. 178-79).” Truman then set the terms of the conflict, laying the ground for the later introduction of the Marshall Plan: “I believe that our help shouldbe primarily through economic and financial aid which is essential to economic stability and orderly political processes (p. 179).” The Cold War would thus be waged through primarily through economic and ideological means, though the military build-up that resulted in a thriving defense industry in the Santa Clara Valley became a parallel and complimentary policy track in the years immediately following.30 There is a rich and substantial body of literature on the subject of the Reverse Course in Japan, including the aforementioned text by Joyce and Gabriel Kolko, The Limits of Power . . .; Howard Schonberger, Aftermath of War (Ohio: Kent State University Press, 1989); and Theodore Cohen, Remaking Japan (New York: The Free Press, 1987).31 Walter LeFeber, America, Russia, and the Cold War, 1945-1996 (New York: McGraw-Hill Companies, Inc., 1997), pp. 56-73.

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national security state continued to take shape in 1947 with

the passage of the National Security Act (NSA) in June. The

NSA created the CIA and National Security Council (NSC), and

consolidated the various branches of military services under

on Defense Department.32 All of these developments would

have direct and/or indirect impact on the electronics

industry, just as the transistor would open the door to new

technologies that would influence the course of the Cold War

and global economic reconstruction. Electronic technologies

from missile guidance systems to computers for the CIA would

provide a technological basis for waging the Cold War for

the next four decades, as well as communications

technologies that would become vital to postwar economic

globalization. In the process, the semiconductor industry

that was built on transistor technology would mature within

a symbiotic relationship to postwar restructuring and the

Cold War.

There is only one easy way to untangle the growth of

high-tech electronics from ideological and structural

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44

economic developments in the immediate postwar era and the

Cold War: avoid it. This has been the approach of all but a

handful of authors who write about rise of Silicon Valley

and the global economy.33 A consistent theme in this

dissertation is, however, that policies formulated at

various levels of government aided in the establishment and

growth of both Silicon Valley and globalization. Federal

policy formulated for the postwar era was the most important

of these. Postwar foreign and economic policies laid the

foundation for the economic growth of the industry, the

ideological basis of its industrial relations, the

globalization of high tech production, and the evolution of

the industry’s global division of labor.34 Given its nature33 Stuart Leslie, “The Biggest ‘Angel’ of Them All: The Military and theMaking of Silicon Valley,” in Martin Kenney, ed., Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region (Stanford, CA: Stanford University Press, 2001). Leslie’s essay is a notable exception.34 Note: one such example of popular authors’ neglect of the importance of federal policy can be found in Paul Freiberger and Michael Swaine, Fire in the Valley: the Making of the Personal Computer, (Berkeley: McGraw-Hill, 1984). In exploring the roots of the Silicon Valley computer industry, the author's devote two full pages to the "difference engine" - probablythe first theoretical model of working mechanical calculator - of 19th Century English inventor, Charles Babbage - a machine which remained in the imagination - while failing to mention any government involvement inthe ENIAC project, and summarizing the federal wartime computer researchcontribution thus: "A new industry emerged from World War II." There isno mention of the military's dominance as first purchaser of computers in the 1950s, only a note: "And the market [for computers] continued to grow too."

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as a high-tech manufacturing region that produced both the

technology used in the Cold War and the globalization

process, Silicon Valley is not only a fruitful case study

for the relationship between federal policy and

globalization, but the text book case for that relationship.

Two of the most important factors in the material

growth of the semiconductor industry were the 1944 Bretton

Woods Conference and subsequent U.S. trade policies that

grew along side of it and out of its ashes. The life and

death of Bretton Woods as the foundation for postwar foreign

economic policy not only shaped globalization in the postwar

era, but, with its emphasis on the critical importance of an

integrated global economy, also stimulated the growth of

semiconductors and electronics into international industries

through the growth in demand for communications and

information processing technology. Since this chapter is

primarily concerned with the Cold War and the effect of Cold

War defense spending on the birth of electronics industry in

Silicon Valley, a more substantial discussion of Bretton

Woods will be provided in subsequent chapters on trade

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policy and the growth of the Silicon Valley industry after

it weaned off of a near exclusive reliance on defense

contracts in the late 1960s.

A subtext to the federal government’s support for

electronics connected to the

1950s was the relationships the industry established with

local and state governments – a subject that bears mention,

but is beyond the scope of this project. Without public

funding of water and highway projects, airport improvements,

favorable zoning laws, labor relations, and environmental

regulations, it is unlikely the high-tech industry would

have developed and stayed in the Santa Clara Valley. State

and local governments have long supported the building of

infrastructure for industrial development, though for less

explicitly ideological reasons than those tied up in

geopolitics. To build a tax base, cities must attract new

industries and new residents. Local business interests,

such as real estate developers and civic boosters intent on

election to public office, are most often the driving forces

behind local and state funding.

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In the 1980s, the development of the high-tech industry

in the Silicon Valley would become a highly-touted model for

potential third world development. Less well known, is that

many communities within the United States would adopt

policies used by Santa Clara, San Jose, and other Valley

communities to lure high-tech industries as an engine for

local development. North Carolina, Austin Texas,

Albuquerque, Portland (Maine and Oregon), and Seattle all

developed thriving high-tech industries modeled on Silicon

Valley and, perhaps to a lesser extent, on Route 128 in

Massachusetts. It is not surprising that these cities are

now experiencing many of the problems that attended high-

tech development in Silicon Valley: severe traffic

congestion, burgeoning real estate and housing prices,

groundwater pollution from the toxic chemicals employed to

manufacture high-tech products, and a dual wage structure

that generously rewards engineers and managers, but

compensates production workers with below subsistence wages.

As a regional and international development model,

high-tech development has been at best a mixed blessing for

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many of the communities that have adopted it. No small part

of the industry’s mixed record as an economic engine has

been the failure of communities and countries to fully

assess the hidden cost of its success in Silicon Valley, or

the dependence of the high-tech industry on subsidies

provided by both the regional and federal governments.

High-technology is, of course, not the only industry in

which economic viability has been guaranteed by government

subsidies at various levels. As a model for developing

nations in a global economy, however, it has been promoted

by its boosters as a kind of economic “perpetual motion

machine” in which “ . . . one can create value out of thin

air: information and innovation combine to produce economic

value.”35 The fact is, there would not be an enclave of

high-tech production in Silicon Valley as large, as

innovative, or as dynamic as the one that exists today were

it not for significant material and ideological support from

the federal government as well as regional governments.

35 Everett M. Rogers and Judith K. Larsen, Silicon Valley Fever: The Growth of High Technology Culture (New York: Basic Books, Inc., 1984), pp. 275-76.

49

World War II Midwife, Cold War Nursery: The Role of the Federal Government in

the Birth and Growth of the Modern Electronics Industry

In establishing the genesis of the modern Silicon

Valley electronics industry one must arbitrarily designate a

moment of birth in the evolution of both electronic

technology and the companies that grew around it. A more

conventional business history might establish that point in

the years before the turn of the century with Thomas

Edison’s work on the light bulb in Menlo Park, New Jersey in

the late 1870s, or perhaps with the founding of the regional

company, Poulsen Wireless Telephone and Telegraph in 1909,

or Lee De Forest’s invention of the wireless radio in Palo

Alto in 1912.36 There is a rich “prehistory” of the modern

electronics industry in the Santa Clara Valley on which to

draw, but these antecedents have only a tenuous relationship

to the modern electronics industry that has transformed the

36 There is no connection between Menlo Park, NJ and Menlo Park, CA, butEdison has been adopted as kind of a “patron saint” of Silicon Valley bysome, and, of course, can be legitimately be considered as a founder of an older electrical industry in the United States to which the Silicon Valley industry can trace genealogical links through the founders of thesemiconductor industry who originally worked in the electrical industry.

