The physics of technology

MICHAEL R Splinter, former executive chairman of semiconductor equipment maker Applied Materials, is an avid stamp collector, a hobby he picked up when he was nine years old. These days, he is charting the genealogy of his and his wife's family. A semiconductor industry veteran with more than 40 years experience, Mr Splinter joined Applied Materials as CEO in 2003 and is credited for much of the company's growth into one of the pre-eminent semiconductor equipment makers in the world. He stepped down from his role as CEO in April 2013 and became executive chairman. Last month, he retired from the Applied Materials board.

Going back to his story, stamps were the window to the world for a small kid who was growing up in a tiny town in the state of Wisconsin in the US in the 1950s and 1960s. "I would write letters and send them to people around the world and they would send me stamps... It gave me a window to the world." Mr Splinter now has an impressive collection which might be the envy of many philatelists.

Genealogy is a more recent interest. On his mother's side, Mr Splinter has been able trace back family roots to Europe till around the 1700s. He has even managed to identify the grave of one of his distant ancestors. His father's side is proving to be more challenging with him being stuck with his great grandfather's roots. Mr Splinter, the meticulous man that he is, is confident he will find the missing link. On his wife's side, he has been able to trace the family back well into the 1600s.

It's easy to understand why something like tracing family genealogy excites Mr Splinter, who was in Singapore recently to receive the Public Service Star (Distinguished Friends of Singapore) award from President Tony Tan. The attention to detail and patience that is required for this is something that appeals to the Applied Materials' former executive chairman, who has used this trait to carve an impressive niche for himself in the semiconductor industry's hall of fame.

Applied Materials occupies a significant position in the semiconductor industry. It supplies equipment, services and software to enable the manufacture of semiconductors, flat panel displays, and solar products. At first glance the portfolio of products that the company produces may not look as exciting as those of semiconductor giants like Intel and AMD, among others.

More high-tech than high-tech

These companies are pushing the limits of physical boundaries by producing chips that are incredibly small and powerful. However, Mr Splinter, who is ex-Intel, feels that Applied Materials is a far more high-tech company than either Intel or AMD.

The key to understanding Applied Materials is to understand that the advances charted by the likes of Intel are made possible by the equipment that the Applied Materials custom builds for the semiconductor companies, says Mr Splinter.

"We probably don't get enough recognition in terms of the impact we have on the semiconductor supply chain. Our company is really fundamentally a very, very high technology company.

"I have worked in Intel; this company is a higher technology company than Intel and Intel is a higher technology company than Apple or Qualcomm. And Apple and Qualcomm are higher tech companies than the social media companies. But at the end of the day, all of them are high technology companies. It's a question of degree.

"When you really look at the depth of technology and the fundamental understanding of physics we are bringing together, Applied Materials has very few peers."

To a question on why the market cap of demonstratively "lower tech" (than Applied Materials) company like Apple is several magnitude higher, Mr Splinter says that market capitalisation does not work on the basis of the level of technology.

"Part of the reason for (Applied Materials') lower market cap is the fact that we are far away from the consumer: we sell to other business who sell to companies that use these products to make gadgets that the consumers buy.

"And so those companies that interface with the consumers are well known, we know all the names. And they do well and are well managed and their 'notoriety' also brings some additional value.

"Also when you are selling to hundreds of millions of customers or are interfacing with a more than a billion users (like Facebook), you get and deserve the fame and market cap that you have."

Mr Splinter, however, does agree that despite all that Applied Materials has to spend a huge amount of money in research and development (R&D) in order to keep its sharp technology edge.

"We became a high technology company by hiring PhDs and by putting in millions of man hours into R&D. In our business we have to put in 15-20 per cent of our revenue back into R&D and so we don't give that money back to shareholders, this is part of the race we are all in."

Mr Splinter says gadgets like today's modern smart phones are able to wow us because of the immensely powerful chips that go into them. And he thinks that there's more to come after devices such as the iPhone 6 or the Samsung Galaxy S6.

