Processors Toolkit

T.J. Rodgers: It's all about what's best for business

Declan McCullagh CNET News.com

Published: 19 May 2004 11:55 BST

Based on what?
The Republicans are supposed to be a party of free trade and economic freedom. Bush has been one of the worst free-trade presidents we've had in a long time. He is a big spender who makes Bill Clinton look like a penny pincher. I doubt that I'm going to find Kerry to be a viable alternative. This year, if the Libertarians put up a non-nut, I may end up voting for a Libertarian.

How widely do you think your views are shared by other Silicon Valley chief executives?
The practicality of voting shows that you have to be a Democrat or Republican, if you want your vote to matter. In my case, I'm a registered Republican, but I'm always trying to get rid of their "moral majority" crap. There are a lot of Republican chief executives like that, who believe in economic freedom, free markets, free trade and also don't really buy into the moral-majority part of the current Republican party.

You're expanding your Bloomington, Minnesota, operations. What percentage of your wafers is manufactured there?
Since it makes different-size wafers than the other fabs, a better way to express division is revenue. For the last year, Bloomington has consistently been 65 percent of revenue, and Texas has been 35 percent of revenue.

You still have a small fab in San Jose. Are you thinking of expanding it or building another in California?
We just finished expanding the fab in San Jose in the last 18 months, modernising it. Our most modern equipment is there. We do all of our research and development there.

You'd be insane to open a manufacturing fab in California. You need a big piece of land, you need freeway access to it for your employees, you need water and power, and you need a local government that wants you there. Then you need a local or several local schools to provide you with a relatively large number of trained people to work in the plant. You obviously want to pay wage rates that make you competitive in the world. What I described is not California.

Why not?
The wage rate is one problem, but it's surmountable, because the cost of a wafer is only 15 percent labour. So if I paid a 20 percent premium for labour, the wafer would only cost 3 percent more. The killer factor in California for a manufacturer to create, say, a thousand blue-collar jobs is a hostile government that doesn't want you there and demonstrates it in thousands of ways, through bureaucrats and regulations.

Ayn Rand said no society can jail an honest man. So if you want to use the power of society on citizens, you have to make normal behaviour illegal. The zoning ordinances and environmental ordinances are a classic example. I guarantee you that nobody truly understands them, and no plant can meet all of them simultaneously. So you end up with a dynamic that there are no laws, and there are no rules, and you're completely at the mercy of the local government, and they don't want you there. And they tell you that. So you go away. That's why there's no silicon left in Silicon Valley.

Cypress has found Minnesota and Texas to be more welcoming?
I remember when I went to Round Rock, Texas, to build our second plant, the mayor walked into the meeting wearing cowboy boots, jeans and a cowboy hat. He flipped a manila folder onto the table. I opened up the folder, and in it was a building permit that was totally blank with a signature at the bottom. Obviously, we went through the code and reviews of Round Rock, but he made the point that: "We want you here. We're going to facilitate you in building a plant."

Would you ever move a substantial amount of Cypress' R&D outside California?
We already have. Any business that depends on any critical aspect of its business being localised in one spot is crazy. You never make all your chips in one plant, you never test all of your chips in one plant, and you never have all of your engineers in one country.

What's the business climate like in California today?
Let me give you an example. When the political pygmies fight with each other in Sacramento and change the workers' compensation rules every few years, it's a big jerk around for industry. Once we get our payroll set up, we have to change it again. The local county and city basically are just bears to deal with in trying to run a business and build things.

You've also run into regulatory problems with your winery, haven't you?
I have a four-barrel winery in a building on my property, and I've been trying for years to get a licence to sell the wine I make. I'm building another in the hills that's tied up in red tape.

You're a vigorous opponent of the mandatory expensing of stock options. It looks as if the Financial Accounting Standards Board is going to require it. (Note: This interview took place before the board voted for expensing stock options.)
I'm going to disagree with that. I think that the Semiconductor Industry Association is going to win, and the expensing of stock options for the top five executives is going to be the law of the land for the next few years. Fundamentally, stock options shouldn't be expensed. It's mathematically obvious for anyone who can count, which doesn't include professors at the Stanford and Berkeley business schools.

What will happen if we expense stock options is the exodus of every tech company from Generally Accepted Accounting Principles to pro forma accounting. They've finally made the product so bad that nobody will use it.

You're taking swipes at Stanford, your alma mater, but you still give the school money.
I've taken swipes at Stanford's Graduate School of Business. But the engineering school at Stanford is still top-drawer. [My money] goes to that school; it goes to support graduate students through an endowment.

Why did Cypress branch out into manufacturing solar cells?
My board asked the very same question. First, we've bet as much money on communications as we should bet. In addition to all of our internal R&D, we've spent about $600m in acquiring communications companies. We weren't achieving our growth rate goals, which are to be a $1bn-per-quarter company by the end of 2005. It's a way to grow in a more diversified way and place a few venture bets, if you will. Solar cells require high-volume, low-cost manufacturing. We know how to do that. It matches up one of our core competencies in a new field.

Oracle formed a group called ProComp to lobby the US Department of Justice to take down Microsoft. Now, Oracle is having to fight off the Justice Department regarding PeopleSoft. Is there some irony there?
I wouldn't use the word "irony." I'd use the word "hypocrisy". Larry Ellison has never been one to let a consistent philosophy get in the way of doing what he wants. So antitrust is good, if you want to bash Microsoft in the courtroom, because you can't beat it in the marketplace. Antitrust is bad, if it hurts you.

You're outspoken. What kind of reactions do you get from other chief executives as a result of what you say?
There are very few chief executives I dislike enough to publicly criticise. Ellison is probably the best example.

How did you reach your political views?
First, I learned that being an American doesn't mean that you try to maintain all of your jobs in America. On the flip side, for consumers, they don't have to go buy all-American products. That was one lesson: understanding that free trade is important and basic to America. I went through another round when Jesse Jackson came to Silicon Valley and accused us of racism, based on some preposterous racial studies. I had to think about racism. I realised that despite Jackson's self-appointed image as the heir of Martin Luther King Jr, King and Jesse Jackson couldn't be farther apart.

What's your advice to anyone considering looking for a job in this field?
There are jobs out there. The unemployment rate in Silicon Valley is low. Technology and science is where the world is going. A career is something you live with for 40 years or more. You don't make your decision on what's up and what's down.