50

Valley in the last 50 years.37 There are, however, few

direct links between these early 20th Century companies and

their technologies and the high-tech industry that evolved

50 years later.

The genealogical break between Edison, De Forest, and

other electronics pioneers and today’s electronics industry

can be pinpointed with the invention of the transistor by a

team of Bell Lab scientists in December 1947.38 The

transistor, though it performed essentially the same task as

the vacuum tubes it eventually displaced, was one of those

rare inventions that changed everything. State simply, the

transistor is simply an off-on switch that allows electrical

current to pass through its gate (or not), thus creating a

37 One excellent essay on the industry’s prewar and 19th Century roots is “The Origins of the Electronics Industry on the Pacific Coast” by Arthur L. Norberg, formerly of the Bancroft Library, (Unpublished Manuscript, 1976). Norberg’s work was supported in part by the Marco Francis Hellman Fund of The Bancroft Library, University of California, Berkeley. Several of the texts noted in this chapter also contain good summaries of the electrical industry’s early years in Palo Alto, including Michael Malone’s, The Big Score, and Dirk Hanson’s, The New Alchemists; referred to in previous footnotes.38 Like Edison’s Menlo Park lab, Bell Lab was located in New Jersey, butthe adoption of the transistor has a strong association with the Santa Clara region because of the eventual migration of co-inventor William Shockley to Mountain View in the mid-1950s, as well as through the size and importance of the local semiconductor industry to the region’s economy.

51

simply yes-no or 0-1 binary language – the basis of all

digital/computer programming.39 More than any electronic

technological advance until the invention of the

microprocessor in 1971, the transistor enabled the

miniaturization and thus diffusion of electronic technology

into thousands of new devices and became the foundation

technology for a transformed and vastly expanded electronics

manufacturing industry. While the benefits of the

transistor accrued mainly to the military for nearly two

decades following its invention , the refinement of the

transistor during those years brought about technological

advances which formed the basis for the explosion in

consumer electronic beginning in the 1970s.40 The

39 Of course, both the process of manufacturing viable transistors and assembling them into electronic devices such as computers is far more complex than represented here. This is not a technological history, however; for a more sophisticated and elegant text on the subject, see Michael Malone, The Microprocessor, A Biography (Santa Clara: Telos, 1995). 40 There is a good deal of controversy surrounding what impact the focuson military technology had on the diffusion of that technology into consumer products. The most common position is that focus on military research and development of electronics held back the development of consumer applications. This issue will be discussed later in this chapter, but at the very least, the military production of the 1950s resulted in the creation of high-tech enclaves around Boston and in the Santa Clara Valley that provided crucial experience and training for theengineers that later developed consumer applications. Stuart Leslie, “The Biggest ‘Angel’ of Them All . . .,” pp. 48-67.

52

transistor became the base technology upon which the new

semiconductor industry formed; the Cold War provided the

context and initial impetus for the expansion of that base.

Federal government support for the electronics industry

began in earnest during the Second World War. The demand

for new technologies to prosecute the war was a boon to both

the established electrical industry (companies like GE,

AT&T, Sylvania, Western Electric, Westinghouse and Philco)

and the nascent electronics industries in the Santa Clara

Valley. In the Valley, Varian Associates was founded by the

Varian brothers immediately after World War II from capital

accumulated through their invention of the Klystron tube and

its wartime use in radar and bombsights. Hewlett-Packard

(H-P), founded in 1939, grew from a company employing eight

people with $34,000 in sales in 1940, to a company employing

111 with $679,000 in sales in 1947.41 H-P actually

achieved most of that growth by 1942, and its 1947 sales

marked a slight decline from their wartime peak.42 On the

41 "Hewlett-Packard through the years," in the San Jose Mercury News, July 20, 1999, p. 12A. 42 Rogers and Larsen, Silicon Valley Fever, p. 33.

53

strength of demand for mass-produced bombsights, aircraft

and artillery guidance systems, and communications

technology, the national electronics components industry

reached a wartime peak of $2.9 billion in production in

1944.43 Hewlett-Packard and Varian were a relatively small,

but disproportionately important part of the national

industry because they manufactured electronic instruments

that were vital to the continuing development and testing of

new technologies by the industry as a whole.44

During the war, military-oriented research and

development helped establish a closer relationship between

the university and the electronics industry, in part,

through the development of computer technology in the ENIAC

project - the design and construction of a city bus-sized

computer to calculate gunnery ranges and aid in further

scientific research. Less well known than its counterpart

in atomic weapons development, the Manhattan project, the

43 Department of Labor, Defense Manpower Requirements in Electronics Production, Bureau of Labor Statistics, Washington, D.C., February 1952, p.3. (Dollar figure in 1952 dollars.)44 H-P manufactured oscilloscopes, for instance, that were indispensableto testing electronic components and equipment for the aerospace and industrial sectors.

54

ENIAC project was the forerunner to today's supercomputers

(though packing about the same calculating wallop as today’s

pocket calculators).45 ENIAC was funded by the federal

government through MIT and, though not completed until after

the surrender of Japan, its first program was designed to

develop a mathematical model for analyzing the data of a

hydrogen bomb test collected at the Los Alamos Atomic

Weapons Laboratory.46 The potential uses of computers,

though not fully understood, was neither entirely lost on

the federal government, and the establishment of triangular

research relationship between the university, the state, and

private industry was as significant a byproduct of the World

War II research projects, as was the technology itself.

The demand for military electronics products did not

end with the cessation of hostilities in 1945, though it

curtailed slightly in the immediate postwar years.47 In

45 Paul Edwards, The Closed World: Computers and the Politics of Discourse in Cold War America (Cambridge, Mass: MIT Press, 1996), pp. 46-58.46 Paul Freiberger and Michael Swayne, Fire in the Valley, p. 6; Paul Edwards, The Closed World, ch. 2.47 Thomas J. Misa, "Military Needs, Commercial Realities, and the Development of the Transistor,1948-1958," in Merritt Roe Smith (ed.), Military Enterprise and Technological Change: Perspectives on the American Experience (Cambridge: Harvard University Press, 1985), pp. 253-287;

55

fact, military demand escalated as the United States moved

from the recent global conflict into an extended "cold war"

with the Soviet Union and the People's Republic of China in

the late 1940s. The advent of the Korean War in 1950, the

building of the Distant Early Warning radar network to

defend against a Soviet nuclear strike, the demands of the

Army Signal Corps for effective communication equipment,

Air Force demand for advanced avionics, the rapid

development of a nuclear intercontinental ballistic missile

(ICBM) force, Navy demand for nuclear attack subs and a

technologically advanced surface fleet, and the institution

of a national space program in the latter part of the decade

all stimulated the development of advanced electronics and,

thus, the growth of the industry.48 The 1950s electronics

boom did not grow out of the demand created by consumer

markets for advanced technology.49 The demand was created

48 Defense Manpower Requirement, p. 32. Note: Employment in electronics production dropped from a peak of 302,700 workers in the summer of 1944 to 165,100 in 1947. In the first year of the Korean War, over 40,000 new production workers were added, brining the total back up to 238,000.By the end of 1951, the number of workers increased to 290,000, and eventually surpassed the World War II peak in 1952.49 Ibid. Note: In fact, production workers in Radio and TV production –the primary consumer electronics products, declined from 139, 000 in the4th quarter of 1945 to 112, 700 in 1949 due to decline in consumer

56

by federal military and ideological agendas stemming from

early Cold War confrontations with the Soviet Union.

