The Planar Genesis

Fairchild Semiconductor and the Invention of Silicon Equity

Ten crisp one-dollar bills, signed in ink across their faces at the Clift Hotel in San Francisco in September 1957, served as the founding contract of modern Silicon Valley. Eight signatures belonged to Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce, and Sheldon Roberts. All eight had been recruited a year earlier by William Shockley, the Nobel laureate who had co-invented the transistor at Bell Labs, to staff Shockley Semiconductor Laboratory in Mountain View. Although Shockley was a brilliant solid-state physicist, his erratic management—subjecting researchers to lie detector tests and abruptly sidelining silicon diffusion to chase a four-layer diode—drove his eight key scientists to resign together.

In 1957, American electronics was dominated by eastern industrial conglomerates such as General Electric, Westinghouse, RCA, and AT&T's Western Electric. In those hierarchies, the corporation owned all patents, compensation followed seniority, and stock options were restricted to corporate executives. Engineers did not defect to form competing companies, and commercial banks refused to lend capital to researchers without physical collateral.

Eugene Kleiner wrote to his father's brokerage house, Hayden, Stone & Co. in New York, where the letter reached investment banker Arthur Rock. Recognizing that the eight researchers represented a rare concentration of silicon fabrication expertise, Rock traveled to California and urged them to form an independent company rather than join another conglomerate. After thirty-five corporations declined to finance the group, Rock introduced them to Sherman Fairchild, founder of Fairchild Camera and Instrument on Long Island.

Rock and attorney Bud Coyle structured a corporate charter that broke American industrial precedent. Fairchild Camera loaned the new venture, Fairchild Semiconductor, $1.38 million in exchange for an option to buy out the company for $3 million within eight years. Crucially, each of the eight founders received a 10 percent equity stake, later adjusted to leave shares for general manager Ed Baldwin and Hayden, Stone. For the first time, laboratory scientists held direct equity ownership in the capital appreciation of their technical breakthroughs.

Setting up furnaces in a leased building at 844 Charleston Road in Palo Alto, the team initially manufactured double-diffused silicon "mesa" transistors for IBM's B-70 bomber guidance computer. Mesa transistors, however, suffered from chronic surface reliability defects. Acid etching left the microscopic p-n junction protruding above the wafer like an exposed desert mesa, where conductive dust particles or moisture caused electrical shorts and current leakage.

On December 1, 1957—barely two months after Fairchild opened—Swiss physicist Jean Hoerni recorded a revolutionary solution in his laboratory notebook: the planar process. Instead of etching away the surrounding silicon and stripping off the surface oxide, Hoerni proposed leaving the thermally grown layer of insulating silicon dioxide ($\text{SiO}_2$) intact across the flat surface of the wafer. Using photolithographic masks to etch tiny apertures through the oxide before diffusing boron and phosphorus dopants, every p-n junction formed beneath a continuous, atomically bonded glass shield that sealed out contamination.

Thirteen months later, on January 23, 1959, Fairchild research director Robert Noyce recorded the next leap in his patent notebook. Because Hoerni's planar process left all transistor terminals flush with the flat insulating $\text{SiO}_2$ surface, and because Kurt Lehovec's p-n junction isolation could electrically separate adjacent devices on the same silicon slab, engineers no longer needed to solder delicate gold wires by hand between individual components. Instead, a thin film of aluminum could be vapor-deposited directly onto the flat silicon dioxide layer and photochemically etched into microscopic interconnecting wires. Noyce had invented the monolithic integrated circuit.

Fairchild's planar transistors and Micrologic integrated circuits proved so stable that the U.S. Air Force specified them for the Minuteman ICBM and NASA adopted them for the Apollo Guidance Computer. When Sherman Fairchild exercised his $3 million buyout option in October 1959, each founder received $250,000 in stock—seed capital that Noyce, Moore, Kleiner, and their colleagues soon deployed to launch Intel, Kleiner Perkins, and dozens of successor "Fairchildren" firms across the Santa Clara Valley.