The Chip That Changed the World

On this day in economic and business history...

The foundations of the modern computing industry were laid on Sept. 12, 1958, when newly hired Texas Instruments (NASDAQ: TXN  ) engineer Jack Kilby demonstrated a working integrated circuit for the very first time.

Kilby had begun working on his prototype through the typical two-week vacation period afforded most TI employees, as his recent hiring meant that he had not yet earned vacation time. Originally, Kilby had been assigned to a project for the U.S. Army Signal Corps -- the "Micro-Module" -- to develop a standardized electronic component using transistors that could snap together with others like it to create complete circuits. Kilby decided to skip the "snap-together" part and put all the components on the same chip, as TI's historical documents explain:

[Kilby] didn't think the Micro-Module was the answer -- it didn't address the basic problem of large quantities of components in elaborate circuits.

So Kilby began searching for an alternative, and in the process decided the only thing a semiconductor house could make cost effectively was a semiconductor. "Further thought led me to the conclusion that semiconductors were all that were really required -- that resistors and capacitors [passive devices], in particular, could be made from the same material as the active devices [transistors]. I also realized that, since all of the components could be made of a single material, they could also be made in situ interconnected to form a complete circuit," Kilby wrote in a 1976 article titled "Invention of the IC."

Kilby began to write down and sketch out his ideas in July of 1958. By September, he was ready to demonstrate a working integrated circuit built on a piece of semiconductor material. Several executives, including former TI Chairman Mark Shepherd, gathered for the event on September 12, 1958. What they saw was a sliver of germanium, with protruding wires, glued to a glass slide. It was a rough device, but when Kilby pressed the switch, an unending sine curve undulated across the oscilloscope screen. His invention worked -- he had solved the problem.

Kilby's germanium design eventually proved inferior to a silicon chip developed by Fairchild Semiconductor (NASDAQ: FCS  ) . However, because Kilby both demonstrated his integrated circuit and filed for a patent first, he is generally considered to be the father of this essential technology, while Fairchild's Robert Noyce is honored for his work in perfecting the design. Noyce went on to help found Intel (NASDAQ: INTC  ) a decade after the development of the first integrated circuit, and three decades after that company's founding, it became the first (and thus far only) dedicated chipmaker granted a place on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) .

Today, integrated circuits power virtually every business operating today in one way or another, but their popularity got a little boost thanks to one big government program that became famous on Sept. 12...

Bold visions
President John F. Kennedy delivered a famous speech (click here to read it in its entirety) on the importance of sending a man to the Moon at Rice University in Houston, Texas on Sept. 12, 1962, barely a year after he'd first proposed such a program before Congress:

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too. ...

But if I were to say, my fellow citizens, that we shall send to the moon, 240,000 miles away from the control station in Houston, a giant rocket more than 300 feet tall, the length of this football field, made of new metal alloys, some of which have not yet been invented, capable of standing heat and stresses several times more than have ever been experienced, fitted together with a precision better than the finest watch, carrying all the equipment needed for propulsion, guidance, control, communications, food and survival, on an untried mission, to an unknown celestial body, and then return it safely to earth, reentering the atmosphere at speeds of over 25,000 miles per hour, causing heat about half that of the temperature of the sun -- almost as hot as it is here today -- and do all this, and do it right, and do it first before this decade is out -- then we must be bold. ...

Many years ago the great British explorer George Mallory, who was to die on Mount Everest, was asked why did he want to climb it. He said, "Because it is there."

Well, space is there, and we're going to climb it, and the moon and the planets are there, and new hopes for knowledge and peace are there.

Apollo 11 landed on the surface of the Moon, and returned safely to the earth, about seven years after Kennedy's speech. Its guidance computer was the first such machine to use the integrated circuits first demonstrated in a Texas Instruments lab in 1958. Click here to read more about the Apollo program and the technologies it helped push forward.

Chasing after banking dominance
JPMorgan Chase
(NYSE: JPM  ) has one of the highest pedigrees in American banking history. Much of its prestige derives from J. P. Morgan himself, but the "Chase" half of the name has rather venerable roots as well. Chase National Bank was established in a one-room Manhattan office on Sept. 12, 1877. Its name honored Salmon P. Chase, Treasury Secretary under President Abraham Lincoln and a friend of the bank's founder. Despite this connection, Chase himself had no relationship with the bank, as he had died four years earlier.

Chase grew quickly, and by the start of the Roaring '20s it was already the second-largest bank in the United States, despite having never undergone any mergers or acquisitions. This merger-free existence didn't last long. By the end of the Roaring '20s Chase had completed seven major deals to become the largest bank in the world. Other banks eventually eclipsed Chase, and on the eve of its merger with the Bank of the Manhattan Company in 1955, it was only the third-largest bank in the U.S.

Today, Chase is again the largest bank in the country, thanks to a number of deals that followed its 1996 merger with Chemical Bank -- including, most notably, the new Chemical-augmented Chase Manhattan's acquisition of J.P. Morgan in 2000.