For the military, the transistor allowed the

miniaturization of components previously limited in their

utility by the bulky and unreliable vacuum tube technology

that preceded it, but the seat of semiconductor production

might have remained on the East Coast had not William

Shockley moved to the Santa Clara Valley and set up shop in

1955. Shockley's move to the west coast from Bell Labs, NJ

has been explained by some as an early example of what

AnnaLee Saxenian has identified as an "informal network" of

contacts unique to the Santa Clara Valley industry - in this

case, connections between Shockley and Frederick Terman and

others at Stanford. Others have explained his move to the

region as serendipity – his mother lived in Palo Alto.

However, it was neither serendipity nor informal networking

that assured the growth of the transistor from the status of

a brilliant technological/theoretical advance into the basis

for the regional and national industry. Shockley’s

demand.

57

relocation to the Santa Clara Valley was a key development

in bringing semiconductor production to the region, but it

was the federal funds that poured into research institutes

dedicated to electronic engineering and electronic

production industries drove the expansion of the industry in

the Santa Clara Valley in the early 1950s.50

Neither was the invention of the transistor at Bell 50 AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge: Harvard University Press, 1994), Note: Saxenian's thesis, examining the different trajectories of Silicon Valley and Route128 outside Boston, Massachusetts, is constructed around the proposal that cultural differences between the industries in California and Massachusetts is central to the rise and continuing vitality of Silicon Valley as opposed to the decline of the industry along Route 128. One ofthe key components she claims contributed to the success of the west coast industry is the casual atmosphere which promoted "informal networks" of contacts and communication - an atmosphere she claims is absent in the east. Though she does not use Shockley as a specific example of these networks, others do. Rogers and Larsen, in Silicon Valley Fever, note Shockley's connection with Arnold O. Beckman of Caltech and the fact that Palo Alto was Shockley's home town as key factors to his move to the area (p. 37), as do Freiberger and Swaine in Fire in the Valley (pp. 8-10). None of them give any emphasis to the context in which Shockley returned to California - that in his absence, a nascent boom inelectronics was already developing fueled by federal research funds and cold war military spending, making a move back to his home town attractive. Henry Lowood, curator of Stanford's Silicon Valley archive, further undermines the idea that Shockley returned to Palo Alto to join in Terman's "community of technical scholars," by noting that Shockley did not associate with the community then established in Stanford Industrial Park, neither did he hire personnel from companies in the area. In fact, Lowood attributes the influx of Cold War era federal contracts and research funds as the crucial factor in seeding the industry in the region, and goes on to note that Stanford had very little contact with the semiconductor industry in the region until afterthe invention of the microprocessor in the early 1970s. Henry Lowood, "From Steeples of Excellence to Silicon Valley" (Varian Associates, 1989).

58

Labs in New Jersey in 1947 simply a feat of individual or

team engineering genius. While Shockley and Walter Brattain

had experimented with the development of a solid state

transistor as early as 1939 as part of Bell's efforts to

develop more reliable telephone relays, the intervention of

World War II redirected Bell's efforts into the field of

military technology. Transistor research, however, was not

abandoned, but continued in conjunction with MIT labs that

received generous funding for wartime research. The

relationship Bell established with the military during the

war, particularly with the Army Signal Corps Electronics Lab

(SCEL), continued into the postwar years and established the

basis for an ongoing relationship throughout the 1950s.51

The Signal Corps' need for a device that would stand up

to extremes of temperature and the shocks of use in combat

better than the fragile vacuum tube technology dovetailed

neatly with Bell's new transistor's abilities. The handset

for the Army's "walkie talkie" weighed about six pounds at

the time and the Corps was in search of technology to make

51 Thomas J. Misa. "Military Needs . . .." pp. 253-287.

59

field phones smaller and lighter. One needs only hold up a

five pound bag of flour to his/her ear for several minutes

to get an idea of why a more compact and lighter device was

desired. When the first solid state transistor was finally

successfully tested in late 1947, two representatives of the

Signal Corps were among six men from three branches of the

military who were given a demonstration of the device a week

before it was unveiled to the public. The Army Signal Corps

was among the first to sign a contract for Bell's new

transistor in June 1949.52 Semiconductor research and

production would remain almost exclusively in the realm of

military funding for the rest of the decade, and military

accounted for almost 50% of total expenditures on

semiconductor research between the late 1950s and early

1970s.53

Though military expenditures for procurement declined

in most categories immediately after the war, the onset of

the Cold War in 1946 and 1947 revived funding for

52 Ibid.53 Paul Edwards, The Closed World, p.64; Kenneth Flamm, Creating the Computer: Government, Industry, and High Technology (Washington, D.C.: Brookings Institution, 1988), pp. 17-18.

60

electronics research and development by the end of the

decade. In the computer field, federal funding for R&D was

about $20 million, nearly four times the amount invested by

private industry, and federal R&D for computers still

accounted for nearly 60% of the six largest firms’ R&D

budgets in 1959.54

The impact of this massive investment of federal funds

to advance of electronic technology, in terms of

technological transfers to today’s predominantly consumer

product-oriented industry, is difficult to ascertain and is

the subject of intense debate among economists and

academics. Terms of the debate largely revolve or devolve

around a question of history read backwards: did the

specific designs of military hardware advance or impede the

development of the technology and, thus, the industry?55 54 Kenneth Flamm, Targeting the Computer: Government Support and International Competition (Washington, D.C.: Brookings Institution, 1987), p. 94-96.55 Robert Reich, for instance, states that: “Rather than encourage American commercial development, defense spending on emerging high technologies will have the opposite effect over the long term, divertingU.S. scientists and engineers away from commercial applications. . . . America continues to regard the rest of the world through the foggy lenses of cold war diplomacy rather than through the clear glasses of commercial competition. . . . Meanwhile, rather than encouraging our emerging industries and nurturing our high technologies, we are distorting their growth through exorbitant defense expenditures on esoteric military hardware.” Robert Reich, “High Technology, Defense and

61

Largely ignored in this debate is the fact that in the early

1950s, the market for civilian electronics – overwhelmingly

located in the radio industry - was saturated and growth was

flat. Immediately after the war, consumer production was

focused almost exclusively on radios, as televisions were

still too expensive for most American households. Consumer

demand actually decreased after the invention of the

transistor, and almost of half of the commercial industry’s

workers were laid off between March and December 1951.56 In

this period, transistors could not be produced reliably and

economically in large enough quantities to replace the

vacuum tube in consumer products. For the radio and TV

International Trade,” in John Tirman, ed., The Militarization of High Technology,pp. 39-40, 41; Rogers and Larsen similarly discount the diffusion of military technology to the civilian economy, claiming: : “Many would argue that human welfare could be advanced tremendously if comparable sums to these huge military expenditures were invested in peaceful solutions to problems.” Rogers and Larsen, Silicon Valley Fever . . ., pp. 269-270. Reich, Rogers, and Larsen are all responding to traditional historical approaches that treat war as an engine of human technologicalprogress. My point is not undermine their claim, though military supportfor electronics did lead to advances in civilian technologies through the demand for reliable design and production techniques, but to emphasize that military is also an arm of the state and military supportfor the industry another form of state support for its development and to emphasize that the military was the market in this era and that the semiconductor industry grew into that market (see below).56 Defense Manpower Requirements, pp. 2, 10-11. Note: Employment in Radio and TV sector dropped from 215,000 to 130,000, with 45,000 of the 85,000electronics workers receiving pink slips.