"I would just say that as far as functionality of devices is concerned, we are really just at the beginning. I expect dramatic changes. If you just think 10 years ago there was no iPhone. In 10 years from now its hard for me to say what devices we will be using or how we will be connecting to one another."

He asks rhetorically: "Why would you need a phone, watch, etc? You could have everything in your glasses."

In 2013, Mr Splinter was given the Robert N Noyce Award by the Semiconductor Industry Association (SIA), which represents leadership in semiconductor manufacturing and design. SIA conferred the award in recognition of a "leader who has made significant contributions to the US semiconductor industry in technology and public policy". The Noyce Award is considered the industry's highest accolade.

He recalls that he made his first transistor when he was 18 years old. "Since then the industry has changed dramatically. In every generation (of wafer manufacture) we have been able to see about three generations ahead (in terms of technology) for the past 20 years. As long as we can see three generations ahead, we know the Moore's Law is going to continue.

"There is now huge pressure on the economics - that is making powerful chips which are affordable. But I have confidence that the engineers who are working on these problems will solve it."

Moore's Law refers to an observation by Intel co-founder Gordon Moore. He predicted that the processing power of computers and other gadgets that use chips, like smart phones, would double in every two year with the doubling of the number of transistors that can be fitted within the fixed area on a chip. The transistor density has become so much that the industry is now reaching the physical limitation with distances between transistors being measured in atoms.

To get around physical limitations, we need to build upwards, says Mr Splinter. "Over the last 50 years we have been restricting ourselves to working in two dimensions. There is good reasons for this but the fact is the world is in three dimensions."

There are difficulties in working in three dimensions but once these problems are solved he reckons that 3D flash memory - a type of memory that is used in smart phones and increasingly in computers - will be in strong demand. And he is confident that the technology will permeate into processors which provide the computing power to devices.

This type of flash memory would have humongous storage capacity. But will there be a mass market demand for this huge memory?

Mr Splinter thinks the extra storage capacity is necessary because high definition video is going to be the next big thing. "The entertainment industry we will see a dramatic change in how people consume content. In future you'd be able to get any show from any publisher at any time and the computing power (and storage power) required for that would be awesome."

More computing power, more memory and more powerful gadgets at cheaper price points. Mr Splinter thinks that the combination of all this will give rise to new and innovative services.

"Take the example of cars. For years we have put up with the fact that more than 100,000 people die in car crashes every year around the world. If that had happened with aeroplanes, no one would be flying today.

"I don't know why we put up with traffic accident deaths. We shouldn't. Why does anyone have to die in a car today? There is really no reason for that. There is going to be a major re-think in the car industry... It's a challenge for society and it's a challenge for not only for leaders of companies but also for leaders of countries."

Mr Splinter notes that the companies who are willing to take the risks to makes the changes - by using new technology like IoT (Internet of Things), big data and analytics - will win.

"You might make mistakes but playing safe or maintaining status quo is no longer options. I suppose there are industries that don't move very fast but you can see what has happened to the taxi industry with the appearance of Uber and its clones. Who thought about disintegrating taxi companies?

"Airbnb has created rooms where there were no hotel rooms with just with an App. This is amazing kind of capability. If you are a hotel owner what do you do? Maybe you go out with all those people and help with maid service?"

All these technology breakthroughs lead to the idea of smart cities or, in Singapore's case, the smart nation. Mr Splinter says he is impressed by the level of commitment to the idea of building a smart nation that has been shown by the top leadership here.

"I think in Singapore's case, I couldn't think of a better idea (that of becoming a smart nation). There are 5.5 million people here and if you can use Singapore as the testing ground for this technology, and you can get your entrepreneurs to start thinking how do you really create a smart nation, and if you are very innovative about it, there are going to be hundreds of ideas or products that you can sell to everybody who is thinking: 'How do we become a smart city/nation?' "

Mr Splinter adds that geography (that is, location) has been a huge strategic plus for Singapore even though it has only 5.5 million people. If you look at a 1,000 km radius then you have a very big number of people who reside within that circle and a lot of these people either live in cities or will soon do so - the mega cities of Asia are only going to get bigger, he observes.

