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The Chip That Changed the World

By Alex Planes - Sep 12, 2013 at 10:33AM

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Learning from the market's past to understand its present.

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 (TXN 3.18%) 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 Kilby decided to skip the "snap-together" part and put all the components on the same chip, as TI's historical documents explain: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 (NYSE: 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 (INTC 3.21%) 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 (^DJI 2.68%).

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
(JPM 2.98%) 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.

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