62

industry, vacuum tubes remained the staple of semiconductor

technology for consumer products simply because they were a

known quantity and could be produced cheaply and in large

quantities with a consistent degree of quality.

In that same period, defense orders were skyrocketing,

surpassing half the total production of the United States’

$4 billion dollar electronics market, with defense

procurement expected to triple by the middle of 1952.

Employment in defense electronics rose from 60,000 to

155,000 in the same nine-month period in 1951, and was

projected to rise to 230,000, or nearly two-thirds of the

industry workforce in mid-1952.57 The catalyst for this boom

on the defense side of the industry was the Korean War - the

first large-scale military intervention by the United States

in the Cold War era. While one can legitimately argue the

merits of what might have been the trajectory of the

technology or the industry if purely civilian markets had

governed development, the fact is that at a crucial point in

the development of the industry and the electronic

57 Ibid., p. 11-12.

63

technology, the military was the market and production

followed the market created by a confluence of Cold War R&D

and foreign policies, sparked by the Korean War. Table 1,

below, illustrates this point in visceral terms.

Table 1: Electronic Equipment and Component Output, 1939-1959 (selected years)

(in millions of dollars)

Year Electronic Equipment Components Semiconductors Pct. Consumer (total) (total) Equipment Output

1939 226 114 n/a

82% 1947 1,279 471

n/a 63%1950 2,160 1,140

n/a 78%1951 2,139 1,261 n/a 61%1952 3,670 1,820 20 37%1953 4,096 2,204 25 39%1954 3,890 1,990 25 37%1955 4,000 2,170 40 38%1956 4,270 2,240 90

64

34%1957 4,600 2,420 150 33%1958 4,600 2,340 210 29%1959 5,950 2,970 395 33%

Note: World War II years were omitted on this U.S. Department of Commerce table, perhaps because the war was seen as a distortion of the electronics market as the proportion of military vs. consumer productionreturned to an emphasis on consumer goods for six years after World War II. Also, component and equipment production for industrial uses are not included, and it should be considered that domestic vs. military production might tilt the proportion slightly in one direction or the other. Since, however, industrial end-users would be split among those who manufactured military or consumer goods, the proportionate figures listed above, would likely remain substantially the same.58

In the above table, two sets of figures are

particularly notable. First, the shift in the proportion of

electronic equipment and components between military and

domestic production changes dramatically in 1952, from 61%

in consumer production in 1951 to 63% military production in

1952. That proportion remained skewed toward military

production for the rest of the decade. Second, the

industry’s output (in terms of value-added, at least)

increases more than two-thirds in 1952 – nearly all from

military orders - and does not curtail after the end of the

Korean War. Cold war production in radar, missile 58 U.S. Department of Commerce, Electronic Components: Production and Related Data, 1952-1959 (Washington, D.C.: Government Printing Office, 1960), p. 3.

65

technology, and eventually the “space race” with the Soviet

Union at the end of the decade continued to provide a

substantial market for advanced electronics after the Korean

War.

Though the Santa Clara Valley’s share of the national

defense electronics industry was small in the early 1950s,

its impact on the region was disproportionate to its

percentage of the national procurement program. The

importance of the early role of military procurement in

fueling capital accumulation and regional economic growth in

the Santa Clara Valley cannot be underestimated. From 1954-

1961, 80% of all new jobs in the valley were related to

defense spending.59 Terman's campaign to establish a local

electronics industry through leases of Stanford University

land was a direct outgrowth of his campaign to bring part of

the effusion of defense R&D funds of the early Cold War into

the Stanford engineering department.60 Terman's drive to 59 Though not all of these jobs were in electronics. Lockheed Aerospace and the Food Machinery Corporation of San Jose were major producers of conventional military hardware - missiles in the former case and armoredvehicles and ordinance in the latter - but both used, or utilized electronics in their finished products. Michael Eisencher, “Silicon Fist in a Velvet Glove. . .,” p. 7.60 Terman’s campaign to build an engineering department and encourage

66

bring defense dollars into the region and the creation of

the Stanford Industrial Park in 1954 more than doubled the

number of electronics firms in the Valley within a year.

This occurred before Shockley established his semiconductor

lab in Mountain View.61 Frederick Terman and Stanford

Industrial Park are cited by some as forces critical to the

establishment of the high-tech industry in the region.

While both important to the growth of the industry in the

Valley, neither were as important as federal Cold War

policy, contracts, and R&D funding in the early evolution of

a local industry.

the growth of a nearby electronics industry were both intimately linked to his view of a triangular relationship between the university, industry, and the state. These efforts did not end in the 1950s, but continued well into the Cold War era. In 1964, the editor of Electronic News corresponded with Terman and reported on his efforts to train engineers as part of the ongoing federal support of high-tech electronics. EN editor Alfred Cook cited a Terman letter in which Terman quoted from the President’s Science Advisory Committee, “Meeting Manpower Needs in Science and Technology.” In it, the Committee recommended that: 1) the federal government should provided funds and scholarships to educate engineers; 2) universities should work with the federal government to identify promising scholars for graduate training;3) both should work together to increase the productivity and capacity of existing industries; 4) the federal government should concentrate funding in regions where high-tech industries and universities already had existing relationships; and, 4) the federal government had a responsibility to train engineers because of the huge demand created by Cold War and space programs. Alfred Cook, “Letter from the Editor,” in Electronic News, October 4, 1964, p. 2.61 Rogers and Larsen, Silicon Valley Fever . . ., pp. 35-36.

