Motorola's fast catch-up in microprocessors
August 29, 1977
Two years ago, Motorola Inc.'s Integrated Circuit Div. was in big trouble. It was losing millions of dollars annually, its key engineering personnel were deserting, and it could not get a new manufacturing process to work at its new Austin (Tex.) plant. And the No. 2 semiconductor maker had to have that process quickly if it was going to catch up with the leaders in microprocessors.
Almost in desperation, Motorola in early 1976 brought in new management, largely recruited from arch-rival Texas Instruments Inc. Proof of the division's resulting turnaround is its remarkable success this year in the automotive microprocessor market. In January it won a bitterly contested fight to develop the computer-on-a-chip for General Motors Corp.'s engine control module. Then last week it did it again -- this time for Ford Motor Co.
One senior Motorola executive describes the division's comeback as a "resurrection." Excited about the big victory over TI and the microprocessor leader, Intel Corp., he says, "We'll soon be turning out more microcomputers in Austin than are being made in the rest of the world." He predicts that production could reach 8 million units anually by 1980, a figure that is undoubtedly optimistic. But even Benjamin R. Rosen, electronics analyst at Morgan Stanley & Co., believes that Motorola now has a good chance to supply half the auto industry's requirements in 1981 -- the year when most, if not all, U.S. cars will carry electronic engine controls. He guesses that if the engine control modules go into nearly all the 1981 autos, the value to Motorola could range as high as $160 million.
Not locked up
All the semiconductor makers agree that the automobile will be the largest market, by far, for microprocessors -- at least until the late 1980s. It would be a mistake, however, to say that Motorola has the automotive market locked up, declares Jerry R. Crowley, director of automotive operations at National Semiconductor Corp. For one thing, he says, GM's contract with Motorola "has been grossly overstated." It is for development, not production. And Crowley points out that there are still other GM microprocessor development contracts, including one with National.
Motorola's development contract with GM "only implies that we will supply the microprocessors once GM gets going," admits the Motorola executive. But he is confident that his company will get the production contract, partly because any microprocessors that GM selects will be to Motorola's specifications.
No one wanted the Ford contract more than TI, which is fighting hard to recover from a late start in microprocessors. "We went all-out to win it, and we're damned upset that we lost it," says a disappointed TI executive. The Motorola official says: "TI sold hard, but they didn't have the technology."
But now Motorola has to provide its custom microprocessor designs to TI and Intel, which will compete for the job of "second-source" supplier to Ford. "We think we can build them," the TI official says. Once advantage that TI has over Intel is that the Motorola design calls for one circuit to be built with "I-squared-L" technology. TI is the industry leader in the process, while Intel has ignored it. "If Intel opts not to bid on the Motorola design, then TI stands to supply more semiconductor parts to Ford than even Motorola," claims the TI executive.
In any case, TI has the biggest chunk of Ford's microprocessor kit business for the second-generation engine control module that will be used by the auto maker until it switches over to the Motorola design in 1980 or 1981. TI starts production early next year, peaking at 300,000 to 400,000 kits annually.
National Semiconductor trails its competitors in developing microprocessors for Detroit, Crowley concedes but he says, "There are more dollars in electronics around the central processing unit than in the microprocessor itself." So National has spent millions to position itself in these peripheral circuits, which, he says, can account for as much as $15 of the $20 worth of semiconductor circuits for an engine control module.
On top of what it already has spent, National will spend an additional $5 million in the next two years for auto microprocessors in a late attempt to move out ahead. And to keep close tabs on the auto makers, both President Charles E. Sporck and Semiconductor Div. Vice-President E. Floyd Kvamme are flying to Detroit every month.
Whether Detroit will even understand or get used to the wild and woolly semiconductor business, only time will tell. For now, it is watching the semiconductor makers like hawks. Says the Motorola executive: "We've got GM men all over our backs down here in Austin. They're making sure everything goes right."
Copyright 1977 McGraw-Hill, Inc.