"If we don't have smart transportation, smart cities and all the sensors associated with that, it will become very difficult to live in those cities. We have seen what has happened in China as the cities have grown faster than the technology to keep people safe in that kind of environment.

Mr Splinter got his love for technology from his father who used to be an electrical contractor and also owned a TV store which repaired TVs and radios.

"Most homes in my neighbourhood had a play area for the kids. In our home we had a radio room. My idea of spending time with my Dad was that we fixed radios or made amplifiers or repaired TVs. That was really my first introduction to technology. In those days, they were vacuum tubes (in the 1950s)!

"And in school, I liked science, and my physics teacher in high school convinced me I should go to the University of Wisconsin. I have two older sisters and they went to a smaller school and I thought I should also go to a smaller school. But luckily I listened to my teacher and I made a big change in my life."

Intel inside

Mr Splinter's first job was with Rockwell Electronics in 1974. By the time he left the company he was running their semiconductor fabs. "In those days they let young people do things. I think the industry was still evolving and they let young people do jobs they certainly were not qualified to do. But I learned quickly and under fire. And then I moved to Intel in 1984. I was managing one of their factories - Fab 1. I progressed to various jobs there and did a number of executive jobs over 20 years."

Mr Splinter credits a lot of his expertise to his time in Intel. "Both Applied Materials and Intel are great companies and very disciplined at what they do. A lot of Intel culture and how they did things was driven by Andy Grove but there was also a good environment of challenging each other and challenging authority and pushing for change and taking responsibility for changing things that could be better. I think that was very fundamental for the company's success."

Moving to Applied Materials was a different ball game for Mr Splinter. "Being at whatever level you are in a company, executive VP, VP or head of this division or another, it doesn't prepare you to be CEO.

"There is a lot of CEO training but for the most part you have to learn to be a CEO. So there were things I tried to do - you learn things in your career that work for you so you try to build those into the company as you become CEOs."

Mr Splinter notes that he had ideas about leadership and also had strong ideas about culture and how culture should be in a company. "These are guideposts on how you do things and how everybody can communicate. If there is one kind of culture and one set of values, we can use those to get things done and understand each other wherever we are. This is invaluable for a company like ours since we have 80 offices around the world and people in 18 countries - you have to be able to communicate across cultures, language, across national and regional boundaries. I thought those things are very important."

But ultimately one needs to focus on products and markets. "If there is one thing I would say after all those years, there is one element of culture that I firmly believe helps and makes a real difference. And that is the culture of not being afraid to take risks, especially in this industry where technology is changing and changing fast and if you don't change along with it, you are dead. The old saying that even if you are headed in the right direction you could get run over by a train is very true, especially for the semiconductor industry."

MICHAEL R SPLINTER

Former executive chairman, Applied Materials

Born Oct 1, 1950

Education

1972 Bachelor of Science, Electrical Engineering University of Wisconsin Madison

1974 Master of Science, Electrical Engineering University of Wisconsin Madison

Career

1974 Joined Rockwell Electronics Research Centre in Anaheim California

1984 Joined Intel to manage Fab 1

1988-98 Managed all chip manufacturing for Intel

1998-2001 Managed technology and manufacturing group of Intel

2001-03 Managed Sales and Marketing group and grew Intel's market share to 95 per cent in microprocessors

April 2003 Joined Applied Materials as CEO, additional charge of chairman in 2009

October 2013 Became executive chairman

June 2015 Retired from the Applied Materials Board "The old saying that even if you are headed in the right direction you could get run over by a train is very true, especially for the semiconductor industry."