67

The growth of the Valley’s electronics industry was

part of a larger, state and national manufacturing boom in

the 1950s fueled by defense and space spending, and should

be viewed, first, in that context. The Korean War was the

initial catalyst for growth and it was followed by an even

larger booms related to an escalating Cold War consciousness

in the late 1950s and the Vietnam War in the 1960s. Only

about 2600 workers were employed in electronics in the

valley in 1949; about 21,000 worked in manufacturing as a

whole. By 1953, 5100 workers were employed in electronics

production, a 96% increase; overall manufacturing employment

increased 32% during the Korean war years.62 By the end of

the Korean War, both defense-related production industries

and electronics production were growing concerns, and many

of the largest defense producers in the country were drawn

to Valley for its emerging defense infrastructure, its

pleasant climate, and its growing labor pool.63 62 Regional statistics for job growth in the 1950s are difficult to extrapolate for all of the 1950s, because California statistics lump different communities into categories as the region was developing, sometimes including smaller communities in with Palo Alto as a region and sometimes including them in San Jose statistics.63 It should not be discounted that an added bonus in moving production to the Santa Clara Valley was its mild climate and a pleasant living

68

Many of the electronics companies that formed the core

of the early growth of the industry in the valley were not

companies which are generally associated with the current

Silicon Valley industry by academics and journalists who

write about Silicon Valley. IBM set up a research and

development lab in San Jose in 1952, followed by the

construction of a 200,000 square foot manufacturing facility

in South San Jose in 1956.64

Lockheed Aerospace (originally Lockheed Missile and Space

Co.), whose parent company Lockheed Aircraft Co. was founded

by local Los Gatos residents Malcolm and Allan Lockheed in

Southern California in 1932, was another of the first high-

tech companies to establish in the area in 1956, and

remained one of the largest employers in the Santa Clara

Valley into the 1990s.65 Litton Industries and United

Technologies, defense contracting giants, founded radar and

rocket fuel facilities, respectively, in San Jose in 1959..66

environment. Though this was not the decisive factor in establishing plants in the area, it was not an insignificant incentive for executivesor entrepreneurs considering relocating operations to the West Coast.64 David W. Kean, IBM San Jose: A Quarter Century of Innovation (IBM Corporation, 1977), pp. 4-48.65 Michael Malone, The Big Score, pp. 60-61.66 Company background on Litton can be found at: http://www.littonatd.com;

69

Raytheon Corporation (Mountain View, 1961), General Electric

(San Jose, 1961), Philco – Western Development Laboratories

(Palo Alto, 1957), and Westinghouse Corporation (Sunnyvale)

were also established in electronics production in the

valley during the 1950s or early 1960s.67 Ampex, one of the

better known Valley Electronics firms, had been in business

since the 1930s, but expanded rapidly during the 1950s

defense boom. The only company that is commonly associated

with the birth of Silicon Valley that commenced operations

during this period was Fairchild Semiconductors, founded in

1957 by Robert Noyce, Gordon Moore, and half dozen other

expatriates from Shockley’s Mountain View laboratories.68

In the post-Korean war era, military spending increasedinformation United Technologies Corporation from Frank Sweeney and Josh Susong, “Building destroyed in S.J. explosion,” in San Jose Mercury News, August 8, 2003, p. 1A. Note: A solid fuel production building recently exploded for unknown reasons on the United Technologies Corporation (UTC) site located in the hills south of San Jose.67 Founding dates established from: Electronic News Financial Fact Book & Directory 1962 (New York: Fairchild Publications, Inc., 1962), p. 153; WEMA Directory 1976: The Association Serving the Electronics Industry (Palo Alto, 1976), p. 40; WEMA 1967: Directory of the Western Electronics Manufacturing Association (Palo Alto, 1967), p. 66.68 Fairchild Camera and Instrument Corp., 1961 Annual Report; Michael Malone, The Big Score, pp. 51-72. Note: One can find the story of the “traitorous eight” employees of who left Shockley to found Fairchild in almost every text on Silicon Valley. In a nutshell, Shockley – though abrilliant theoretical physicist – was a tyrannical and paranoid employer. His eccentricities and unreasonable demands led to the defection of eight of his top researchers in 1957.

70

unabated, and defense dollars for electronics research and

development in avionics and missile technology increased

dramatically. In 1958, for instance, the Defense Department

was funding 85% of research and development for the national

electronics industry.69 The Santa Clara Valley’s share of

these federal dollars increased at an even more rapid pace

as large defense contractors relocated operations to the

region. By 1960, both military and civilian space programs

led to the establishment of new companies and a

proliferation of subsidiaries in the Santa Clara Valley and

the greater San Francisco Bay Area. GE expanded operations

into Sunnyvale, Palo Alto, and Vallecitos. General

Telephone and Electric (GTE) established Lenkurt in San

Carlos and opened a research facility in Mountain View. ITT

established four facilities in Palo Alto.70

1959-60 were peak years for the establishment of

electronics defense contractors in the Santa Clara Valley.

Twenty-one new electronics companies opened up shop in Palo69 Laura D'Andrea Tyson, Who's Bashing Whom?: Trade Conflict in High-Technology Industries (Washington: Institute for International Economics, 1992), pp. 88-90.70 Western Electronic Manufacturers Association (WEMA), “Satellite Year,” in Western Electronic News, April, 1962, pp. 20-21.

71

Alto alone, including: Itek (information systems), Applied

Technology (electronic countermeasures), Coppertronix

(traveling-wave tubes), Magnetic Industries (missile

components), Royco Instruments (gas and liquid measuring

devices), Ultek (ion vacuum pumps), Clevite Transistor (run

by Shockley), Amsco Electronics (ultra-sonic cleaners),

Delcon (scrambling devices), Micro-Magnetic Industries

(character recognition devices), Palomar Scientific (digital

transducers for telemetry), Develco (antennas and

receivers), and Wiltron (microwave devices).71 A second

major Valley semiconductor producer, Signetics, was founded

by four former Fairchild employees in 1961 to build

components for military digital computers.72 Though few of

these companies have gained a place in Silicon Valley

history (in fact, with the notable exception of Signetics,

few survived into the 1970s), they formed a deep and broad

electronics manufacturing infrastructure in which fledgling

semiconductor and transistor firms could find niche markets.

More than the start-up corporations we now associate

71 Ibid.72 Ibid., p. 23.

72

with the valley, it was these early defense-oriented

electronics pioneers and established industry giants that

introduced a substantial electronics presence in the Santa

Clara Valley. The bread and butter of these corporations

was military and space-related hardware – categories that

often overlapped. Between 1955 and 1960, with arrival of

Lockheed, ATT, ITT, GTE, Westinghouse, IBM and GE in the

Valley, the number of electronics workers tripled to almost

17,000 and the number of manufacturing workers - many of

them producing the hardware into which electronic components

were packed - more than doubled to almost 70,000. Through

the early 1960s, the pace of employment growth in

manufacturing slowed to about four percent per year, while

electronics employment grew at a steady eight percent, but

the peak Vietnam War years from 1965 to 1970 spurred another

dramatic expansion. Electronics employment grew at 17%

average, and industry employment nearly doubled again

between 1964 and 1970.73 The manufacturing workforce 73 It was during the latter half of this period that the semiconductor start-ups began to proliferate. Rolm, National Semiconductor, Intel, Advanced Micro Devices, Signetics were the largest and best known manufacturers of the wave of new high-tech companies and all but Intel did substantial business with defense contractors.

73

increased by 42% over the same period. By the end of 1969,

129,000 workers were engaged in manufacturing in the valley,

47,500 of them in the electronics sector. Through the

recession of 1970-71 both manufacturing as a whole and the

electronics workforce contracted somewhat, but by the end of

the Vietnam War in 1975, the Valley employed 160,000

manufacturing workers, nearly 70,000 in the electronics

industry alone.