The first generation of computing was built on the integrated circuit and the machines it made possible. Today, a new generation of giant companies has risen to control the technology of connectivity, and no one can be certain whose standards will win out. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


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  • Report this Comment On September 12, 2013, at 12:50 PM, DZPM wrote:

    Nothing new! Barak Obama, Federal Reserve comity and Ben Bernanke “Giant Ponzi Scheme” .When we have bad economic data market is going up on speculation Fed Chairman Ben S. Bernanke will kip printing money. When we have god economic data market is going up speculation Bernanke is steel printing? This entire look like exuberance sign of market is in the crash mod and will burst 1000 down ward point any second. There is no exist without big consequences Bernanke know that and kip printing money we all American will go down to drain. Either way he will finish as slowly anyway. Bernanke ruin billions and billions of ordinary people’s lives with kipping interest zero in favor of Banks and Speculators Bernanke committed the biggest crime to humanity The Biggest Ponzi Scheme Ever. Bernanke is a Scam bag! Communist was using seam principals like Fed > Bernanke (printing money for ever), and day collapsed next is USA to Collapse, because off sociopath Bernanke. Printing money is poor pyramid scams, artificial unreal! Stock and everything is doom for crash. Every pyramid scam crash everybody loses regular investor watch out doesn’t fall in to the trap.

    A record breaking stock market is distorting a frightening reality: The U.S. is being eaten alive by a horrific cancer that will ultimately destroy the economy and impoverish the vast majority of its citizens.

    That's according to Peter Schiff, the best-selling author and CEO of Euro Pacific Capital, who delivered his harsh warning to investors in a recent interview on Fox Business.

    "I think we are heading for a worse economic crisis than we had in 2007," Schiff said. "You're going to have a collapse in the dollar...a huge spike in interest rates... and our whole economy, which is built on the foundation of cheap money, is going to topple when you pull the rug out from under it."

    Schiff says that, despite "phony" signs of an economic recovery, the cancer destroying America stems from a lethal concoction of our $16 trillion federal debt and the Fed's never ending money printing.

    Currently, Bernanke and company is buying $1 trillion of Treasury and mortgage bonds a year. That's about $85 billion per month against a budget deficit that is about the same level.

    According to Schiff, these numbers are unsustainable. And the Fed has no credible "exit strategy."

    Eventually interest rates will rise... and when they do, Schiff says, stocks will tank and bonds dip to nothing. Massive new tax hikes will be imposed and programs and entitlements will be cut to the bone.

    FCS is > Sell candidate

    Fairchild Semiconductor International Inc.'s earnings have declined to an estimated $0.16 from $0.49 over the past 5 quarters; they have shown deceleration in quarterly growth rates when adjusted for the volatility of earnings. This is an indication of weakness that could lead to declining earnings.

    FCS seems highly valued with the highest PEG value in the Semiconductors & Semiconductor Equipment industry of 104.3551, which is supported by a PE of 521.7755 that is also the highest in the industry.

    The prior quarter Operating Margin of 1.50% is less than the TTM Operating Margin of 7.85%.

    Balance Sheet Strength: n The Long-Term Debt/Capital is 25.57%. This indication of financial leverage measures the extent of a firm’s capital that is provided by lenders. Below 25% reflects well on a company’s financial stability. FCS's debt to total capital ratio, at 25.61%, is in-line with the Semiconductors & Semiconductor Equipment industry's norm. The company does not earn enough through its day-to day operations to comfortably satisfy its interest payments as illustrated by its Interest Coverage ratio of 1.07 and when interest rate goes up after Bernanke and company stop buying $1 trillion of Treasury and mortgage bonds interest will skyrocketing . The average LT Debt/Capital for this Industry Group (Electr. Semi.) is 11.21%. Growth Potential: The prior quarter EPS of $-0.06 is less than the EPS of the year over year quarter of $0.02. The prior quarter EPS growth rate of -400.00% is smaller than the TTM EPS growth rate of -41.97%. n The TTM EPS growth rate of -41.97% is less than the TTM Sales Per Share (SPS) growth rate of -0.08%. Earnings Trend is Negative for the last three quarters on a year over year basis. FCS >SELL

  • Report this Comment On September 12, 2013, at 12:50 PM, DZPM wrote:

    FCS is > Sell candidate

    Fairchild Semiconductor International Inc.'s earnings have declined to an estimated $0.16 from $0.49 over the past 5 quarters; they have shown deceleration in quarterly growth rates when adjusted for the volatility of earnings. This is an indication of weakness that could lead to declining earnings.

    FCS seems highly valued with the highest PEG value in the Semiconductors & Semiconductor Equipment industry of 104.3551, which is supported by a PE of 521.7755 that is also the highest in the industry.

    The prior quarter Operating Margin of 1.50% is less than the TTM Operating Margin of 7.85%.

    Balance Sheet Strength: n The Long-Term Debt/Capital is 25.57%. This indication of financial leverage measures the extent of a firm’s capital that is provided by lenders. Below 25% reflects well on a company’s financial stability. FCS's debt to total capital ratio, at 25.61%, is in-line with the Semiconductors & Semiconductor Equipment industry's norm. The company does not earn enough through its day-to day operations to comfortably satisfy its interest payments as illustrated by its Interest Coverage ratio of 1.07 and when interest rate goes up after Bernanke and company stop buying $1 trillion of Treasury and mortgage bonds interest will skyrocketing . The average LT Debt/Capital for this Industry Group (Electr. Semi.) is 11.21%. Growth Potential: The prior quarter EPS of $-0.06 is less than the EPS of the year over year quarter of $0.02. The prior quarter EPS growth rate of -400.00% is smaller than the TTM EPS growth rate of -41.97%. n The TTM EPS growth rate of -41.97% is less than the TTM Sales Per Share (SPS) growth rate of -0.08%. Earnings Trend is Negative for the last three quarters on a year over year basis. FCS >SELL

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