From 1949 to 1969, manufacturing employment in the

Santa Clara Valley increased over 600%, the electronics

workforce grew over 1800%.74 The catalyst for this growth

was federal defense spending, and the major engines of

employment were not smaller entrepreneurial ventures, but

established defense industry corporations. In that period,

the manufacturing infrastructure was put into place, and as

it grew, the formerly agricultural Santa Clara Valley was

transformed into a major urban-industrial complex. The city

of San Jose more than quadrupled in population as a result

grew from a relatively small city of 100,000 in 1952, to

74 Cite Census stats

74

440,000 by 1970.75 The northwestern production corridor

from Santa Clara to Palo Alto more than doubled in

population over the same period, though population growth

does not begin to reflect the extent of urbanization in that

area as most of the Valley’s industrial facilities were

located in this corridor.

The explosive growth in population and industrial

capacity, driven increasingly by the electronics industry,

were like the gravitational effect of twin suns: people were

drawn to the region by the dynamic growth in job

opportunities, and more industries were drawn by the

expanding labor pool that accompanied in-migration. It was

during the this period, particularly the 1960s, that the

Valley experienced its first large influx of immigrants from

Mexico, though the region had a significant minority of

Mexican-Americans at the end of World War II.76 Still, most

75 Cite Census Stats76 The Mexican-American population of the Santa Clara Valley was approximately 3600 in 1940 and 35,306 in 1950. By 1960, the Latino population had grown to 66,715 – more than 31,000 were immigrants from Mexico. U.S. Department of Commerce, Bureau of the Census, Census of the Population: 1950, vol. 2 (Washington, D.C.: Government Printing Office), Table34; U.S. Department of Commerce, Bureau of the Census, U.S. Censuses of Population and Housing: 1969, San Jose, Calif. (Washington, D.C.: Government Printing Office, 1961), Table P-1.

75

of the new arrivals in the Valley before 1970 were white,

working class or professional people, drawn by opportunities

in the electronics industry and related construction and

service industries.77

It is questionable if the region would have become the

seedbed for later electronics entrepreneurs had not IBM,

Lockheed, Raytheon, and Litton established a core defense

industry in which many of the later start-up endeavors, such

as Advanced Micro Devices and National Semiconductor, found

first purchasers for their products. Profits and stocks

from these companies led to the creation of a burgeoning

pool of venture capital that stimulated funding for new

high-tech endeavors. That process duplicated the process of

venture capital accumulation and investment then underway in

the Route 180 high-tech area around Boston.78 The Santa 77 U.S. Department of Commerce, Bureau of Census, Census of the Population: 1960. Subject Reports, Mobility from Metropolitan Areas (Washington, D.C.: GovernmentPrinting Office, 1963), Tables 50 & 51. Note: 37% of new arrivals in the Valley were college educated migrants from other areas of the U.S.78 Gene Bylinsky, “General Doriot’s Dream Factory,” in Fortune, August, 1967, pp. 103-107, 132-136. Note: Bylinsky’s article on General Doriot and the American Research and Development, Corp. (ARD) emphasized the same characteristics of the Route 180 electronics business cluster that were later attributed to Silicon Valley’s success: venture capital, innovation, networks of individual communications, and risk-taking. It is interesting and somewhat tempting to make something more of the fact that ARD was founded by a former Brigadier General who worked in

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Clara Valley was thus not alone in founding a new high-tech

industry on military contracts and research funding. In the

1950s, Cold War ideology and military procurement led to

dramatic growth in the high-tech electronics and

semiconductor industries across the nation.

Federal military contracts provided a valuable training

ground for electronics engineers. The high quality of

semiconductors and electronic hardware demanded by the

military provided valuable design and production experience

for the region’s companies, and the fierce competition that

developed between the upstart industry in the Santa Clara

Valley and industry giants like Texas Instruments and

Motorola seasoned regional entrepreneurs and prepared them

for the even more intense competitive arena of the global

economy they would expand into in the 1970s. Before

plunging into global consumer markets, however, Santa Clara

Valley companies would sharpen their design and production

skills building products for an even more remote and

procurement, but Doriot was not representative of a general trend of military men turned venture capitalists; most venture capitalists started in the private sector.

77

forbidding environment: outer space. Along with military

spending, the race with the Soviets to conquer space, a race

steeped in the ideology and military contingencies of the

Cold War, was a critical stimulus to the growth of a young

industry struggling to survive intense competition in the

national high-tech arena.

“From the Endless Frontier to the Final Frontier:” The Cold War Space Race and

the Growth of High-Tech Electronics

The point of the matter always has been not only of our excitementor interest in being on the moon, but the capacity to dominate space, which would be demonstrated by a moon flight, I believe this is essential to the United States as a leading free world power.

- John F. Kennedy79

The space race with the Soviet Union was the second

most important incentive to the growth of the electronics

and semiconductor industries after Cold War defense

spending. The space race was popularly thought of as a

“peaceful” rivalry between the U.S. and the U.S.S.R., but it

79 Public Papers of the President of the United States, President’s News Conference of July 17,1962 (Washington, D.C.: Government Printing Office, 1963), p. 567-68.

78

cannot be separated from the ideological and military

tensions between two.80 After the Soviets launched sputnik

in 1957, the conquest of space became another battle in the

Cold War. It was also as important, if not more important

to the development of the semiconductor industry than the

earth-bound programs of national security and military

defense. While the civilian space program provided the bulk

of demand for new electronics technologies, the Defense

Department space budget was never anemic. Demand for both

the military and civilian space programs grew alongside each

other as the Cold War escalated to include terrain beyond

Earth’s atmosphere.81

When he was vice-president, Lyndon Johnson, told

electronics industry leaders that they were a growing team

of ambassadors for “peace and freedom,” and that the 80 “Polls: Military Strength and Defense; Science and Space,” in Public Opinion Quarterly, Winter 1961, pp. 483-87. In 1960, 47% of Americans thought the Soviets were ahead in long range missile and rocket development. 60% of college educated people held this opinion. An AIPOpoll taken a year later revealed that Americans felt, by a 40-35% plurality, that the Soviets would beat the U.S. in the race to put a manon the moon,81 Western Electronic Manufacturers Association (WEMA), “Satellite Year,” in Western Electronic News, April, 1962, pp. 18-19. Note: WEMA quoted projections of $15 billion for spending on space defense projectsfor the balance of the 1960s, as opposed to $35 billion for civilian NASA projects.

79

electronics industry that it had a “major role in this

program of “peace through space.”82 Johnson’s talk of

“peace through space” was understood in its full Cold War

subtext by the industry. Western Electronic News published a

two part series on electronics and the space program in

April-May of 1963 that gave thirteen factors for the growth

of the western electronics manufacturing community. First

on the list was: “Cold War tensions – foreign aid, uncertain

exports, shifting markets.” The industry responded to

Johnson’s challenge, but recognized that the military

aspects of the space race were key to their interests:

The United States’ openly demonstrated space effort, under the personal direction of Vice-President Lyndon B. Johnson, . . . integrated with the programs and resources of our military, amounts to a great deal more than a dramatic race to the moon. Ofcourse we intend to get there first despite odds favoring the Soviets who have circled the moon and hit it. Their lead, augmented by new monster rockets and finest guidance and re-entry techniques, is compounded by the possibility of harsh communist determination to establish the first moon base by fateful one-way trips. Incurring great risks as our space program will, Americansvalue first the life of each astronaut in the great adventure. But other options of the space program concern our government-university-industry teams. . . . The military option is the lifeline of the Bay Area space age industry . . .83

82 “The Role of Electronics,” in Electronic News DOD Purchasing Supplement, February 4, 1963, p. 2.83 WEMA, “Satellite Year,” p. 18. Note: The reference to the Soviet being willing to sacrifice the lives of cosmonauts on suicide missions to the moon, as opposed to the U.S. valuing the “life of each astronaut”

80

WEMA understood that in the Orwellian language of the Cold

War, “peace though space” meant militarizing space and the

space program. The Cold War was still a war, despite a

desire by both sides to avoid direct military confrontation,

and space was but one of its many physical and ideological

battlefields.84

As noted earlier, Harry Truman and the Cold Warriors

who filled his cabinet and advisory staff were the

architects of U.S. Cold War policy and rhetoric. After

Truman, John Kennedy was probably the most outspoken Cold

Warrior until Ronald Reagan assumed that mantle in the

is telling of the ideological battle over space. The industry and the public worried that Soviets may win the race to put a man on the moon, but it they did, it would be in part to the lesser value they placed on human life. Ultimately, both sides would lose astronauts in the space race because it was a fundamentally risky venture.84 JFK and four presidents who followed him office would attempt to walka thin line between supporting large military space budgets and keeping actual weapons out of space – particularly weapons of mass destruction. The Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and other Celestial Bodies was signed by 122 nations in 1966-67 and outlawed the “weaponization of space,” but not the “militarization of space.” The liberal use of both the U.S. and Sovietsof military spy satellites effectively “militarized” space and led to efforts by the Reagan Administration and George W. Bush Administrations to circumvent or undo the treaty. The tension between allowing militarysatellites which compromise national security and disallowing weapons todestroy or disable those satellites has been a contradiction that has sporadically threatened to unravel strict adherence to the treaty over the years. United Nations,http://www.unog.ch/frames/disarm/distreat/space.htm.

81

conflict’s fading days of the 1980s. John F. Kennedy is

well known for his rhetorical promotion of the space

program, though Lyndon Johnson deserves much of the credit

for overseeing the implementation of the program. While

Kennedy is best remembered for promoting the peaceful uses

of space, he occasionally cast the efforts to put a man on

the moon and win the space race with the Soviets in stark

Cold War terms. His articulation of the space race in Cold

War terms grew more militant as his term in office passed,

and often varied according to the public venue for his

remarks.85 Kennedy reserved his most powerful rhetoric for

the peaceful exploration of space for speeches to

international bodies like the U.N. In September 1961, in a

speech to the General Assembly memorializing Dag

Hammarskjold, he most eloquently called on the Assembly to

“extend the rule of law on earth . . . to man’s new domain –

outer space:”

All of us salute the brave cosmonauts of the Soviet Union. The new horizons of outer space must not be driven by the old bitter concepts of imperialism and sovereign claims. The cold reaches of

85 Kennedy often framed the space race in terms of the Cold War and national security at press conferences, particularly after Cold War tensions increased in his first two years in office.

82

the universe must not become the new arena of an even colder war. . . . To this end, we shall urge proposals extending the United Nations Charter to the limits of man’s exploration in the universe, reserving outer space for peaceful use, prohibiting weapons of mass destruction in space or on celestial bodies, and opening the mysteries and benefits of space to every nation.” 86

Kennedy’s call for a de-militarized space open to

exploration and use by all nations was reinforced by offers

of a joint U.S.-Soviet moon exploration program in his 1961

State of the Union Address and at a subsequent press

conference he offered to meet with Nikita Krushchev to

discuss the issue.87 Whatever brief window may have been

open to negotiate such an effort was neither open wide, nor

for very long. By mid-1962, as Cold War tensions over

Berlin, the Congo, Southeast Asia, and Cuba deepened,

Kennedy’s Cold War rhetoric sharpened.

In June 1962, he was asked at a press conference

whether he planned a bigger military role in Space. He

answered: “ . . . the military have an important and

significant role, through the primary responsibility is held

by NASA and is primarily peace, and I think the proportion 86 Public Papers of the President of the United States, John Kennedy, Address in New York City Before the General Assembly of the United Nations, September 25, 1961(Washington, D.C.: Government Printing Office, 1962), p. 622.87 Public Papers of the President, President’s News Conference of February 15, 1961,p. 94.

83

of that mix should continue.”88 He noted that while the

U.S. was still behind in the space race, a major effort was

underway to change that status. Kennedy’s statement’s

contained nothing about joint-cooperation on the exploration

of space. By July 1963, eight months after the Cuban

Missile Crisis and amidst a growing conflict in Vietnam,

Kennedy responded quite differently to a question asking

what he would do with moon program if the Soviets dropped

out of the race:

Well, in the first place, we don’t know whether the Russians are –what their plans may be. What we are interested in is what their capabilities are. . . . Their capacity is substantial; there is every evidence that they are carrying on a major campaign and diverting greatly needed resources to their space effort. With that in mind, I think we should continue. . . . I think we ought to go right ahead with our program and go to the moon before the end of this decade. The point of the matter always has been not only of our excitement or interest in being on the moon, but the capacity to dominate space, which would be demonstrated by a moon flight, I believe this is essential to the United States as a leading free world power.89

Following up on the possibilities for U.S.-Soviet

cooperation, Kennedy said it was still desirable, but would

require “breaking down a good many barriers of suspicion and

distrust . . . between the Communist world and ourselves.” 88 Public Papers of the President, President’s News Conference of June 14,1962, p. 496.89 Public Papers of the President, President’s News Conference of July 17,1962, P. 567-68.

84

The message was clear, there would be no cooperation in

space for the course of the Cold War and, in fact, U.S.

space policy had become a weapon of the Cold War that could

be used ideologically as well as a means to drain Soviet

resources in a largely symbolic race to the moon.

There was an epilogue to Kennedy’s public campaign to

promote the peaceful uses of space. On September 20, 1963,

he again addressed the U.N. General Assembly and again

brought up the idea of a joint U.S.-U.S.S.R. effort to put a

man on the moon.90 Following his July remarks on

cooperation, there was little chance of the offer being

taken seriously by the Soviets. Some members of Congress,

however, did. Independent Offices Appropriations

Subcommittee Chairman, House Democrat Albert Thomas of

Texas, wrote a letter strongly objecting to the idea to

Kennedy the following day. He was joined by House Manned

Space Flight Subcommittee Chairman, Olin Teague on September

23rd, who told Kennedy, “I was disappointed in the

90 U.S. House of Representatives, Toward the Endless Frontier: History of the Committee on Science and Technology, 1959-79 (Washington, D.C.: Government Printing Office, 1980), p. 174.

85

suggestion. . . . I believe that our national security and

the security of the rest of the free world is very dependent

on the success of our space program.”91 Kennedy wrote back

to Thomas and Teague, reassuring them that cooperation with

the Soviets would not slow down the program, to which Teague

responded to a colleague: “That letter said nothing as far

as I’m concerned. . . . I’d just as soon cooperate with any

rattlesnake in Texas.”92 Teague protested to the White

House that he and Thomas had not received a straight answer

and received a reply from McGeorge Bundy assuring them that:

“The relationship between national security and the space

program is very clear and important in the President’s

judgment . . . we can assure you that there will be new

expressions of the administration’s point of view in good

time for your subcommittee’s authorization hearings in

January.”93 Congress was not satisfied and not only cut the

91 Ibid., p. 174-75.92 Ibid., p. 175. It is unclear in the context of Teague’s remarks if his allusion to “cooperating with any rattlesnake in Texas” referred to the Soviets, Kennedy, or his fellow Texan and White House supervisor of the space program, Lyndon Johnson.93 Ibid., p. 176. Note: A NASA appropriation bill came before the Houseduring the midst of this flap and NASA’s budget was docked a half-billion dollars and saddled with an amendment that barred payment of “expenses of participating in a manned lunar landing to be carried out

86

NASA budget, but barred use of funds for a joint venture

without Congressional consent.

Kennedy’s soaring speeches on space exploration and

offers of cooperation may have played well on the

international and even national popular stages, but his

harsh statements toward the Soviets more closely reflected

White House policy and congressional sentiments and undercut

any serious efforts to forge a cooperative effort in space.

NASA may have looked wistfully at he possibility of a joint

venture after their budget was slashed from $5.6 to $5.1

billion in the appropriations bill for 1964, but this was

three times the agency’s budget for 1962, and did not

include NASA’s take of the Air Force’s space budget.94 The

electronics industry expressed little concern over whether

or not space would be militarized or explored peacefully.

In their early years, neither the semiconductor nor

electronics industries were as concerned with making policy

as taking advantage of it. Cold War federal policy was most

by the United States and any other country without consent of Congress.”The funds, however, were eventually restored.94 “75% Hike in ’63 Civilian Space Funds Seen Only a Prelude to Future U.S. Goals,” in Electronic News, January 21, 1963, p. 32.

87

often congruent with the interests of the industry, and

presented little need to challenge it

NASA director, James Webb, proudly proclaimed that over

90% of NASA’s funds were funneled back into private industry

for research, development, and procurement, a substantial

portion of this going to electronics development and

hardware.95 The DOD’s budget for radar, missile guidance,

and surveillance satellites was also a multi-billion dollar

business for the electronics industry. The Cold War drove

both programs, a fact evident in President’s Kennedy’s

repeated statements on the importance of beating the Soviets

to the moon. Either way, exploration and exploitation of

space was essentially a militarized venture and a very large

boon for the semiconductor and electronics industry, and

there was little distancing of the industry from federal

contracts before the Vietnam War made the Cold War a dubious

proposition later in the decade. Through the first half of

the 1960s, the Cold War was good for business.

NASA depended on the electronics industry to enable the

95 “Guidelines: NASA, Program Role Sought for All States,” in Electronic News, February 4, 1963, section 2, p.4.

88

space program. Without advanced communications, guidance,

and tracking systems, there could be no space program and

all of these systems depended on ongoing advances in

semiconductors and electronics hardware. NASA was not only

invested in new generations of technology, but in making

certain that the technology could be produced on schedule

and function reliably.

In 1963, NASA R&D Director, Albert Kelley, stated: “By

far, the great majority of our flight failures are due to

the failure of electronic components.” Kelley attributed

the failures to inadequate research & development, testing,

and production problems stemming from the industry’s habits

of approaching defense production: “We do notice a tendency

in the electronics industry to be content with past

accomplishments. The requirements of space change all

that.”96 When Kelley noted that the “requirements of space”

were different form other electronics R&D and production, he

was not just speaking of the challenging physical

environment of extreme temperatures, radiation, and zero-

96 Joel Olesky, “Electronics Tops NASA Needs,” in Electronic News, February 4, 1963, section 2, p. 1.

89

gravity; he was also speaking of lengthy, intensive

research, development, and testing phases followed by short

production runs.97 Semiconductors, in particular, had a

historically high rate of failure which diminished only as

the production run lengthened. For NASA contracts, this was

unacceptable, particularly for manned space flight in which

even minor failures could be fatal.

One of the seldom-noted beneficial effects of both

military and space production on the development of

semiconductor and electronic technology was the high quality

requirements and small margin for errors demanded by the

work. These requirements led to advances in production and

testing, as well as heightened design skills for engineers

operating in these areas. Semiconductor companies were

accustomed to working out design problems over the course of

longer production runs, in essence, using them as a de facto

part of the testing process. Gene Strull of Westinghouse

told authors Ernest Braun and Stuart MacDonald that: “The

thing that put the semiconductor aside from any other type

97 Ibid.

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of technology . . . were the yields. In the mid to late

fifties yields of 20 to 30 percent were common and even

lower on some sophisticated devices.”98

Companies that produced for the military and,

especially, for the space program learned to work out

problems before production and thus learned how to produce

higher yields of viable microchips. One of the relatively

obscure facts about semiconductors in the 1950s and early

1960s is that they were not widely used commercially because

few commercial manufacturers could afford to subsidize the

inherently inefficient process of making semiconductors.

One semiconductor manufacturer told Stuart and Braun: “I can

hardly think of a single company that did not enjoy

significant government support for their semiconductor

operation. . . . I can assure you that we would never have

enjoyed the success we enjoyed in that period had we not had

government money.”99

If military manufacturing imparted these benefits to

98 Ernest Braun and Stuart MacDonald, Revolution in Miniature: The History and Impact of Semiconductor Electronics (Cambridge: Cambridge University Press, 1982), p. 67.99 Ibid., p. 72.

91

the industry over a period of time, NASA and the space race

both accelerated the process and upped the ante on quality.

With unlimited time and money, NASA might not have had such

a large effect on the industry’s design, testing, and

production processes, but the space race with the Soviets

did not afford the agency much time and budget consideration

in the midst of the balance-of-payments crisis limited the

amount of money that could be poured into the space program.

The ideological foundation and military imperatives of the

Cold War, however, assured that a substantial amount of

money was available, and the electronics industry and

semiconductor manufacturers did not hesitate to come to the

federal government wellspring before industrial and

commercial markets began to develop later in the decade. As

noted in “Satellite Year,” the Cold War was the first and

most important factor in the evolution of the semiconductor

industry and the rise of Silicon Valley. Cold War ideology

encompassed both space and war in its adversarial thrust,

but its impact was not limited to swelling NASA and Defense

Department budgets. The Cold War was also fought on the

92

terrain of global economic development. As the war in

Vietnam began to intensify during Kennedy’s term in office,

the importance of winning “hearts and minds” in developing

countries in Asia and Latin America led to policy decisions

that also had far-reaching effects on the semiconductor and

electronics industries and, indeed, the full spectrum of

U.S. manufacturing industries. John F. Kennedy and his

administration escalated the ideological war with Soviets in

space and heightened the tensions of military confrontation

by escalating the war in Vietnam. The shape of the postwar

global economy was fundamentally changed by these

developments.

International trade had been considered a part of the

Cold War conflict with the Soviets since the late 1940s and

both the Eisenhower and Kennedy administrations perceived it

as such. In doing so, they shaped what we now call

globalization in both unintentional and intentional ways by

linking foreign economic policy to the Cold War agenda. In

more closely linking U.S. foreign policy and foreign

economic policy, they adjusted trade policy in ways that

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empowered multinational corporations to, not only enhance

their power in selling their products to Europe and East

Asia, but to expand their a manufacturing empires into the

developing world. These seemingly minor adjustments to U.S.

trade policy provided a policy infrastructure that continues

to shape the global economy to the present day.

94